This Day On The Street
Continue to site
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

Buying Stocks Now May Be Less Risky Than You Think

By BERNARD CONDON

NEW YORK (AP) â¿¿ Is it too late?

If you've stayed out of stocks recently, you might be worried that you've missed your chance to get back in. After all, they must be expensive now that the Dow Jones industrial average has risen nearly 130 percent in four years to a record high.

The good news is that stocks still seem a good bet despite the run-up. The bad news: They're no bargain, at least by some measures, so don't get too excited.

Many investors obsess about stock prices. But you must give equal weight to a company's earnings. When earnings rise, stocks become more valuable â¿¿ and their prices usually rise, too.

That seems to be happening now.

"We've had record profits upon record profits," says John Butters, senior earnings analyst at FactSet, a research firm. "And estimates are we'll have record profits this year, too."

What's more, some of the typical threats to stock run-ups â¿¿ such as rising inflation and interest rates, which often trigger a recession â¿¿ seem unlikely to appear soon.

Among reasons to consider stocks again:

â¿¿ A STRONGER ECONOMY:

There are no signs of a recession. And that's encouraging for stocks, which almost always fall ahead of an economic downturn. Stocks started falling two months before the Great Recession began in December 2007 and one year before the recession that started in March 2001.

Better yet, the economy may be on the verge of faster growth. The Labor Department announced Friday that the unemployment rate in February dipped from 7.9 percent to 7.7 percent, its lowest level since December 2008. Employers added more than 200,000 jobs each month from November-February, compared with 150,000 in each of the prior three months.

More jobs mean more money for people to spend, and consumer spending drives 70 percent of economic activity.

1 of 5

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
Only $9.95
14-Days Free
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

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs