subject: What To Do With Your Stocks [print this page] Two huge recessions were met by an uncharted level of government bailouts. Still, the aid seems to have had little effect on what many experts say is a lost decade in terms of economic growth.
Many investors have the same net worth, or lower, due to the past ten years. Current stock market conditions have influenced many pundits and investors alike in perpetuating investment strategies that focus on getting out of the stock market for many investors who buy stocks and hold them until conditions are favorable for selling. Many people have a good part of their investment portfolios in stocks, and may be in a panic. However, is there good reason to follow what you hear from the rumor mill and cash out your stocks? Or is this merely a myth that could cause the loss of profit for many who heed it?
For two decades until the turn of the millennium, long-term investing was the key to earning from the stock market - buy, hold, and sell stocks when you stand to make a profit. Amateur investors and experts were sold on the buy-and-hold investment model that a Securities Industry Association survey from 1999 found that many stock market players projected 30% returns - this just goes to show that confidence in the market was at a historic high.
Today, many factors are working to diminish the investor's equity premiums, such as the availability of information through technology, the diversified portfolio, and widespread use of mutual funds. Although some investors tout expectations of 8-10% in annual returns, it's a lot more likely for the figure to be between 4-5% for the near future. Some asset allocation firms such as Smithers & Co. have even predicted that stocks in the coming decade will only deliver less than two percent.
Should you go to savings, bonds, or government pensions to help augment your funds? Unfortunately, these products won't be enough to save your nest egg. Stick to a diversified portfolio that contains different kinds of stocks across many industries. Individual and diverse stocks are your best bet for protecting your money and your future - not cashing out all your stocks and eliminating these investments from your portfolio.
