Navigating Retirement: The Role of Stocks in Your Financial Future

As a certified financial planning team, it's pivotal to consider the world of investments, especially for those nearing retirement age. We have discussed before how bonds and alternatives can play an important role in your retirement investment portfolio. Let's now learn more about stocks and why they can be valuable asset in your retirement planning journey.

First things first, what exactly are stocks, and why should you care about them? Simply put, when you buy a stock, you're purchasing a slice of ownership in a company. This means you have a stake in the company's assets and earnings. You might hear terms like "shares" or "equities" thrown around, but essentially, they all refer to the same thing: ownership in a company.

Now, why should stocks be a crucial part of your investment strategy? Well, history tells us that the stock market has been a great power for helping creating wealth. Take a look at the S&P 500, which has delivered average annual returns of 8% to 12% since its inception in 1923*. That's some serious potential for helping grow your assets.

Of course, it's important to acknowledge that the stock market isn't all rainbows and sunshine positive returns. There are downturns and periods of volatility. But even with occasional setbacks, stocks have historically outpaced inflation by a wide margin. Over the last century, stocks have provided returns well above the rate of inflation. This means that investing in a diversified stock allocation can help protect your purchasing power over time, ensuring that your hard-earned money continues to work for you.

Another potential benefit of investing in stocks is the potential for passive income through dividends. While not all companies offer dividends, those that do provide shareholders with regular payouts, adding another layer of financial stability to your portfolio.  In retirement it is important to have a plan for how dividends can help your retirement assets.

Additionally, stocks offer liquidity that many other investments lack. Unlike real estate or certain types of debt instruments, stocks are easily bought and sold on major exchanges. This means you can quickly adjust your portfolio to capitalize on market opportunities, mitigate risks, and have access to needed cash.

Last but not least, stocks are often a cornerstone of diversification. By spreading your investments across different asset classes, including large companies, smaller companies, international companies, bonds, and real estate, you can help reduce your overall risk exposure. Stocks, in particular, offer a wide range of opportunities for diversification, allowing you to balance out the ups and downs of other investments.

So, if you're nearing retirement age and wondering where to put your hard-earned money, consider adding stocks to your investment mix. They offer growth potential, potential hedge against inflation, the possibility of passive income, liquidity, and diversification benefits—all valuable elements of a well-rounded retirement portfolio.

Remember, investing in stocks comes with risks, and it's essential to consult with a qualified financial advisor near you to ensure your investment strategy aligns with your goals and risk tolerance. As you embark on your retirement journey, knowing what to know when retiring includes understanding the value of stocks in your investment arsenal.

Disclosures:

*sited by: https://www.fool.com/investing/how-to-invest/stocks/why-invest-in-stocks/

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy. AI (artificial Intelligence) sourced articles may be prone to error, due to the vast information they assemble from the internet. Always confirm any questions or concerns you may have with an experienced professional. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual

*Stock investing includes risks, including fluctuating prices and loss of principal

*The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Indexes are unmanaged and cannot be invested in directly

*Asset allocation does not ensure a profit or protect against a loss.

* There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk

* Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company

* All investing involves risk including loss of principal. No strategy assures success or protects against loss