Investors can run, but they can't hide from the volatile stock markets. Most
people simply cant retire without some exposure to the stock market in general.
The now and the future for these investors, however, is not entirely bleak.
First of all, not everyone is panicking. Corporate insiders, for one, are
staying put , as CBS Moneywatch recently noted. The sell/buy ratio among
corporate insiders in early August was at its lowest point since March 2009.
Big-shot executives might not be smarter than anyone else, but they usually dont
hesitate to run for the exits when times get tough. Wild swings in the Dow Jones
Industrial Average might be scary, but they aren't necessarily the end of the
world. The market likely will remain volatile for weeks, or maybe months, as the
debt crisis in Europe continues to unfold and President Barack Obama unveils his
jobs plan. The volatility can't be ignored entirely, and people should monitor
their stocks more closely than they did when times were good. Remember, panic
selling eventually leads to bargain hunting by investors. Many pundits argue
that many blue-chip stocks are at rock-bottom prices. I recently snapped up
shares of McDonald's (NYSE: MCD ), Coca-Cola (NYSE: KO ) and Target (NYSE: TGT
) for my personal account. Investors don't have better alternatives to prepare
for retirement than the stock market. The U.S. mutual fund industry held $11.8
trillion in assets at the end of 2010, according to the Investment Company
Institute. That might seem like a huge amount of money, but it probably should
be higher. Experts repeatedly have pointed out that many people's retirement
savings are in poor shape. A recent survey by Fidelity Investments found that
30% of Americans nearing retirement dont want to know if there are fiscally
strong enough to quit working . Another report by the Employee Benefit Research
Institute found that only 13% of respondents were confident their savings would
last through their golden years. Bonds are safe, but their returns are far more
modest than stocks. Cash and cash equivalents such as treasury bills are very
safe but offer even worse returns. Famed economist Nourial Roubin recently told
The Wall Street Journal that he was putting most of his money into cash, arguing
it's better to be safe than sorry. He never addresses the tougher question of
when to jump back into the stock market, though. It's a key issue because most
people including professional investors are unable to successfully time the
market. Real estate is not going to rebound for several years. Buying antiques
and collectibles might pay off over time if someone buys something great (a
Picasso painting or Babe Ruth's hat) and is lucky enough to find a willing
buyer, which is not a given. But remember the average valuation of items brought
to "Antiques Roadshow" is about $50 hardly enough to quit one's day job.
Gold prices hit a new record Friday of $1,867.80 per ounce. Will it go higher?
Probably. Morgan Stanley recently hiked its 2011 gold price forecast by 8% to
$1,511 per ounce and has it continuing to rise through 2012. But what happens
after that is anybody's guess. Historically, gold has been a terrible
investment over the long term. A dollar invested in gold in 1801 would have been
worth 78 cents by 1998. The average inflation-adjusted return of the stock
market since 1802 is about 7%, says Jeremy Siegel of the University of
Pennsylvania's Wharton School of Business. The stock market might not be the
only game in town, but it's the best one for investors. Jonathan Berr owns
McDonald's, Coca-Cola and Target.
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