Why Should You Worry About Greece?

By Mark Jewell, AP Personal Finance Writer

BOSTON (AP) — A financial tremor in one corner of the globe can leave cracks in an investment portfolio. It's a painful lesson just as many U.S. investors are regaining their confidence.

The stock market remained volatile on Wednesday. After falling 112 points earlier in the day, the Dow Jones industrial average closed down 60. It posted a two-day loss of 285 points.

The trigger is Greece, whose debt troubles threaten the pace of a global economic recovery. It's a growing concern even though the country's population is less than one-third of California's.

But the overriding issue is the financial health of Europe, and of an economic alliance on a continent that still matters despite faster growth in places like China and India. Investors worry that a $144 billion aid package for Greece won't be adequate to keep debt problems in Europe from spreading — not just there, but here as well.

In the short-term, investors trying to escape fallout from Greece have been shifting toward the safest types of bonds, with the trade-off of lower yields. What's more, they're exiting stocks, as seen in this week's sell-off. It's like late 2008, on a smaller scale.

"You're seeing something of a worldwide flight to safety," says David Joy, chief market strategist for Columbia Management, with $341 billion in assets.

The stock market rally that took hold in March 2009 has gone a long way to get investors back on track, but many have been late to latch onto stocks. For 27 consecutive months, safety-minded mutual fund investors have been plowing more money into bonds than into stocks, according to Morningstar Inc.

This year, investors have resumed a more typical pattern of putting more into stock funds than they've been pulling out.

"We're a year and half out of the crisis, which is usually the time it takes for people to become less panicky," says Avi Nachmany, research director of Strategic Insight.

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