Not all equities are hair-raising

01/16/2013 12:15 PM

01/16/2013 12:15 PM

Regarding "Many losing faith in stocks" (Jan. 6, Work & Money): I'm reminded of the idea of contrarian thinking in investment decisions. The "investor mistrust" that Bernard Condon notes is real, but is it rational?

Economist Ulrike Malmendier reminds us of the "experience effect" that suggests that Main Street investors today, "contrary to logic," remain in a state of "risk averseness" stemming from the '08 crash. It would seem that managers of many institutions (pension funds, mutual funds) may not be immune to this effect either, and why should they be considering what their aggressive strategies prior to 2008 cost them. However, the time to get into equities is often when everyone else is getting out and vice versa. Investors tired of the micro returns of government securities might do well to consider value stocks — those that pay reliable dividends, have proven track records (easily researched on MSN's webpage), respected brand names and reputable management. Executive coach Andrew Neitlich may be justified in his distrust of government and Wall Street, but note his alternative: owning real estate. If your lifestyle tilts that way, fine; otherwise, you may be stuck with bonds and the hope that inflation doesn't outpace their meager returns.



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