3 reasons to stop worrying and invest now

Hoarding cash isn't any safer.

By InvestorPlace Oct 6, 2011 10:05AM
By Jeff Reeves, InvestorPlace.com

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:

1. Cash is losing value fast. The myth of going to cash is that you will protect your money. Maybe you won’t see a red arrow next to your bank account unless you make a withdrawal, but the sad reality is that if your money is just sitting there, it is losing value every day. The U.S. Labor Department reported recently that consumer prices were rising at a 3.8% annual rate -- the hottest pace of inflation since November 2008. In short, your money buys about 4% less now than what it did a year ago.

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.

2. Stocks and funds are the only place to find income. Ten-year T-notes yield less than 2% as of the end of September. A high-yield savings account or CD delivers about the same. What’s the point of tying up your money in these investments, only to see it languish and deliver such paltry returns on your investment?

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.

Consider telecoms like AT&T (T) and Verizon (VZ). Both yield more than 6%, and the duopoly between them means neither stock is going anywhere.

In Big Pharma, stocks like Pfizer (PFE) and Eli Lilly (LLY) yield more than 4.5%. Also big brands that will stick around for decades.

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 a
re 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 editor@investorplace.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.

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Oct 6, 2011 11:17PM

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.



Oct 6, 2011 10:56PM

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.

Oct 6, 2011 8:18PM
Unless your a billionaires hooked up to computerized trades that will dump when the rest do I wouldn't purchase any common stock unless your just buying a dividendLightning
Oct 6, 2011 9:23PM
I sold most of my stock out and bought all high dividend stuff when the market dropped 400+ points. I'm still low on most from the purchase price at this time after a couple of rallies. Everyone writes a story to buy when the market is up. Then when the market goes way down everyone writes a story to sell and go bear. All these stories are after the fact and they all are want to be experts to help us. I could do that. Last time gold and silver dropped the dollar was the ultimate protection it seems. But now the dollar is crap again. Sure I hope it gets better in the long run, But every time a world problem occurs, We will be yelling FIRE at the movie theater and trampling each other to get out the door. Then we will get a story on something like we should of invested  in bonds heavily because an expert writer predicts it three days later.
Oct 7, 2011 3:12AM

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.

My wife and I took all our money out of the market in July just before the big drop.  Have the money in the bank now, but going to lose there too if I don't convert to something else fast.  I'm thinking about investing in guns and ammo and silver coins.
Oct 7, 2011 12:57AM
The flight of money out of the stock market, by the small investors, might be a sign that the instability of the market with radical ups and downs, just isn't a wise investment for retirement funds in the present atmosphere.  And if the stock brokers are whining, might be a sign that their paycheck might get a little smaller, too. 
Oct 6, 2011 9:03PM
What nonsense.  Buying stocks is a losers game.  We have all been manipulated by corporatism and we aren't drinking the Kool-Aid anymore.  It's amazing how many articles are pushed out by Wall Street people trying to convince us again that everything is okay.  Stocks don't compound but interest does.   Look for investments that produce interest income.
Oct 7, 2011 8:25AM

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.

Oct 7, 2011 7:55AM
please please could the stock market please have a meltdown perhaps down by 40% or more would stop the oil speculators maybee we need it to go to zero to stop these greedy bastards from destroying our lifes with this runaway speculation greed.
Oct 6, 2011 9:41PM
all I can say about these lies is shut up and sit down!!
Oct 7, 2011 5:59AM

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!

Oct 7, 2011 5:07AM

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.

Oct 6, 2011 8:04PM
Disappointed Who's worrying? I am because I haven't got anything to invest and I worry because I missed all the opportunity to make big money so I can travel all over the world and stay in posh hotels.Confused Thanks for nothing. you have to rub it in all the time.
Oct 7, 2011 6:59AM
CD's beat Wall Street by 15% since 2009!Actually for long term investors they havent been paid in decades with stocks.
Oct 6, 2011 10:49PM
Three reasons I would say you have terminal cancer, only $100 left and your ex wife would get it anyway !
Oct 7, 2011 9:57AM
I wonder how many short positions are held by the writer of this article??
Oct 7, 2011 8:00AM
the price of gas is still going up every ****ing day how in the ****ing world do these bastards get off on reaming it up your azz every day and not a ****ing peep from nobamaballs.
Oct 7, 2011 10:41AM
Its easy to tell people that dont have any money to invest,that way Wall St can finish bankrupting americans with their one little positive headline they publish every morning to pump and dump their stocks.
Oct 7, 2011 6:30AM

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.......Luck​y?? .....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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