Recession & Recovery

October 10, 2009 12:36:53 PM PDT
A year ago the stock market took its biggest plunge since the great depression, wiping out savings accounts for countless investors. But a year later, the markets are slowly creeping back up, and that's leading many people to ask themselves if now is the right time to get back in Ellen Flynn was extremely leery about getting back into the stock market. And she had reason to be.

Her former financial advisor invested one third of her income in a feeder fund tied to swindler Bernard Madoff.

She lost it all.

Sot Ellen Flynn, Investor said: "I really thought I just need to be able to touch this money and feel secure about it."

John Sterba is her new financial advisor. He convinced her to put her money back in the market and invest long term in diversified mutual funds.

John Sterba, Jr. Chairman, Investment Management Advisors, Inc. "I can tell you 25 years from now, the market is going to be a lot higher than it is today."

A highly-regarded study by Brinson, Hood and Beebower that took a look at the wealthiest investors concluded that - trying to buy low and sell high was responsible for 2 percent of their overall performance, sinking a large amount of money into one stock was responsible for less than 5 percent

But the overall wealth was generated over time, by putting their money in different markets by diversifying.

Most financial advisors agree the stock market rises on average about 8 to ten per cent each year.

But is now the time to reinvest? The answer depends on who you ask.

Jeff Kleintop LPL Financial: "Presently, yes, stocks offer pretty good opportunity but looking further down the road, some caution is warranted."

There's always an element of risk when investing in stocks.

Even now, as the Dow flirts with 10,000 again, some economists fear the country is headed for a double-dip recession, where values go down before they go back up.

Jeff Kleintop LPL Financial: "The stock market is not for everyone, in fact there have been tremendous gains in the bond market over the course of the last six months, keep in mind where you're comfortable, where you can sleep at night."

There's still room for the market to recover, but it could take months, even years. So ultimately, it's a question of how much time you have.

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