My search for proper long term investment brought me to this book " Irrational Exuberance" by Robert schilling. It is now considered as one of the classics of market irrationality. It is a thoroughly researched book documenting graphs from a hundred years. This book is about the hype created by media and general guru advice that stocks are always superior to other kinds of investments like the bonds or other inflation indexed bonds. But the truth according to the author is that it is not true. Just because in the past 2-3 decades stocks have outperformed other investments it does not mean it is true forever in the future. And especially for retirement investments like the 401 k stocks are the most risky. Because the elderly blindly invest in stocks to see them decline when they most need it. This has happened recently in 2008 market crash. Retirement funds have decreased by almost half. There is so much wrong advice around that we fall into the trap unawares. This the kind of book to remedy over enthusiasm about stocks and their truth in the past.
I found good advice at the end of the book to fight inflation. Stock dividends is one good way to beat the inflation but the problem with that individual investment is that the price of the stock is volatile and one may loose on the capital if the stock market conditions are not good. Of course on has to search for a fundamentally sound company to profit from increasing dividends but apart from that there are many other factors that influence the price of the stock, one of them is psychology of the investors at that time.
Coming to the good advice in the book is to invest in government inflation indexed bonds like TIPS. One can purchase them at Treasury direct website. These bonds are inflation adjusted and one never loses money because of inflation as one does if the capital money is sitting in bank accounts which give interest rates below inflation rate. These inflation bonds are good alternatives for long term retirement investments. Some of the money should definitely be used to buy TIPS. I opened an account online and may be diversify a certain amount in it too.
Apart from making more money, it is a difficult job just to secure the money hard owned money. Stocks can be a easy way to loose all one's saving if one does not sell soon when there is a market crash. The 30 day MA method is very useful to get out of the stock from looking at the 30 day MA of S&P or any other major index.
The usual guru advice to hold onto stocks when they are diving is a recipe for financial disaster. There is no other advice that can ruin ones saving. When the market is crashing one has to get out of stocks into money market funds which is equivalent to cash. If one does not do it, and listens to guru advice from fund managers, who often advice to hold on to stocks because they presume and advice that the stock market will come back to the past highs in a couple of years.
This false logic is also been dealt in this excellent book about irrationality.