The stock market is a wild ride these days. Even experts are scratching their heads about what’s next. More everyday people are jumping into investing, but they might be taking big risks without knowing it.
Wall Street veteran Jim Paulsen thinks regular folks should be more careful with their money. He’s the chief investment strategist at The Leuthold Group and has seen market ups and downs for over 40 years. “The market has been really good to people lately, maybe too good,” Paulsen told Yahoo Finance.
Some newer investors only know a market that goes up. When GameStop shot to the moon in 2021, many thought making money in stocks was easy. Apps like Robinhood made buying stocks feel like playing a game. But real investing isn’t about quick wins – it’s about growing money over time.
Paulsen worries people are putting too much money in risky investments. “I see regular folks with nearly everything in tech stocks or crypto. That’s like putting all your eggs in one basket,” he explains. If those investments crash, people could lose a lot.
The smarter move? Spread your money around. This old investing advice still works today. Put some money in different types of stocks, some in bonds, and keep some as cash. This way, if one investment falls, others might still do okay.
Many new investors don’t remember tough times in the market. The 2008 crash wiped out retirement accounts and college funds. More recently, people who went all-in on tech stocks in 2021 saw their investments drop 30% or more in 2022.
“I’m not saying don’t invest in stocks,” Paulsen adds. “Just don’t bet everything on the riskiest ones.” He suggests index funds that track the whole market as a safer choice. These funds own small pieces of hundreds of companies, so you’re not relying on just a few to do well.
For younger investors, time is on your side. Even if the market drops, you have years to recover before retirement. Older folks need to be extra careful since they have less time to bounce back from big losses.
Financial advisor Maria Rodriguez from Cornerstone Wealth agrees with Paulsen. “I see clients coming in with portfolios that would keep me up at night,” she says. “Taking some risk is okay, but you need to know how much you can handle losing.”
What about those amazing returns some people brag about? “For every winner story you hear, there are ten losers who stay quiet,” Rodriguez points out. The flashy success stories on social media don’t show the full picture.
Both experts suggest a simple approach: first, save an emergency fund with 3-6 months of expenses. Then pay off high-interest debt. Only after these steps should you think about investing in stocks.
The recent market has been unusual. Since the COVID crash in 2020, stocks have mostly climbed despite high inflation and rising interest rates. This isn’t normal, and markets don’t always recover so quickly from drops.
“We might be heading for choppier waters,” Paulsen warns. “Better to prepare now than wish you had later.” He suggests taking some profits if you’ve done well and moving some money to safer investments like short-term bonds or high-yield savings accounts.
The most important thing is knowing yourself. How would you feel if your investments dropped 30% tomorrow? If that would cause panic or sleepless nights, your portfolio might be too risky.
Smart investing isn’t about getting rich quick. It’s about steady growth that helps you reach goals like retirement, buying a home, or paying for education. Taking shortcuts might work sometimes, but often leads to big disappointments.
As the old Wall Street saying goes: “Bulls make money, bears make money, but pigs get slaughtered.” In other words, being too greedy usually backfires in the end.
