by Catherine Rein
(last updated May 14, 2009)
Whether to invest or not invest in stocks is dependent on your tolerance for risk, the amount of time you have till retirement and if you have other investment options open to you. Market weakness such as what we've experienced over the past couple of years is by itself not a good reason to leave the stock market. Markets rise and fall, but over the long-term a well-diversified portfolio of stocks will provide a positive rate of return. Three areas to consider when deciding if you should pull your money out of the stock market:
Generally speaking, any money you need in the next year should be in cash. After that, any money you need in the next two to five years should be in a safe fixed-income investment, such as CDs or bonds. Any money you don't need in the next five to 10 years, you should look at investing in the stock market.
Keep in mind that within the stock market there are safer investments and riskier investments. If your risk tolerance is low you might consider so called 'blue chip' stocks. These are larger companies with strong historical patterns of profitability. They will likely have lower rates of growth, but in a down market will be safer investments in the long term.
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