Think about it. Why are they called 'common' shares, or 'preferred' shares? because you are just a commoner. or you 'prefer' to be treated like a dog begging for interest rates to remain depressed.
The reality is that equities (a.k.a. the stock market) is dominated by big boys.
mutual funds, pension funds, hedge funds, foreign investment funds. They control billions of dollars in cash on a minute by minute basis. THEY EFFECTIVELY CONTROL THE PRICE OF INDIVIDUAL STOCKS! with their gigantic trades in the hundreds of thousands of units, what effect, if any, will the individual investor have, taking his measly $500-$15000, against a mammoth trade from a corporate pension fund that trades in the millions of dollars per trade?
This market decline is dramatic and has exposed ALL, and I repeat ALL finanacial advisors and gurus who tell people to get into stocks as a wise form of savings and investment as fraudsters!
i'm not trying to be alarmist. The reality is that the stock market is simply a very risky arena for your personal savings. The exact same can be said about starting your own restaurant or becoming a professional poker player. you need a very large bank roll to withstand the dramtic ups and downs in your net worth. It's an area of investment for people with millions of dollars in asstes who also have jobs that already bring in large amounts of steady income.
ONLY these types of people can truly afford to invest large sums of money in the stock market. It is simply too risky if you do not earn at least $100 000 a year from your current job. regardless of your age, if you are someone who does not have a large inheritance and has had to work for your home, your education and to pay for your children and your retirement, you will ALWAYS have a great deal of anxiety if you invest your savings in the stock market. The past 6 months have shown us that anyone is vulnerable to losing 100% of their capital and net worth if it's overly invested in common stocks.
The reality is that everyone loves the idea of a 10%-15% return on their investment. It means that saving 10-15 thousand dollars a year will lead to a more affluent life when you are older. But this is only an average number, people who think that this is the typical return from the stock market take this average too literally. A literalist would put one hand in a pot of scalding water and the other in a pot of freezing water and tell you that the average temperature was nice and warm.
A laddered bond portfolio (investment grade corporates, provincial and municipal) will provide healthy, stable and secure returns. EVEN IF INFLATION RISES you will be able to purchase new bonds, at elevated interest rates.
Remember, when infaltion was at or around 8% in the 70s and 80s, interest rates on investment grade bonds were over 11%. inflation has recently (since the early 90s) been at or around 1-2%. the average yield of a properly constructed laddered bond portfolio is anywhere from 4-7%.
Don't be greedy, 5%. it's the magic number people. your investment will be safe, you can sleep at night, you can pay your taxes and yes, you can even retire.