Michael Stadler of Osteopathy Central, whom I coach on his retirement savings, already knows: investing in stocks has a big drawback: he cannot do precise planning anymore.
For example, if you put your money under your pillow, you will know exactly how much you have saved and how long it will take until you can buy a house.
With stocks, you lose this predictability. Depending on how the markets behave, you might have to wait a few years before you can finance your house.
On the other hand, saving is much shorter on average because the shares provide an additional return that you won’t get by putting your money under your pillow. That’s why the problem of not being able to plan is not really a disadvantage. The higher flexibility for creating your lifestyle is rewarded by the fact that you usually don’t have to wait as long, in other words, your saving period will be shorter.
In addition, stocks are liquid, meaning they can be sold at any time. This is a great advantage for Michael Stadler that many laymen are not aware of. The liquidity of stocks is often greater than that of mutual funds, which are being recommended to savers around the world. A questionable practice.
In Western stock markets and with stocks from big companies, shares can always be sold. Globally there are very few exceptions, such as recently in China, when shares were no longer available for sale. This was the case during World War II in Western Europe.
Michael Stadler should, therefore, sell his shares independently of the stock market and solely because he needs the money. This also applies to retirement. Michael Stadler will not need all his retirement money in one go the day he retires but over a period of many years and even decades. This is especially true for a person who is well-versed in health care.