Magazine article Newsweek

Diving Back In: Many Investors Are Mulling a Return to Stocks. How to Take the Plunge Safely

Magazine article Newsweek

Diving Back In: Many Investors Are Mulling a Return to Stocks. How to Take the Plunge Safely

Article excerpt

When will it be safe to go back in the water? Many individual investors think now. In the last two months they've invested $26 billion into stock funds, lifting share prices 10 percent from April lows, even after a couple of rough weeks. "Long-term investors get rich during bear markets--they just don't realize it until later," says Charles Carlson, editor of DRIP (Dividend Reinvestment Plan) Investor newsletter and an advocate of the buy-and-hold school of investing.

People who believe we're headed for a recession should remember that investing is counterintuitive. In a full-fledged recession, savvy investors are buying into stocks. "You must be present to win," says Curt Rohrman, a fund manager for USAA. Stock turnarounds can be swift and unpredictable. Miss the best 2 percent of days in the market and you can cut your average returns from 19.87 percent to 1.9 percent, says University of Missouri professor John Stowe. Being in the market at the wrong time is better than being out at the right time. But buyers should scale back expectations to the 9- or 10-percent level from the 18 percent a year they saw in the '90s. "We will never see another decade like the '90s in our lifetimes," says Peter Tanous, of Lynx Investment Advisors. Instead, here's how to make the 2000s work for you.

Tech talk: Technology firms make up 30 percent of the U.S. economy; it would be "foolish" to ignore them, says Tanous. But remember to shop for companies that have actual products and sales, and reasonable prices compared to those sales. …

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