Why I’m Rooting Against The Stock Market

First, let me clarify. I’m not rooting for it to drop like it did last year, I’m just hoping it doesn’t increase like it did in the first half of this year. At least not yet.

Entering the workforce, you may think that this would be the best time for me. I didn’t lose anything last year and as the market improves, my investments will do well. Over time, we may look back and decide that 2009 was one of the best points in history to start investing.

So why am I rooting against the stock market?

Because I haven’t really been investing yet! I’ve contributed a small amount to my retirement savings since August, but don’t have significant amount of money in that account. I am trying to save up money so that I can invest outside of my retirement, and while I am in that process, big percentage gains on small amounts of money won’t make that much of a difference. Why make $100 on my $1000 investment now (10% return) when next year, that 10% increase could mean $500 a year and increase after that? So until I have a little bit more money in investments, I’m not quite ready for the stock market to take off.

Also, interest rates are extremely low right now. That includes my student loans. Right now, my debt is only accruing interest at a rate of around 3%, which is extremely low, and as the market improves, the rate will increase. My plan is to pay the minimum on my student loans while investing my extra income, thinking that if my returns exceed the interest rate of my student loans, I’ll come out ahead. So when I have a little more money invested, I’ll be able to make more significant gains and have results to show for my effort. Also, the market will likely improve before the student loan rates increase, so I’ll have a little bit of a head-start before the student loan interest rate increases.

This is a very short-term view, but that’s the situation I’m in right now. I can think of other situations where I would like the market to stay low. When I buy a house and get a mortgage, a weak economy would bring low mortgage rates. By locking in a low rate, I would be able to save a considerable amount of money over the life of the mortgage.

What are you rooting for this year?

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