Wait. Treasuries are as safe as it gets. Right?
Yes and no. If you bailed out of the stock market and bought Treasuries last fall or winter, you're probably earning less than 4%, maybe a lot less. That isn't going to cut it over the long term. Even if you bought TIPS -- "Treasury Inflation Protected Securities," with an interest rate that adjusts for inflation -- the premium over the inflation rate isn't going to give you much if any growth. Not enough to retire on.
TIPS will preserve your capital, but if you need growth to achieve your long-term goals, you need to get back into the stock market. If you're still in stocks, you need to be smart about what you own.
Uh-huh. The S&P 500 is lower now than it was 10 years ago. How does that help me?
The S&P 500 is not every stock in the stock market. It's an index of big U.S. stocks, and the biggest -- names like, oh, Microsoft (Nasdaq: MSFT) and General Electric (NYSE: GE), just to pick a few -- have much more impact on the index's movements than smaller companies such as Wynn Resorts (Nasdaq: WYNN) and Pulte Homes (NYSE: PHM).
Many of those big-name stocks have gotten torched recently, but lots of folks have made good returns in the last decade with stocks, whether chosen on their own or via mutual funds. Not just crazy flyers like Dendreon (Nasdaq: DNDN), either -- boring old Altria (NYSE: MO) has more than tripled over that time, if you count reinvested dividends and the value of the Philip Morris International (NYSE: PM) spinoff. You can find lots and lots of other examples. But you didn't need to own individual stocks, or even world-beating mutual funds -- even index funds have worked out for those who owned a diversified set of them