June 25, 2009, 5:48 am

Can We Still Make Money Out of the Stock Market?

by: The Financial Blogger    Category: Investment, Market and Risk
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I have been a financial planner for the past 15 months. During this period, I decided to pursue build my book of business with two different types of clients: The first group is the ones that my banks want in order to grow right away (people with more than 250K invested). The other group is what I think is the future of all organization and what banks seemed to completely forget right now: the young professionals / the first group’s children!

This is how I sign a lot of “small” account with people my age making 75K+ with very promising career. They barely show in my numbers since they didn’t have time to accumulate 250K, however, I know that I can build a strong relationship with them and they will be the one brining in the money to banks in 15 years! One thing I really like about young professionals is that they ask a lot of smart question such as:

Can We Still Make Money Out of the Stock Market?

They look at what happened to their parents in 2008, the huge amount of money loss on paper, and they really wonder when they will get it back. It is going to take a while…. That is the cold hard truth. However, it will come back 😉

So they think; what if there was another way to make money then investing in the stock market? Most of them refer to start their own business or investing in real estate properties. So today I will answer the first part of the question (can we make money out of the stock market?) and the following day, we will look at those 2 other options that may become great financial solutions as well.

I do believe that we can make money investing in the stock market

After so many years losing money and looking at others being discouraged, a lot of people are wondering if their RRSP wasn’t the worst joke in history. This perception comes a lot from the lack of financial knowledge or the way their portfolio statement is built.

When we look at the current market, we lost about 5 years of growth, which bring us back right before the techno bubble. 3 months ago, I would have said that the last 10 years brought a 0% yield (this happened 5 times since 1920). We you look at these facts, there is nothing glamorous about investing in stocks. Why bother when you could have made 4-5% with bonds? Unfortunately (or fortunately), numbers can say everything we want them to say. In 2007, most financial advisor were talking about the last 5 years returns. Why? Because since 2002 (after the techno bubble, September 11th and financial scandals such as World Com and Enron), the market surged and never look back. Therefore, we were talking the stock market at one of its low and showed them in 2007 at its peak. Most funds were making double digits numbers (emerging market funds were showing annualized return of 20% +!). Nobody was questioning if we could make money at that time!

Now that we are back to a low level on the stock market, we are discussing if we really can make money out of it. Well, let me tell you that I signed accounts in the middle of the market turmoil (in October and November), and they are all making more than 10%, even if they were conservative investors. Why? Because they happened to invest in the right timing!

So my point is the following; if you are 30 and you wonder if investing in your RRSP is a good strategy to retire wealthy, you should look at the next 30 years in term of yield instead of thinking what happened last years. I’ll tell you a big scoop; this is not your last financial crisis 😉 However, we should not got through another one as big as this one!

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