Are Stocks Worth It?

Now that talk of a double-dip recession has new life, what with the Economic Cycle Research Institute’s weekly leading indicator index turning down for the first time in 18 months, people are asking if stocks are worth the trouble. “Do they suck, or what?” one reader asked.

They can, and for long periods, too. From about the end of World War II to 1956, stocks went mostly up. Then, until 1982, they went mostly down. That’s 26 years. For the next 18 years until the dot com bubble burst in 2000, stocks went mostly up again. Since then it’s been a mixed bag, but overall not good, and quite a few analysts are saying we’re only somewhere around halfway through what will end up being a 20-year period of stocks going mostly down.

Opportunities within the market? Sure, even in a bear market, as last year proved. For a typical part-timer, though, the stress and work of finding stocks that will go up and then hoping to be right isn’t worth it. As the editor of a stock newsletter, I’m not supposed to write that, but it’s true. Most people would be better off investing profits from their jobs or their businesses into cash-producing assets like a small business or income property. There’s more control over the outcome, more pleasure in the process, and more strength for the economy.

The stock market was once about allocating capital to worthy businesses. There’s still a little of that going on, but it’s mostly become a crapshoot among high-frequency desks at the still too-big-to-fail and now government-backed banks. You did know that they’re trading with your tax dollars, didn’t you? That’s why there’s so little lending going on.

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