Investing: You can’t shun stocks forever

A few months ago, Chris Hinners decided that the spate of negative headlines about the economy required drastic action, said Jeffrey R. Kosnett in Kiplinger’s Personal Finance. The computer-network engineer moved all $100,000 of his 401(k) holdings into cash, gold, energy, and other “stuff he figures will hold its value ‘if the American economy goes the way of the British Empire.’” While all those investments did fine in the short term, they don’t stand a chance of beating inflation over the next 15 years, and the 50-year-old Hinners hopes to retire at 65. “So he plans to emerge from his bomb shelter in the second half of 2008 and begin to build a more normal portfolio.”

Talk of recession—and there’s been a lot lately—has sent investors into a defensive crouch, said Chris Farrell in BusinessWeek. “But for those who are relatively flush and feeling secure at work, the best survival strategy may be just the opposite.” If you’re thinking of ditching growth stocks for more conservative investments, consider this: “It’s probably too late.” Rather than sell now, out of fear, re-evaluate your portfolio. See “if it’s time to take profits and invest in other opportunities.” Case in point: international stocks. The declining dollar has made foreign stocks a good bet for Americans. But “if the dollar’s decline slows or reverses, the driving force behind recent gains is gone.”

In the short term, things could get worse for the stock market, said Gregory Zuckerman and Shelly Banjo in The Wall Street Journal. “A real turnaround might not take place until there are signs of a bottom in the housing market, something that might not be seen until at least the summer.” But you can still start looking toward the long term: Put together a wish list of companies you’d like to own and the price at which you would plan to buy them. Not sure what to buy? Take a look at household names, such as General Electric, Coca-Cola, or Home Depot, says Pat Dorsey, director of equity research at Morningstar. General Electric was recently down 20 percent from its October numbers, and Home Depot shares are priced as if the company won’t grow at all. “If the world hands us anything better than that, the stock should do fairly well,” Dorsey says.

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