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Stock market corrections. Recessions. Downturns.

Many Monmouth County investors think these pose the biggest risks to their retirement savings. And that fear often keeps them from investing in stocks.

But what many investors don’t realize is that there’s an even greater risk associated with investing in bonds and Treasuries: inflation.

I’ve identified inflation (or failure to maintain purchasing power) as the number one risk faced by investors across the country.

And Warren Buffett agrees.

In his recently published 2014 annual letter and report, the Sage of Omaha stresses the importance of investing to overcome inflation.

Here are three ways his message echoes mine.

(1) Owning shares of great companies pays off over owning bonds.

In the short-term, stock prices are much more volatile than cash-equivalent investments. But the long-term outlook for currency-based investments is much worse because of the effects of inflation.


(2) High fees and poor behavior continue to be the bane of many investors.

There are many investing behavioral factors that can contribute to poor returns, especially making the Big Mistake – selling out just as stock prices are poised to rebound. Not to mention paying the high fees commanded by some managers and advisors!


(3) The real risk is not stock market volatility, but rather maintaining purchasing power.

Only stocks with growing income and dividends have consistently beat inflation over time. During the past 50 years, investors have been much better off investing in a diverse portfolio of successful American companies compared to securities, which are tied to cash, and thus, inflation.


Don’t Bail on Cash Just Yet

My company ValueAligned® Partners makes sure we have some emergency cash invested in FDIC-insured bank deposits so we are not forced to make the Big Mistake and sell stocks when the next bear market hits – once every five or six years.

If you have a meaningful need for cash in the next few months or years, consider investing some of your money in money market funds or Treasuries.

Just remember that your best bet for saving for retirement is always to invest in stocks of great companies – and to stay invested in stocks of great companies, even during corrections, recessions, or other downturns.

The truly successful stock investor earns more money for retirement by weathering stock market storms.

And following Warren Buffett’s investing wisdom doesn’t hurt, either:

“Be greedy when others are fearful, and be fearful when others are greedy.”


Maintaining Purchasing Power with Stocks of Great Companies

Since 2002, I’ve been helping investors in Middletown, NJ; Red Bank, NJ; and throughout the U.S. save more for retirement simply by investing in a diversified portfolio of stocks of great companies.

You can get on the road to retiring earlier and more comfortably starting today – all you have to do is contact me at or 732-800-2375.

If you would like me to contact you, please fill out the form below and I will be in touch shortly.

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Image Credit: pippalou | morguefile