"Money File"-Risk & Rewards
Wednesday, July 08, 2009SUSIE GHARIB: In the "Money File" tonight, why risk doesn't have to be a four-letter word. Here's Jonathan Pond, author of "Safe Money in Tough Times."
JONATHAN POND, AUTHOR, "SAFE MONEY IN TOUGH TIMES": After what we've been through since the beginning of last year, it's no wonder that risk is viewed by many investors as something to be avoided at all cost. As a result, huge amounts of money are sitting on the sidelines earning element nothing. Of course, during the last bull market, investors loaded up on risky stocks and eschewed money market funds. It's time for a change. Long-term success requires a consistent approach, avoiding too much risk in ebullient markets and too little risk in dour markets. Rather than invest at the extremes, loading up on stocks after the markets have risen or loading up on Treasury bills or the like after the markets have fallen, you should strive to include investments in between those two extremes. For example, move some of the money that's earning a pittance in cash equivalents into short-term bonds and short-term bond funds to earn more interest without risking much, if any of your principal. While there's no such thing as a no-risk stock, you can reduce risk by avoiding speculative stocks and sector plays and instead spreading your money among a variety of U.S. and overseas stocks with index funds or exchange-traded funds. Most important, keep in mind that risk doesn't have to be a four-letter word. In fact, the biggest risk in investing is taking no risk at all. I'm Jonathan Pond.
