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What to Expect From Consumers This Holiday Season: Shopify President
What to Expect From Consumers This Holiday Season: Shopify President

Here's Why You May be Taking Money out of Stocks--and Why You Shouldn't

The S&P 500 has slipped 16% year-to-date, but has rebounded 12% since Oct. 12.
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As you’ve surely noticed, rampaging inflation is putting a dent into many areas of your budget.

It can mean buying less groceries or trading down in brands, it can mean less travel or trading down in the level of your trip, and it can mean buying less holiday gifts or again trading down in brands.

Inflation also can force you to curb your investing in stocks. A total of 25% of us are moving money from stock investments to everyday essentials like groceries, gas, and housing, according to a study from Wells Fargo bank.

The same amount of us are putting less money into stocks to begin with, because we need to keep cash available for these regular household expenses.

Top 5 Cash Needs

The top five budget areas in need of cash are:

  • Groceries, cited by 58% of respondents
  • Transportation and gas, cited by 47%
  • Utility bills, cited by 42%
  • Debt, cited by 39%, and 
  • Housing, cited by 34%

Experts at Wells Fargo don’t think it’s such a hot idea to abandon stocks. “When you pull money out of your retirement accounts, you’ve locked in market declines,” said Michael Liersch, head of advice and planning in Wells Fargo’s wealth and investment management business.

Presumably, much of the money in your retirement accounts is invested in stock funds.

Keeping a lot of money in savings and money-market accounts isn’t such a hot idea, either, according to Wells Fargo.

“When you hold your money in cash, you forgo potential future investment returns,” Liersch said. “Remaining balanced in your approach may help you achieve short- and long-term financial success.”

Further, “saving and investing is not a light switch that you turn on and off,” he said. “It’s better thought of as a dimmer switch that you should regularly revisit and dial up or down based on your present and future needs.”

Retirement Worries Weigh

Speaking of retirement, if you’re worried about financing it, you aren’t alone, regardless of your wealth bracket.

When it comes to people with $1 million or more of investable assets, things look good on the surface, according to a survey by wealth management firm Natixis. A total of 79% of millionaires say they will be financially secure in retirement.

But scratch that surface and the fears come out. Almost as many millionaires say it will take a miracle to achieve a secure retirement (35%), as do investors overall (40%).

Read more from TheStreet's Retirement Daily: Think You Can’t Retire Now? Think Again. Our expert shares the four key factors to a financial plan and what determines if you can retire now versus later on.

“One key reason may be that the million-dollar mark may not be as significant as it once was,” Natixis’ said in its commentary accompanying the survey.

“The millionaire handle has always held a certain mystique. But over time, the picture of wealth it paints has changed dramatically.

“Where our grandparents may have envisioned the Monopoly mascot--Uncle Pennybags--as a millionaire, we’re more likely to think of our neighbors. Gone are the top hat, morning suit and spats. In their place are a pair of jeans, running shoes, and a comfortable sweater.”