Those that have money in the stock market through investment vehicles such as stocks, mutual funds, 401k’s, IRA’s, or similar investments, could be “victims” and could be losing money as Michael Lewis describes in his book Flash Boys.
Not only could these investors be losing money in the stock market as victims, but they could be subjecting that money to more risk than they might think.
The Difference between Saving and Investing
Unfortunately many have come to believe that saving and investing are one in the same, which is simply not true. For example, some of the characteristics of money for “savings” could include: safety, liquidity, guarantees, no risk or minimal risk. Characteristics for “investing” usually include: risk, speculation, and a chance of loss.
“Savings” vehicles could include savings accounts, money market accounts, Certificates of Deposit (CD’s), bonds, cash value life insurance, etc. Common investment vehicles include stocks, mutual funds, 401k’s, 403b’s, 529’s, IRA’s, and other Qualified Plans.
Most people are “saving” money in the wrong place.
Most people are “saving” for retirement, or “saving” for a child’s college education in the stock market. The stock market is for “investing” money, not “saving” money.
Think of your money in buckets
Money that you want to be there in the future should be in the savings bucket. Money that you are willing to risk and subject to loss can be put into investments. I have seen people put “savings” money into the “investment” bucket and lose so much of it that it almost ruins their life.
So what you can you do about any of this? The obvious answer is to keep your “savings” money out of the stock market. Look for good savings vehicles. Look for savings vehicles with “investment-like” qualities.
Re-evaluate where you are saving money and where you are investing money. And, be sure your savings vehicles, and possibly even your investment vehicles, have the two fundamental characteristics of guarantees and liquidity. These are key to financial success!