In the March 2010 issue of Kiplinger's magazine, readers posed questions and the responses were overall pretty reasoned but here is one that I had trouble with:
"...Stocks still terrify me. How can I get back in the market with less risk?..."
Kiplinger's response was first to invest through a merger fund and second to consider a balanced fund (that owns stocks and bonds) and finally, regardless of fund chosen, to buy in gradually.
Now for my "real" answer:
Get over it. Stocks are risky. Short-term, that is. They go up and down.
Long-term, however, stock returns are not your worry. Inflation and taxes are what should be terrifying you. Don't invest in the market with a short-term outlook.
You can not lessen risk (the original question) by buying a merger fund (one of the riskier styles) nor by buying a balanced fund (if bond interest rates go up, then that portion of the fund will go down).
And, do not dollar-cost average into stocks if you have the funds already. That is useful for payroll deductions when you do not have the money readily available but makes no sense if you happen to have a stash. Diversify immediately. That may require some lump-sum purchases into stocks if none exist in your investment portfolio.
Understanding market volatility certainly would help. Time horizon is so very important as well as what your income needs are from your investments.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.