The stock market has everyone scared right now. If you're trying to get rich, though, you still need stocks in order to succeed. It's just more important than ever to make sure you pick the right ones.
Words that will doom your finances
Many people are questioning the long-held belief that stocks are the best way to make money in the financial markets, with a well-worn argument: "This time, it's different." A decade of flat returns for broad market measures like the S&P 500 certainly bolster that argument, as anyone who put their money in even simple bank CDs has dramatically outpaced the overall stock market. Gold, a historical safe haven in times of turmoil, has quadrupled from its lows a decade ago, and investors have responded to that uncertainty by buying up shares of precious metals investments like specialized gold ETFs. The SPDR Gold Trust
Believing that history won't repeat is a dangerous position to take, though. According to research from Jeremy Siegel, a 10-year period where stocks trailed bonds is far from unprecedented: It has happened about 20% of the time. Over the length of a typical worker's career, 30 years or more, stocks have always done better. And with bonds on top of the world while stocks are stuck in the doldrums, do you really think that an investment in bonds today is going to do better than money put in the right stocks?
Get the stocks you need
For money you can invest over a fairly long time horizon -- that is, money you don't need within the next five to seven years or so -- you should concentrate on stocks and other higher-risk, less conservative investments. You can afford to weather the occasional market storm with this money, as we've seen with 2009's big gains after 2008's staggering losses. You may not always end up a big winner with stocks, but you'll greatly increase your chances of maximizing your returns over an ultra-safe, low-growth portfolio.
What stocks should you pick, though? The simple way out is to use index funds or ETFs to give you broad, low-cost exposure to the overall market.
But if you'd prefer to take a stand on some particular stocks, I'd urge you to consider some broad trends that will develop in the coming decades. Here are a few.
1. Buy the essentials that people need.
Whether you think emerging markets will bring the next global boom or are simply overhyped, the rise of billions of people in emerging economies means one thing: More people are going to need more things. In particular, companies that produce raw materials that go into all sorts of necessities will be poised to profit in the decades to come.
For instance, Titanium Metals
2. Grow old with your stocks.
Companies respond to demographic trends. The ones that do the best job can profit the most.
An aging population will need more health care, which supports not only obvious picks like Merck but also riskier plays. Dendreon
3. Stick with survivors.
Just because you should take risk doesn't mean you should take too much risk. It makes sense to balance risky plays like the ones above with some more secure picks.
Companies with a long history of paying ever-increasing dividends are a good place to round out your stock portfolio. Procter & Gamble
Stocks will play an important role in whether you can retire rich. If you get off on the right foot, you'll have the best chance to have the retirement of your dreams.
Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.
Fool contributor Dan Caplinger ain't afraid of no ghosts, or a falling stock market either. 3M is a Motley Fool Inside Value recommendation. Intuitive Surgical is a Motley Fool Rule Breakers selection. Titanium Metals is a Motley Fool Stock Advisor pick. The Fool has opened a diagonal call spread position and written puts on United States Natural Gas. The Fool owns shares of Procter & Gamble, which is a Motley Fool Income Investor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy doesn't have to worry about retirement; you'll find the Fountain of Youth in its Duke Street penthouse.