Tags: Stocks | Safe | risks | market

Market Experts to WSJ: Stocks Aren’t as Safe as You Think

Thursday, 15 Mar 2012 08:44 AM

By Dan Weil

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Conventional wisdom has it that stocks are the safest way to earn reasonable investment returns over the long term. But Boston University management professor Zvi Bodie and financial consultant Rachelle Taqqu beg to differ.

They argue in a Wall Street Journal essay that the stock market is full of pratfalls.

“Despite the assurances of the financial industry, stocks are always a risky investment, and the longer you hold them, the better your chances of getting blindsided by a downturn,” the duo writes.

Editor's Note: Meltdown on Main Street Coming, Prepare Now

“The usual way of mitigating that risk, diversification, holds no guarantees, either — for the simple reason that investments don't always move the way we want in relation to one another.”

The Standard & Poor’s 500 Index has soared 11 percent so far this year, so it’s easy to see why investors are tempted to dive in.

What should they do instead?

“A safer way to build and protect retirement assets is to picture your goals as clearly as possible. Then pare things back to the basics,” Bodie and Taqqu write.

“Figure out the bare-bones level of income you need and invest in products that guarantee it, such as inflation-protected bonds.”

Not everyone is pessimistic about stocks.

“We have had a good series of economic data come out the past few months,” Jason Pride, director of investment strategy for Glenmede, tells The New York Times. And that offers strength to the market.

Editor's Note: Meltdown on Main Street Coming, Prepare Now


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