42% of Americans are delaying their investments because of the conflict in Ukraine. Here’s why it’s a mistake
Jhe war in Ukraine has many people on edge, including American consumers. In fact, 73% of Americans think this will have a negative effect on the US economy, according to a recent MassMutual poll. And 66% fear that the war will have a negative effect on their day-to-day finances.
On a positive note, 46% of Americans are looking to increase their savings in light of events abroad. On the other hand, 42% are delaying investments in response to the crisis. And that could be a huge mistake.
Why waiting to invest does not pay
If you don’t have a fully loaded emergency fund, increasing your savings should absolutely be your first financial priority. This applies not only because of the war in Ukraine, but as a general rule.
However, if you’re ready to save some emergency money, you might not want to let the situation in Ukraine stop you from continuing to invest. While the war in Ukraine could result in a more volatile stock market in the short term, we have to hope that the crisis will resolve itself in time. But if you miss the opportunity to invest in the short term, you could lose serious growth by sitting still.
Imagine you were planning to invest $10,000 this year in a broad-market ETF (exchange-traded fund), but instead decided against it because you feared the war in Ukraine would drive down stock prices. short-term stocks. Let’s also assume that the same ETF offers an average annual return of 8% over the next 30 years, which is a little below the historical stock market average. By not investing your $10,000 and letting it sit for 30 years, you could end up losing $100,000 if you factor in that 8% growth.
Even if you delay your $10,000 investment by a single year, you’ll actually end up $7,000 short of $100,000 with a 29-year growth window instead of giving you a full 30-year window. , assuming the same 8% yield. That’s a lot of money to pass up.
Plus, if you typically invest your money in a tax-efficient retirement account like a traditional IRA, and choose not to fund that account this year, you could end up paying the IRS a lot more money than you need. . And if you’re not funding your 401(k) plan because you’re worried about the effect of the Ukraine war on the stock market, you could end up missing out on a generous employer match.
A better bet? Stick to your investment plan rather than putting it off.
We do not know to what extent the crisis abroad will ultimately affect the overall market. And it’s certainly wise to arm yourself with a comprehensive emergency fund in case the US economy takes a turn for the worse. But do not give up investing because of what is happening abroad. If you do, you could end up with a slew of wealth building opportunities lost in your hands.
10 stocks we like better than Walmart
When our award-winning team of analysts have investment advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*
They have just revealed what they believe to be the ten best stocks for investors to buy now…and Walmart wasn’t one of them! That’s right – they think these 10 stocks are even better buys.
View all 10 stocks
Equity Advisor Returns 2/14/21
The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.