How Much Money Should I Invest in The Stock Market?
Many investing books say you must invest a certain portion of your capital in stocks and the rest in bonds. The figures vary, some say 50% in the stock market is too much, others say 20% is better and others believe that anything less than “everything” is a complete waste of time for the investor.
But really, how much should I invest in stocks?
The answer depends on several factors. The first is the investor’s risk tolerance. If you always had money invested in a simple savings account, you will have psychological difficulties in investing all your money in stocks. Likewise, if you’re an entrepreneur which is not used to any certainty in your life, you will probably feel more comfortable with the ups and downs of the stock market.
The recommended approach is that the investor should not invest a portion of his money that causes discomfort in the near future. If desired, you can always increase your investiments later, when you are better prepared.
The second factor is the purpose of investing and age. A teenager will have much more to gain by investing in equities than people older than 80 years. If you are middle age person, it pays to reduce the amount of investments in equities to get bonds, which are way safer.
It makes sense to invest a lot if you’re young and if you’re just a little older. In the case of a young man, if he loses anything, he has his whole life before his eyes, he can still recover everything and more later. But if he put all his money in bonds, he is really wasting his time.
On the other hand, if you’re old and already has the assurance of a secure source of income in bonds, it doesn’t makes sense to invest much more in equities just because you will not need the money anyway. Plus, what if somethin happens (like, hmm, the 2008 crisis) and you lose all your savings in the stock market? That’s not great, is it?
Therefore, as your getting older, you should become a more conservative investor.
Exceptions
Obviously there are exceptions. Most investors are not professionals. However, if you know the market like the palm of your hand, go on and keep investing in stocks. Warren Buffett has already passed the age at which normal people would be advised to stay away from equities but still remains firm and strong in investing. But Buffett knows what he’s doing, he knows how to invest in the stock market.
So this is it. If you’re young, try to invest at least 80% in equities and a 20% maximum in bonds. If you are afraid to invest directly in stocks, invest in an index fund (Buffett’s tip). If you’re middle aged, try to keep a 50/50 ratio. And finally, if you’re close to retirement, there is no reason to risk your savings, invest almost all (90%) in bonds and just relax.
Regulators Investigate Blue Cross’ Grip on Insurance Market
State regulators say Pennsylvania has one of the least competitive health insurance markets in the nation and they want to find out why.
The state Insurance Department has launched a formal examination of the four nonprofit Blue Cross insurers in Pennsylvania – Blue Cross of Northeastern Pennsylvania, Capital Blue Cross, Highmark Inc. and Independence Blue Cross – to determine if they engage in anti-competitive or unfair trade practices that violate state law.
The examination will focus on whether Pennsylvania consumers could reap the benefits of lower costs and greater choices from having a market that is more competitive, department officials said.
Pennsylvania’s market is less competitive than in nine other populous states because of a key indicator, state Insurance Commissioner Joel Ario said in an interview Monday.
That indicator is the market share of the Blues compared to major national commercial carriers.
The combined Blue market share is almost 60 percent in Pennsylvania, compared to Blue market shares ranging from 18 percent to 48 percent in other states. Texas has a Blue market share of 18 percent, New York 33 percent and California 24 percent, according to a department document.
That means national commercial carriers such as Aetna, UnitedHealth and Health America have a smaller market foothold in Pennsylvania than in those other nine states, Ario said.
The examination will explore whether the Blues’ territorial licensing agreements in Pennsylvania, under which each Blue does business only in its own region, are anti-competitive in nature.
If the Blues compete with each other instead of dividing up territory, then the national insurers and state-based insurers such as Geisinger Health Plan will have more of an opportunity to compete for customers, too, added Ario.
Other issues are whether the Blues use their market power to unfair advantage to force prices on providers and whether they have agreements among themselves that hinder competition.
Blue Cross of Northeastern Pennsylvania and Pittsburgh-based Highmark Inc. have a business relationship dating back to April 2005, when Highmark invested $34 million to buy a 40 percent stake and several board seats of two of the local Blue Cross’ subsidiaries. Highmark-appointed directors were given control over any major corporate changes.
They strengthened their business ties in 2007, as the Wilkes-Barre-based Blue Cross moved several popular insurance plans into one of the subsidiaries co-owned by Highmark. The shift meant more than half of Blue Cross of Northeastern Pennsylvania’s 585,000 customers at the time were subscribed to health plans partly owned and fundamentally influenced by Highmark.
“We welcome state regulators’ periodic reviews of market conditions,” said Anthony Matrisciano, spokesman for Blue Cross of Northeastern Pennsylvania, in a statement.
He said Blue Cross of NEPA has special obligations that affect its market share.
“As a Blue plan, we do have a unique position in the market in that we are the only insurers required to serve those considered uninsurable or high risk by other carriers,” added Matrisciano. “We are also the only carriers in the state statutorily mandated to serve as the ‘insurers of last resort.’”
The examination will start months after the collapse of a proposed merger between Highmark and Independence Blue Cross in January. The two companies withdrew their application several days before Ario had planned to deny the merger.
The commissioner said the merger didn’t satisfy the competition test, and a consolidated company would have had a 51 percent market share – an unprecedented level in a single state.
An examination is similar to a fact-finding process where the results will be made public. The department can enter into agreements with the Blues as a result or offer proposals for lawmakers to consider.
The department hired the law firm of Hangley Aronchick & Segal to serve as examiner.
The four Blues pay the cost for their own examination, Ario said. Therefore, he doesn’t think the undertaking will have a great impact on the department’s budget.