The young and risk-averse
Conventional investing wisdom recommends taking on risk early in life, when you have time to ride out storms in the stock market, said Sarah Morgan in SmartMoney. But young investors today “are no longer buying it.” A recent Merrill Lynch survey found that investors under 34 are more risk-averse than those in any age group other than people over 65. Over the long run, though, sitting out of the stock market can actually be riskier—especially if you put your money in more conservative investments. Without stocks to fuel returns, young investors may find that portfolios consisting primarily of cash and bonds can’t carry them through retirement. That may be more worrisome than temporary bumps in the road.
Bracing for D-day
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Ominous warning signs suggest that a “bout of deflation may be coming,” said Jane J. Kim and Eleanor Laise in The Wall Street Journal. The core inflation rate increased a paltry 0.9 percent over the past year, and investors may need to brace themselves for the deflationary downward spiral of falling corporate profits and job losses. Some investors have been flocking to bonds, whose fixed-interest payments can be a lifesaver if deflation rolls in. Though deflation is “generally bad news for stocks,” consumer-staple companies with lots of cash and dependable dividends should tend to hold up. But limit your exposure to financial firms: “As borrowers struggle to pay off debts, lenders could face more defaults.”
Say no to stuff, yes to trips
Can money buy you happiness? asked Stephanie Rosenbloom in The New York Times. That depends. Several different studies point to one conclusion: “Spending money for an experience—concert tickets, French lessons, sushi-rolling classes, a hotel room in Monaco—produces longer-lasting satisfaction than spending money on plain old stuff.” Whereas most physical goods tend to lose their appeal as the purchaser becomes accustomed to them, experiences strengthen social bonds and pay dividends over time. We reminisce about them, often sugarcoating the details, so that in hindsight, even a hellish family road trip or expensive journey abroad may ultimately seem like money well spent.
