Make us your home page

Is it safe yet to put money back into stocks?

Is this rally fool's gold or the real thing?

That's the $4 trillion question. By some estimates, that's the amount of money investors have parked in cash, savings or other safe places until they are confident the market has regained its traction for the long term. Some clearly think this rally is for real, and money has begun to flow into the market again. Investors pulled nearly $40 billion from the safe haven of money market funds by the end of April, while stock and bond mutual funds gained $138 billion, according to the Investment Company Institute.

But that is a fraction of the money still on the sidelines, and not everyone is convinced by the market's recent rise.

"Obviously, it's not yet a stampede back to the market," said Glen Mather, chief executive officer of Lake Mary-based Entrust Administration Services Inc., an investment account processing firm. "But a lot of people are starting to feel like they aren't earning anything in these safe havens, so they need to put their money back to work."

So should I jump into this market?

The short answer is this: Swim at your own risk; and know what your risk tolerance is.

Even if this rally is indicative of a sustained recovery ahead, most experts agree there will still be gains, losses and additional volatility for an undetermined period.

"This market is on sale, and I agree that it is probably a good time to buy," said Gene Balliett, a financial planner and founder of Winter Park-based Balliett Financial Services. "But with this caveat: It's still a gamble on what's going to happen in the future. And anybody who says they know what's ahead is kidding, at best."

Experts say the degree to which you invest still depends on how close to retirement you are and how badly you need cash for current living expenses. Younger investors have more latitude because they have time to offset any losses. A well-diversified portfolio for people still decades from retirement can contain more than 90 percent in stocks and the rest in bonds and cash.

The picture would look markedly different for people at or near retirement. The most conservative mix for people retiring next year, for example, would be less than 30 percent in stocks, 62 percent in bonds and the rest in cash and other fixed-income investments, according to the Morningstar research firm.

I don't have much of an emergency cushion. Should I invest in stocks?

Overall, financial advisers still urge people to put a priority on building their emergency cash reserves to cover at least six months of living expenses. That is especially important for people who think their jobs may be in jeopardy.

With so much uncertainty, shouldn't investors wait until things are undeniably back to normal?

By then, you may have missed out on capturing the big returns and recouping much of what you lost last year. Plus, you risk having inflation eat away at what little returns you get on money markets and other safer investment vehicles.

What should investors do differently this time to make sure they don't get burned again in the stock market?

Don't be passive. Read as much as possible about any stock, bond or other investment you're considering. Test every source of information. Don't impulse-buy.

If you decide to use a financial adviser, shop around and compare their fees, biases and approaches to investment. Beware of scams. Look for red flags such as high-pressure sales tactics and unrealistic "too good to be true" guarantees. Look for caution flags such as conflicts of interest or excessive charges.

"We've certainly noticed that people are doing a lot more due diligence," said Neil Oehlstrom, a financial adviser for Edward Jones & Co. in Orlando. "They want to know what is going on. They're not willing to just sit back. And for a lot of people, it's going to take a whole lot to win back their confidence in this market after all the shenanigans that took place on Wall Street."

Remember the classic movie Jaws, when people wondered whether it would ever be safe to get back in the water? Investors burned by last year's stock market crash know how they felt. But now a historic Wall Street rally has propelled the market up about 30 percent from its 12-year low in early March. And investors who pulled hundreds of billions of dollars to the sidelines last year are wondering whether it's time to get back in. Here are some answers to investors' questions:

Is it safe yet to put money back into stocks? 06/27/09 [Last modified: Saturday, June 27, 2009 4:31am]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Orlando Sentinel.

Join the discussion: Click to view comments, add yours

  1. Last steel beam marks construction milestone for Tom and Mary James' museum


    ST. PETERSBURG — Tom and Mary James on Wednesday signed their names to the last steel beam framing the 105-ton stone mesa that will be built at the entrance of the museum that bears their name: the James Museum of Western and Wildlife Art.

    The topping-out ceremony of the James Museum of Western & Wildlife Art was held Wednesday morning in downtown St. Petersburg. Mary James (from left), husband Tom and Mayor Rick Kriseman signed the final beam before it was put into place. When finished, the $55 million museum at 100 Central Ave. will hold up to 500 pieces of the couple's 3,000-piece art collection. [Courtesy of James Museum of Western & Wildlife Art]
  2. Heights Public Market to host two Tampa Bay food trucks


    TAMPA — The Heights Public Market announced the first two food trucks for its "rotating stall," which will feature new restaurants every four months. Surf and Turf and Empamamas will be rolled out first.

    Heights Public Market is opening this summer inside the Tampa Armature Works building.
[SKIP O'ROURKE   |   Times file photo]

  3. Author Randy Wayne White could open St. Pete's biggest restaurant on the pier

    Food & Dining

    ST. PETERSBURG — The story begins with Yucatan shrimp.

    St. Petersburg Deputy Mayor Kanika Tomalin, pilot Mark Futch, Boca Grande, St. Petersburg Mayor Rick Kriseman, and author and businessman Randy Wayne White,  Sanibel, exit a Maule Super Rocket seaplane after taking a fight around Tampa Bay off the St. Petersburg waterfront, 6/28/17.  White and his business partners are in negotiations with the City of St. Petersburg to build a fourth Doc Ford's Rum Bar & Grille on the approach to the St. Petersburg Pier with a second event space on the pier according to White. The group met near Spa Beach after a ground breaking ceremony for the new pier. "We want to have our business open by the time the pier opens," said White. Other Dr. Ford restaurants are located on Sanibel, Captiva and Ft. Myers Beach. SCOTT KEELER   |   Times
  4. Guilty plea for WellCare Health Plans former counsel Thaddeus Bereday


    Former WellCare Health Plans general counsel Thaddeus M.S. Bereday pleaded guilty to one count of making a false statement to the Florida Medicaid program, and faces a maximum penalty of five years in federal prison. A sentencing date has not yet been set, acting U.S. Attorney W. Stephen Muldrow of the Middle District …

    WellCare Health Plans former general counsel Thaddeus M.S. Bereday, pleaded guilty to one count of making a false statement to the Florida Medicaid program, and faces a maximum penalty of five years in federal prison. A sentencing date has not yet been set, acting U.S. Attorney W. Stephen Muldrow of the Middle District of Florida stated Wednesday. [LinkedIn handout]
  5. DOT shows alternatives to former Tampa Bay Express toll lanes


    TAMPA — State transportation officials are evaluating at least a half-dozen alternatives to the controversial Tampa Bay interstate plan that they will workshop with the community over the next 18 months.

    Florida Department of Transportation consultant Brad Flom explains potential alternatives to adding toll lanes to Interstate 275 during a meeting Wednesday at the DOT’s Tampa office. Flom presented seven diagrams, all of which swapped toll lanes for transit, such as light rail or express bus, in the I-275 corridor from downtown Tampa to Bearss Avenue.