Is the stock market today too risky?

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By Donna Hein

Sometimes when people see the stock market fluctuations like we’ve had in 2020, or they think back to the stock market crash decades ago or the smaller crash in 2008, it causes some uncertainty. And they may believe the stock market is too risky.

It’s riskier, frankly, to not be investing money in the market, says Mark Simenstad, vice president and chief investment strategist at Thrivent.

“The mix of your portfolio should take your age into account, but the stock market should be part of any well-diversified portfolio,” Simenstad says.

It’s really not about whether the stock market is too risky. It’s about how your investment risks are being managed according to your retirement goals.

“You need to take a bigger view of the market,” Simenstad says. “For example, if you take a 10-year view of the market, there have only been a few periods that if you held steady for 10 years you didn’t make money.” Working with a financial professional can help you align your long-term goals with the right investment tools.

It’s also about riding out volatility, says Patrick Egan, director, Financial Advice, at Thrivent. “The longer you stay invested, the impact from the volatility is lessened.”

Plus, Egan asks, where else would you put your money right now? Certificates of deposit and money market accounts don’t offer much benefit in a low interest rate environment, he says.

“We’re at historically low interest rates,” Egan says. “If you save for retirement in these accounts, it's unlikely you could save enough with the yield you would be getting. Sure, you’d still be saving money, but after modest inflation like we’ve had, you’d have a negative real return. You’d lose spending power.”

All financial decisions come with some level of risk; the stock market is no exception. Past performance is not necessarily indicative of future returns. It’s important to understand your own risk tolerance, your goals and, working together with a Thrivent financial professional, create a strategy that allows you to invest confidently.