Is This Really So Necessary?

They say we must all invest some significant portion of our assets into stocks. Is this really necessary?

Maybe a better question is "Why is this so necessary?".

Investing our hard earned money in stocks has become a "sine qua non" of good investing and good planning. Statistics about that show how there's no better place to put your money for the long term. We've all seen the spreadsheet samples of putting money "to work" in stocks at a young age, and watching it grow - mushroom really - to some unfathomable fortune by the time we reach and age where we not longer want to work - a/k/a retirement age.

It's an ideal model that we're called to aspire to, urged to incorporate into our planning, even to the point where we're warned that if we don't do this we stand little chance of having a secure retirement. 

But first, let's address the "retirement" thing. The contingent out there - and there are some - who don't get the whole retirement aspiration prefer thinking something like "the time we stop earning our peak full-time salary" or something like that. Indeed, many of us don't really want to "stop working." Work is a full and satisfying part of our lives. What is life without work?

The perfect way to understand this attitude may be the life of monks. Yes, monks. If you read the Rule of St. Benedict - and you really should - you see that "ora" (prayer) and "labora" (work) make up the bulk of the monk's day. Each monastery tries to support themselves. Many successfully do this. Indeed, the history of monasticism, which stretches to ancient times, proves the point. Monks were self-sufficient. They "work for a living." Their time for prayer comes in orderly bursts throughout the day. Traditionally, these prayers are chanted in community. (In fact, these times are called the "work of God.") Outside of prayers, monks work. Sure they have time to eat and some time for a refreshing break, or recreation. But life revolves around the two "pillars" of prayer and work (ora et labora in Latin).

And so work continues until the day of death.

Some of us - whether we connect our thoughts with the life of a monk or not - see work as continuing until - yes, you guessed it - our day of death. We hopefully leave this world with the knowledge that we have put forth our best efforts in our work. For Catholics, we might think something like we've done our best to work for the greater glory of God, the welfare of our family, the benefit of our clients and customers, and the common good.

To acknowledge this brings on a satisfying feeling of having done what we were created to do, an essential part of our mission to know, love, and serve God.

A bit of a digression, perhaps, but let's not stop there.

Fact is, retirement is a relatively new phenomenon. It was more or less "created" in the 20th century. Try to find talk of retirement before that and you'll come up empty handed. Those who needed to work for a living simply worked while they were living - best they could. Sure, some couldn't continue working as much as they aged. But they didn't "retire." Ideally, they had a family and they contributed to their family's well-being even if that meant living and working in the family home, where they remained until death. 

The old TV show "The Waltons" shows this, in case your not familiar with how many folks lived in the "old days."

This dredges up another point we won't address today: the dissolution of the traditional family. It served society well for centuries. It's dissolution, if not destruction in many cases. leaves so many of us vulnerable to old age. And even those who have families are frequently shunted off to various institutional arrangements to live out their dotage, with assisted living and long-term care facilities being the best examples.

Well, that was a rather long digression from investing in stocks. So where do stocks fit into all this? 

Setting aside for now the shunting aside of old folks, as described, whether we want to retire or simply continue to work, if we manage to save something beyond our expenses (and we of course should, or rather, must), then we have to put some of that money into our investment portfolio. That's the common accepted wisdom. And a portion of the portfolio must be in stocks if we want our money to outlive us rather than the other way around.

Guess what: It wasn't always so.

Once upon a time, investing in stocks was considered to be basically speculation, even gambling. When one save money, the first place it went was to "the bank," there to earn interest. And as that interest compounded, the little pot of our savings would grow. And - with no need to speculate - we could see have that pot become a source of money to use in our latter years, especially if we reached an age where we no longer worked and earned money.

Banks once paid steady and reasonable interest. Growing up in that world, your parents could open up an account for you and you'd put money into it. When you went to the bank (there were not online options) you took your "passbook" with you. You handed the money and the passbook to the bank teller. They deposited your funds, updated the passbook and handed it back to you. You could see your balance along with a column that showed the interest you earned. It was a satisfying experience. Indeed, it encouraged you to want to put more in, just to see those totals grow. 

People of a certain age might remember this. Younger folks need to use their imaginations and picture what was just described. 

Nowhere in all this did stocks come into the picture. The basic saving, earning interest that compounded, was the meat and potatoes of the average working middle class financial life.

Stocks were something speculative that you might consider if you had "extra" money. Many of us had not extra money after we paid our bills and saved some percentage to put into the bank.

I remember my Dad talking about do-workers who bragged about buying some stock that shot up. I think he might have been tempted, even put a few bucks with a stock broker. (You had to give your money to a stock broker back then. Again, no online option.) If he did, he didn't hit the lottery. And he never really invested in stocks again during his working life. 

Well, this is getting long. There's  lot more to say. In the end, it's an attempt to question the accepted wisdom that you can't have a healthy financial life without stocks - or at least without a significant chunk of your money in stocks. 

For now, we'll just sit with the admittedly nostalgic story about how things were for us regular folks all those years ago. At some point, maybe we can circle back to whether stocks are really necessary to financially survive and/or prosper in this world of ours.

Meanwhile, the call of our Memorial Day (Observed) weekend echoes. It's time to sign off and enjoy the weekend with family and friends. Maybe a BBQ?