Should You Get Out of the Stock Market for Good?

Knowing what advice to take about your retirement accounts, stocks, and mutual funds can seem an impossible task.

If you turn on any of the financial news channels, you will hear folks (many of whom are very intelligent, trustworthy, and respectable) telling you to invest for the long-term, diversify, and keep your money in mutual funds.

The reason they always give is that "Over the long-term, it always goes up."

This has been historically true, but is it still true today? And even if it is true, does it even matter?

Yes, the stock market does eventually go up over several decades. You don't need a financial guru to tell you that. You can look at the charts yourself.

But there is something else that goes up right along with the stock market, and that is the price of everything. Typically this is called inflation, but it doesn't matter what you call it. The point is that it makes your money worth less and less.

Consider this example: Your boss gives you a 20% pay raise at your job. Great, right? But when you go to the store, the price of everything has gone up by 20%. Your bills and expenses have all increased by 20%. Have you really gained anything?

It's the same thing with the stock market. The market may go up over time, but so does inflation. You don't really gain much, even though you feel like you have. And you might even be happy with that.

But what if the stock market doesn't go up?

Our economy has fundamentally changed over the past 20 years. Not only have the Internet made financial transactions faster and invisible, the rules of borrowing and lending money have changed.

The disparity is widening between members of the old Industrial Age -- with its slow transactions and slow money-making, and the members of the Information Age -- with its light-speed transactions and overnight millionaires.

The rich will indeed get richer, while the middle-class will get poorer. Why?

Because the middle-class will continue to invest their money by the old rules. They will continue to put money into mutual funds, diversify, and attempt to "save for the future."

The stock market will go up again temporarily, but it will come right back down. That is why I believe you should get out of the stock market (including mutual funds), the next time it rallies. Get out and stay out.

Instead of diversifying and investing in worthless paper, focus your money on creating more money -- by lending it out. That's right. There are plenty of people and businesses willing to pay a very handsome interest rate for the privilege of borrowing you money. (You can learn more about this at https://www.lendingclub.com//invite/respond.action?int=67555&referrer=benlending)

Another option is to borrow (yes, as in go into debt) to acquire rental real estate. This can give you a fantastic cash-on-cash return with much less risk that you have in the stock market. Contrary to popular belief, debt is not a bad thing. Debt is like a drug, it can be used to harm and it can be used to heal. It is up to you how you use it.

Whatever you choose to do with your money, be sure you take the time to learn and understand the ramifications of your financial decisions in light of history.

The material in this article has no regard to the specific investment objectives, financial situation, or particular needs of any visitor. This article is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments.