Given the crash of 2008, how do you explain to a person in their 20's or 30's why a good portion of their retirement funds should go into the stock market? (And if you wouldn't, what would you recommend instead?)
I would start with long term data. It would show how 40 years worth of stock investing puts the investor so far ahead of the "safe" investor that they can afford to lose half and still be ahead. But - then I would explain about asset allocation, and how the soon to be retired person had better be properly allocated if they weren't all along so that the impact of down years is mitigated. The retiree is still a long term investor as life spans of 90 are common. Look at the long term charts for the major indexes. So long as you average in, reinvest earnings (dividends) and stay diversified, you will be ahead. The market is still not where it was at the end of 2001, but in the decade, our worth has risen from 5X our income to 12.5X. This was not genius, just a combination of high savings and not panicking.
Look. Here's a graph of the S&P 500. It's up 1200% since the start of the 70's, our late recession notwithstanding. You're not going to get that kind of return on bonds or commodities or savings accounts. (Maybe real estate stands a chance, if your real estate wasn't in, say, Detroit. It's not as easy to diversify real estate...)
People in their 20's who have plenty of time before they need to spend their retirement money invest in the stock market exactly because they're long-term and can withstand these dips just by waiting them out, and earn a ton of money. People approaching their 60's transition their portfolio to bonds so that a market crash won't wipe them out.
The stock market, as a whole, is extremely volatile. During any 3 year period, the market could go up or down. However, and this is the important point,the market as a whole has historically been a good long term investment.
If you need the money in 5 years, then you want to put it in something less volatile (so there's less chance of losing it). If you need the money in 50 years, put it in the market; the massive growth over those 50 years will more than make up for any short term drops, and you will probably come out ahead.
Once you get closer to retirement age, you want to take the money out of stocks and put it in something safer; essentially locking in your profit, and protecting yourself from the possibility of further loss.
Something else to consider: everyone lost money in 2008. There were no safe investments (well, ok, there were a few... but not enough to talk about). Given that, why would you choose another investment over stocks? Taking a 50% loss after decades of 10% annual returns is still better than a 50% loss after decades of 5% growth (in fact, after 20 years of growth, it's still 250% better - and that ratio will only improve the longer you leave it in).
I recommend that people think for themselves and get a multitude of counselors. The more you understand about what drives the prices of various assets, the better.
Getting to good advice for a particular person depends on the financial picture for that person. For example, if they have a lot of consumer debt, then they probably would be better off paying off the debt before investing, as earning 5% (say) in the stock market year over year will be eaten up by the 18%+ they may be paying on their credit cards.
Here's a starter list of the types of information that would be better to have in order to get fair investment advice.
I'm going to go the contrarian route and suggest you stay completely out of the stock market for the foreseeable future. We're entering a period of time this country and world has never seen before. Our country is broke / insolvent. We are printing money to buy our own debt. This is beyond stupid. It will destroy us, just like it did Germany in the 1920's.
Many states are on the verge of bankruptcy. The only thing stopping them is a constitutional issue. California, Illinois, Michigan, New York etc. are all broke. They are billions in debt and massive underfunding of pensions.
More than a half-dozen European countries are on the verge of financial implosion. The Euro is just as bad off as our dollar. There are extremely powerful forces at work bent on destroying this country and the US dollar, to usher in a One World Government and financial system.
IMO, buy as much gold and silver has you can. Not necessarily as an investment vehicle. I would do it as a survival vehicle. And, I don't mean gold/silver stocks. I mean you buy gold/silver and you take physical possession.