As stocks regain lost ground, financial planners say they're getting more calls from old and new clients asking much the same thing:
Is it now time to dive back into the stock market?
Some callers had bailed out of stocks last year in a panic and now have a bit of sellers' remorse. Others who uneasily stuck with stocks have found new courage to buy more since the widely followed Dow Jones industrial average has gone up nearly 30 percent since early March.
David Berman, a financial planner with Berman McAleer Inc. in Timonium, says he has seen a shift in attitude within a matter of weeks. One couple who needed hand-holding in the fall and winter, for example, now want to invest in banks' toxic assets when they become available, he says.
"It's the fear of missing out and the fear of not recovering what you lost," explains Chuck Carlson, of Horizon Investments Services in Indiana. "They took quite a hit. Everybody now wants to get back where they were, which is a dangerous mentality to act on."
There's no doubt that investors are beginning to feel more confident. Investors pulled money out of stock funds in February and March when the market hit a new low, reports Financial Research Corp. But the latest figures show that investors poured $15.5 billion into stock funds in April, and $23.5 billion more in May.
The question of whether now is the time to get back in the market is the wrong one. No one can perfectly time - at least not consistently - the right moment to jump in. And buying just because the market is going up isn't a sound strategy. It's possible that the gains in the past three months could be erased over the next three weeks.
You need to ask yourself whether stocks are for you, and if so, how much. From there, you can develop an investment strategy to stick with in good and bad times.
"This is not a market to be played with. More so than ever, this market has risk, volatility and uncertainty built into it at its core," Berman says. Still, he adds, "It is a perfectly fine place to be for long-term serious money that has a plan attached to it."
Stocks, though volatile, provide growth over the long run. A healthy dose of stocks is recommended for younger workers who are saving for faraway goals, like retirement, and can weather market bumps. But even older workers and retirees can use some exposure to stocks to keep up with inflation.
