Should I Get Out of the Stock Market?

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:

  • Risk Tolerance. Your risk tolerance is as unique as you are. What might seem like an exciting roller coaster ride for some can be a frightening ordeal for others. If investing in the stock market is keeping you up at night, your risk tolerance might be better suited to safer investments such as bank CDs or money market funds.
  • Time Till Retirement. The amount of time you have left until retirement will likely have an impact on how risk averse you are. The more time you have to recover from losses the more likely you are to invest in the stock market. You should keep in mind, however, that most people spend over 20 years in retirement. Keeping some money in the stock market even as you enter retirement will likely prove to be a good investment.
  • Other Investment Options. You should evaluate other investment options. If your risk tolerance and time horizon are leading you away from investing in the stock market, consider your other investment options. After you've paid down any debt and saved 12-18 months of living expenses in an FDIC-insured savings account, you can look into other investment options. You might consider real estate, bonds or bank CDs to be attractive investment alternatives.

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.

Author Bio

Catherine Rein


Do I Lease or Do I Buy?

Leasing an automobile or purchasing one is a decision that needs to be based on lifestyle choices. If you like to drive a ...

Discover More

What is a Derivative?

A derivative is a risk-shifting agreement, which is valued based on the underlying asset. The underlying asset could be a ...

Discover More

Understanding Disability Benefits

There are several types of disability benefit programs, through private insurers and government programs. Three of the ...

Discover More
More Money Tips

Getting Stock Quotes

It's easy to see how stock quotes could be confusing, but actually once explained, stock quotes are one of the easiest ...

Discover More

Understanding Stock Options

You hear about stock options all the time, but what exactly are they? Stock options can actually be a great financial ...

Discover More

Donating Stocks

It would be nice if we could all get to the point where we have too much money and in a manner of speaking, that's what ...

Discover More

If you would like to add an image to your comment (not an avatar, but an image to help in making the point of your comment), include the characters [{fig}] in your comment text. You’ll be prompted to upload your image when you submit the comment. Maximum image size is 6Mpixels. Images larger than 600px wide or 1000px tall will be reduced. Up to three images may be included in a comment. All images are subject to review. Commenting privileges may be curtailed if inappropriate images are posted.

What is 2 + 9?

There are currently no comments for this tip. (Be the first to leave your comment—just use the simple form above!)