After five straight years of money flowing out of stock mutual funds, 2013 finally saw investors getting more comfortable with taking risks in the stock market.
I recently spoke with Charles Stein from Bloomberg Businessweek and suggested that some investors are adding more to their stock allocation not necessarily because they feel more comfortable with stocks now. But rather, it's due to the understanding that the alternative of investing in bonds is not so attractive.
Dismal fixed-income returns, and the potential for worse, are on clients’ minds, said Theresa Wan, a financial planner who advises individual investors in Dumont, New Jersey. “People seem to realize that if they want their money to grow they have to be willing to take more risk,” Wan said in a telephone interview.
One of her clients, retired doctor Michael Resnick of Suffern, New York, in July agreed with her suggestion to increase his allocation to stock funds to 35 percent from 30 percent. Resnick, 77, said he was wary because he has a low tolerance for absorbing losses.
“But expectations for bonds are very low, maybe 2 percent or less,” he said in a telephone interview. So far, Resnick is comfortable with the change. “I’m sleeping all right,” he said.
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