Your Money Matters: Long-Haul Investing: Riding Out the Risk in Stocks
Frustrated over the low returns on safe investments such as money funds, yet fearful about the risks of investing in stocks, many investors feel paralyzed.</br></br>Just what is the right course for someone who wants decent returns but isn't comfortable taking much risk?</br></br>The answer depends a lot on how soon the person will need the money. "The key is: What is your holding period? What is your investment horizon?" says William Reichenstein, a finance professor at Baylor University in Waco, Texas.</br></br>At one extreme are people investing dollars they will tap within the next few years, perhaps to pay college bills. While they may not like current short-term interest rates, "they simply have to grin and bear it," says S. Timothy Kochis, a San Francisco financial planner. "They have no business" putting that money in stocks, he says, because stock-market returns are unpredictable over short periods.</br></br>At the other end of the spectrum are people investing at least some dollars for the long haul, perhaps for retirement 20 or 30 years from now. When interest rates were higher, they may have been happy keeping those long-term savings in money funds or other low-risk, interest-bearing investments. But today's puny rates provide a good reason to consider putting more dollars in stocks.