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Are You Shunning the Stock Market?

This article was written by in Investing. 20 comments.

Have you given up on the stock market like a large portion of Americans? I’m getting ready to dive in.

According to a survey by a large financial company, 58% of Americans have lost faith in the stock market and 44% believe they will never invest in the stock market again. While the first question should be whether the sample of over 1,000 respondents included in this survey represent the country as a whole, assuming the study was well-designed and the survey is accurate, a lot of people are rightly dissuaded by the recession, the perception of Wall Street, and recent stock market performance: On Wednesday, the Dow and S&P 500 had steeper losses than they’ve had in one day in almost a year.

I can’t predict the future, but avoiding the stock market will a problem eventually. For all I know, we could be heading for a decade or two of no growth in the stock market, but eventually stock market performance will most likely return to the averages. To return to an average after a period of bad performance, the stock market must experience a period of great performance, and that’s not something an investor should avoid.

You may have heard stock prognosticators say, “Sell in May and walk away,” referring to historically sluggish stock market performance over the summer months. Analysts seem to be calling for more poor returns this summer, though analysts seem to be influenced more by recent history than predictions for the future. Nevertheless, this anticipated low point may be a good chance to buy in.

I’ve been avoiding the stock market for several months now, investing only with a monthly contribution to my Individual 401(k). I’ve initiated an automated investment plan than takes some of the cash I have in money market funds in my IRA at Vanguard and moves it over to the Total Stock Market Index fund over the course of the next eight weeks.

Photo: ericabreetoe
CNN Money

Published or updated June 2, 2011.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 20 comments… read them below or add one }

avatar 1 Anonymous

I’m not sure if the market is ready to come back yet. I’m thinking about putting my extra cash to a guaranteed investment; paying back student loans. For the past two years, I’ve been confident I can get better than 6% in the market in a year. Now, I’m not so sure…

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avatar 2 Luke Landes

Regardless of the market, getting rid of loans with an interest rate of 6% is a great idea… I don’t think it’s possible to guarantee a 6% stock market return over the course of 12 months even if it were to look like we were in a bull market.

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avatar 3 Anonymous

Well I got a 26.85% return in my 401k last year, which is why I was throwing extra money at that as opposed to my loans. :)

I had a hunch that the market would do well, and it did. My hunch this year is that I expect it to be roughly flat through the rest of 2011, which is why I’m changing my investment strategy accordingly.

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avatar 4 Sarah

I haven’t been shunning it, although recently it has been making me rather sad. I’m trying to do the right by waiting things out rather than selling at a loss out of panic. I’m hoping things start looking up again soon.

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avatar 5 Ceecee

I got in in 2008—bad timing. I still have my initial investment, but no gains at this point. I am focusing on dividend stocks for future cash flow.

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avatar 6 Anonymous

To be honest its a case of once bitten twice shy or in my case bitten about 5 times. Its hard when you get burnt to get back into the market even when you see what you think are really good bargains. I think my problem has been trying to time the market which I now realise is a bit of a fool’s game. That being said my investment goal is going to be for the long term – 20 years plus. It has to be otherwise I will go crazy with the swings of Mr. Market.

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avatar 7 Anonymous

I am fully invested, but would like a little less volatility! The market appears to react to every bit of news whether it is relevant or not. It reminds me of a company where rumors are rampant! That generally means the company morale is low or non existent.

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avatar 8 Anonymous

I have a little more cash now than I have recently. I am suspecting the summer will pretty weak and wouldn’t be surprised to see 4 figures on the Dow in the next year. That being said, I have no clue as to the direction the market will take so I have certain criteria that I use to help me decide what to do.

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avatar 9 Anonymous

I bought $3,000 in stock fund ETFs at the end of yesterday’s trading day, to capitalize on the plunge in the Dow. I’m fully aware that it’ll take years — “the long run” — to pay off, but I’m confident it will.

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avatar 10 Anonymous

The market is, in my view, still an essential part of any portfolio – but only a part. A smart financial planner will have you in a variety of investments, with the mix being determined by your risk tolerance and where you are with regard to retirement. You want a different mix at age 25 than you do at age 60.

Bottom line is that you don’t want all your eggs in one basket.

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avatar 11 Anonymous

I’ve been in the market for 20 yrs and don’t plan on getting out any time soon. Think of the stock market as being on sale right now. I just started building a position in commodities while the consensus now is to sell. Since I don’t really have much of a position, I am ok with it going down now.

To give you some perspective, an investment I made in 1994 after splits and stuff was approximately $2. It’s now worth $21 not including dividends, which range between 1 – 2.5% per yr. It lost 25 – 30% during the recession, but has come back. Point is you should be ok if you have a long term horizon.

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avatar 12 Anonymous

Timing is everything in the market…in March 2009, you could get Dow Chemical, International Paper, Bank of America, GE, B&G Foods, etc., at fire-sale prices. Check what their prices were then, and then check what they are today. And then look at the dividend being paid out by Dow, IP, and B&G in particular.

Now is not the time to buy McDonald’s, or Coke, or Caterpillar, or Apple…but there are good equities out there–you just have to find them. Look at DHT, or PEI, or WFC, or SSW…stocks that are still relatively cheap, pay dividends, and have a whole lot of upside.

But reward is commensurate with risk….that’s rule number two, right after diversify, diversify, diversify…

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avatar 13 Anonymous

I’m waiting for the double dip to occur for me to jump in to the market. With the way things are going lately, I don’t think I have to wait too long.

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avatar 14 Anonymous

It seems like people often go with an all or nothing investment approach (as well as a debt repayment approach)…never understood why. Why not just put a little bit into the market and a little bit into cash/alternatives?

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avatar 15 Thedogeofsl

I’ll second that. I know just enough to be dangerous, myself, so I concentrated on finding an independent financial planner who had done well by people we knew and who shared my view on the value of diversity in a portfolio.

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avatar 16 skylog

i certainly am not. no one knows what the future will hold, but to avoid it completely, i feel is a huge mistake. of course, this depends on one’s place in life, financial situation…etc…that said, for most people, there is too much growth to be lost with this strategy. most people will need that growth to get where they need/want to be.

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avatar 17 Cejay

I have lost what little faith I have in the stock market. But then I am very conservative when it comes to my money so I never invested a lot. My husband does the investing and I have told him not to let me know what is going on with our money. He has made the same comment that he wishes to invest more. I keep saying NO

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avatar 18 qixx

I did not have any investments in the stock market to begin with that i could access (401(k) not withstanding).

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avatar 19 Anonymous

I’m not shunning the stock market. In fact, I’m studying it now how to invest and avoid losses. But first and best way to start investing is by saving money.

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avatar 20 lynn

I received very good advice a while back to never invest in the stock market. This advice has been good for me. I MAY have made a good return, but then again, I may have lost it all too. Call me MS conservative, but call me content.

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