This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

No. 1 Reason You Should Stay Invested in Stocks

(Adds today's rise in the S&P 500.)

NEW YORK ( TheStreet) -- The stock market's erratic moves this year haven't been for the faint at heart. Still, investors shouldn't be so concerned.

Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, says stock-price volatility for traders is different than it is for the average American. Traders take a short-term view because they live and breathe by daily moves in the market. Investors like us are in it for the long haul and are less affected.

But we've all been spooked by record volatility this year. After seesawing stocks gave us anxiety all year, the benchmark S&P 500 Index is little changed for 2011. And now a study by Paulsen shows that long-term investor risk is in-line with levels seen throughout the post-war era, suggesting we should stay in equities instead of moving to perceived safe havens such as bonds and cash.

Many investors with long horizons may be "mistakenly" lowering their exposure to riskier assets, such as stocks, due to elevated short-term volatility, Paulsen says.

The frequency and depth of market moves have increased over the past year. At this point, it's probably expected by traders. News on the European debt crisis, and U.S. economics and politics have been quick to move markets in a big way. Wednesday of last week was a good example: Stocks were up nearly 500 points on a successful Italian bond offering and eurozone progress on a bailout plan.

Lack of confidence by traders and investors is producing severe market volatility. When the European debt debacle is resolved and unemployment falls in the U.S., investors will have faith that companies will make money and volatility will diminish. As a result, stocks should rise.

Paulson recommends investors remain diversified by stock sector and asset class in this environment. He currently suggests investing in emerging markets, which will benefit from lower borrowing costs over the next year. In the U.S., he likes manufacturing stocks that are undervalued. Manufacturing and car sales have been better than expected.

Stocks to consider are industrial manufacturer Cummins (CMI - Get Report) and railroad company Union Pacific (UNP - Get Report).

The S&P 500 today rose more than 1%, extending last week's 7.4% gain. The benchmark index is now up 0.5% for the year.

-- Written by Lindsey Bell in New York.

Readers Also Like:


Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CMI $143.42 -1.30%
UNP $117.94 -0.44%
AAPL $128.75 -0.47%
FB $80.16 0.70%
GOOG $574.54 0.16%

Markets

DOW 18,065.99 -137.38 -0.75%
S&P 500 2,096.67 -11.11 -0.53%
NASDAQ 4,963.7220 -16.1790 -0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs