We should not let the weekend pass without noting that on Friday the Dow Jones Industrial Average closed at a record high of 16,064, andthe S&P 500 also hit a record of 1,804. The Dow's closing marked the 41st record high for 2013. More importantly, these averages stand at 13% and 15%, respectively, above their pre-crash highs on October 9, 2007.
Could there be another crash on Monday morning? Yes. Will the market continue to fluctuate with up years and down years? Yes. Generally, will equity (stock) investments continue to be the best investments over long time horizons as they have been since time immemorial? In all likelihood.
Still, over 50% of Americans' "investments" are in cash. Of course, these are not investments, they are savings, and are virtually guaranteed to continue to lose money due to interest rate risk and inflation risk.
Should everyone have a significant cash cushion for emergencies? Yes. Should 50% of the nation's investable assets be under a mattress? No.
Something like 80% of the nation's actual investments (other than cash) are owned by the richest 10% of Americans. Part of the reason is that many of the rest literally can't afford to invest. But another part of the reason is that many who can afford to take prudent risks to make their money grow simply won't do it, and remain in cash.
There are many reasons why the middle class is disappearing, and this is one of them. Only a tiny percentage of Americans have ever taken the trouble to learn the rules of money and apply them in a long-term, unemotional way. Those who have gained this understanding early in life have done very well in good times and in bad, but it's a curriculum that almost nobody teaches.
Where are you in your financial journey?
--I live paycheck-to-paycheck, so investing in anything is out of the question.
--I'm in cash because I'm frightened to be anywhere else.
--I'm a "trader," and play the market based on my own research and hunches.
--I'm in bonds, because they're "safe."
--I'm in commodities, because things like gold are solid, substantial and real. And my favorite radio talk show host recommends them.
--I own positions in a wide variety of asset classes, which I continually rebalance based on my investment goals, age and risk tolerance. I will never have a perfect portfolio and make a "killing," but I will never be in a position to lose it all either. My investment philosophy is "no big bets."
--Something else entirely.