Why I invest in the stock market
I’ve been wary about the long-term outlook for the State Pension for some time. That’s the single biggest reason I started investing in the stock market a few years ago.
The latest study from the Institute for Fiscal Studies (IFS) suggests my scepticism is well-founded. It suggests that – unless something changes – the State Pension age might have to go up to 74.
Pension problems
The triple lock on pensions guarantees the amount the paid out to its recipients increases each year by at least 2.5%. But there are a lot of issues with its long-term sustainability.
On one side of the equation, longer life expectancy means more people receiving the State Pension. On the other side, lower birth rates and higher benefit claims reduce the UK’s capacity to finance it.
Politically, it’s tough for any government to scrap the triple lock. So to limit the pressure on the UK’s finances, the age at which people become eligible to claim has been increasing.
According to the IFS, something has to give sooner or later. If the triple lock stays in place, the Stare Pension age is going to have to rise to 69 by 2049 and 74 by 2069.
Investing for retirement
I quite like my job. But it’s not the thing I enjoy most in the world and I don’t want to be in a position where I have to do it until I’m 74.
That means I’m going to have to find a way of generating extra income I can use until I become eligible… whenever that is. And I think the stock market is where I want to be.
Fundamentally, investing in stocks isn’t about predicting what share prices will do. It involves becoming an owner of a business and earning a return from the profits the company produces.
Over the long term, I think an ownership stake in some of the world’s best businesses is likely to provide me with a better income stream than cash or bonds. And that’s why I invest in the stock market.
An example
A good example is confectionary producer Mondelez (NASDAQ:MDLZ). The enduring popularity of its products – which include Cadbury, Oreos, Toblerone, and more – put the company in a strong position.
If I tried to start a business making chocolate, I’m pretty sure I’d find it near-impossible to compete with these names. But there’s a threat that investors have been paying close attention to recently.
The rise of GLP-1 drugs could have meaningful implications for chocolate consumption over time. I think this is a genuine risk, but it’s worth noting the company doesn’t really agree.
Mondelez estimates the effect of anti-obesity medication on sales volumes is going to be less than 1% over the next 10 years. And if it’s right, the outlook for the business could be very promising.
Investment returns
Over the last 10 years, the dividend per share – the cash Mondelez returns to investors – has more than tripled. And I like the idea of funding my retirement with a share of the firm’s future profits.
The GLP-1 threat’s something to think carefully about. But for investors who share the company’s view that the long-term impact is relatively limited, I think the stock’s worth considering.
The post Why I invest in the stock market appeared first on The Motley Fool UK.
Should you buy Mondelez International, Inc. now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence,
he says. Meanwhile, they’re hellbent on achieving net zero emissions.
No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
More reading
- UK shares look cheap to me! But not this one…
- Where next for the Persimmon share price?
- Prediction: in 12 months the rampant Tesco share price could turn £10,000 into…
- As the US dollar falls, is now the time to buy US shares?
- 2 FTSE 100 stocks to consider for a second (or third) income!
Stephen Wright owns shares in Mondelez International. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
