3 reasons to stop worrying and invest now
Hoarding cash isn't any safer.
You might think it’s a stupid idea to buy stocks right now. And I’ll admit, things are a bit bleak. Seasonal hiring is disappointing, and unemployment remains stubbornly high. Inflation is eroding family budgets, while wages and personal income are stagnant. Debt woes in Europe are in focus, but the "supercommittee" ensures that debt problems in America will be the subject of ridicule sometime soon.
It’s indeed ugly on Wall Street. September saw us shed about 4% from all of the major indexes, and if we hadn’t seen some big up days last week, we could have languished at lows that were off about 6% on the month. And who knows what October will bring after a flop earlier this week and a rally off the lows in the past two days.
But the risk you should be focusing on right now isn’t the risk of owning stocks. No, the real risk could be what will happen if you are not invested in the market.
Here are three reasons you should stop fretting and start investing now, with opportunities to prove the point to consider:
Still think it’s wise to let your cash just sit there?
The solution is to seek shelter in sectors that profit from inflation. For instance, the Market Vectors Agribusiness ETF (MOO) focuses on agriculture and food companies that feed the farm industry, companies that are benefiting handily from selling higher-priced corn, soy and other grains to both consumers and packaged-food companies alike.
For mutual fund investors, consider the PIMCO Commodity Real Return Strategy Fund (PCRAX). With $16.5 billion under management, it's one of the largest and most respected pure-play commodity funds out there, buying and selling futures on hard commodities like oil, grains and gold. This is a broad-based way to play inflationary trends and a more direct investment on inflation. The downside is that the expense ratio is a bit steep at over 1.2%, but the active management and sophisticated trading by PIMCO’s staff might make the premium worth it to some folks who want to deal in commodities directly this way.
No, the only true place to find income these days is in dividend stocks. And not just a decent 3% or 4% return. If you do some hunting, you can find stocks that yield more than 6% of your investment via stable and sustainable dividends.
Utility stocks like Consolidated Edison (ED) and Southern Co. (SO) also boast 4%-plus yields. Utility stocks are legalized monopolies with as stable a business as you can find, so no risk of dividend cuts there.
The list goes on. What’s more, you can find master limited partnerships (MLPs) and real-estate investment trusts (REITs) that boast even bigger yields based on their tax-code designation and mandate to deliver the lion’s share of profits to shareholders.
Not comfortable picking an individual dividend winner? Well, fund investors should consider the Dow 30 Enhanced Premium & Income Fund (DPO) ETF, which boasts a yield north of 9%. It trades well under $10 per share and pays about 23 cents per share in quarterly distributions.
3. There are always profits if you invest wisely. You might be convinced that because the market is volatile and that the Dow Jones is slightly in the red year to date, that means that stock investors have gotten fleeced. Not so.
For starters, a host of big-name stocks have outperformed. Take Apple (AAPL), the poster child of a stock that is beating the market, which is up 20% so far in 2011 as of this writing. McDonald's (MCD) is up 17%. Visa (V) is up 24%. There are a host of others.
Yes, it is impossible to lock up all the stocks that are going to rise and avoid all the stocks that are going to fall, but in a diversified portfolio, some of these gains would more than offset losses.
Think it’s above your pay grade to build a diversified portfolio like this all alone, or to find the real winners in a tough market? That’s what good actively managed mutual funds are for. Take the Wells Fargo Advantage Growth Fund (SGROX) that has tallied 15% gains in the past 12 months versus a measly 3% for the Dow. That’s in large part thanks to winners you might have not even heard of, like Alexion Pharmaceuticals (ALXN), which has tacked on 60% gains since January. No bear market there.
In short, don’t think that just because the market is down your portfolio has to be.
Jeff Reeves is the editor of InvestorPlace.com. As of this writing, he did not own a position in any of the aforementioned stocks. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.
ahh yes, MSN...the written proxy for CNBC and sell side money harvesting managers everywhere. So, what's your cut Jeff?
Irresponsible shill journalism with a nice engineered disinformation topping.
Wall Street needs some more "dumb money" so they can keep paying those 7 figure bonuses. If you don't hand it over willingly they'll just take it through the back door in the form of a bailout.
Sounds like some fat cats paid the media off to put this propaganda out. They must be firing a CEO and need some severance dough.
Rumor has it the trading profits at some big Wall Street banks are starting to decline and bonuses are in jeopardy now that all the cheap Fed money is drying up. I anticipated a slew of super-bullish “Invest Now” advertisements (sorry articles) as soon as I heard that. Unfortunately, they are already starting to sound like cable commercials by car dealers.
If you want to sell it Jeff, tell your Wall Street sponsors they’re going to have to step things up a bit. I suggest a 30 second slot in the first half of the Super Bowl. Of course you’ll have to compete against those e-Trade babies for attention.
Stocks, the way markets are being operated, are nothing more than gambling picks, having less to do with true investing and more to do with big gaming.
The problem is that big time gamblers tap into long-term investments like they never existed. This needs to be stopped!
Stop worrying and invest now. Well, maybe so if my name was Buffet with lots of insider info and privileges. Preferred stocks, the only way to go.
Besides, knowing my $billions in Goldman Sucks and BAC will be well protected by the "TBTF clause" sponsored by government and taxpayer bailouts just in case.
By the comments listed it seems we have a much bigger problem than Wall Street greed. I just secured a job on August 15 after being out of work for over a year......unemployed for the first time in my forty plus years working.......Do the math...I am not a kid.
I made finding a job my new job...took a one year certification course in my field and networked.......Lucky?? .....I made my own luck at an age that one is not supposed to get hired.
Yes, you are all correct in your comments about Wall Street and big money greed.....So what! this has been going on since this country was formed....
It's good to identify the problem.....now what about some possible solutions.....
Stop focusing on the things you can't control because it's affecting what you can control!
At least this bozo who wrote the article brings some optimism....which sounds like it is sorely needed.
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'We're not exactly in a uniformly strong market,' says the notably pessimistic newsletter publisher.
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