Fear Factor: Taking Shocks Out of Stocks

Experts estimate that trillions of dollars of retirement and other savings have now been wiped out by the stock market meltdown that began last year... and that's got lots of investors worried that stocks aren't for them. But we explain how to take the shock out of stocks.

Whenever you see stock prices collapse, you see something else mushroom: fear of investing in stocks.

“I have fear of how long this will last. And how much it will affect me and my loved ones and other people.”
-Federico Alanis, Small Investor

But fear should never be a part of any intelligent investment strategy. And if it’s keeping you on the sidelines, you need to know how to take the shocks out of stocks.

Single best way? Don’t put all your eggs in such a wild basket. Diversify.

“Have your money in stocks, and cash and CDs and treasuries. So when the markets drop 40%… you won’t be hit as much as everybody else because your assets are properly spread.”
-Anthony Altobelli, E*Trade

And then there’s the biggest source of fear: the unknown. Educate yourself.

“The only way you can take the emotion out is if you truly educate yourself. If you understand the investments that you’re in, and if they’re tied to your goals, needs and objectives, if you’ve mapped all that out, then there’s no need to worry.”
-Anthony Altobelli, E*Trade

And finally, remember why you’re in stocks to begin with: over time, they pay more.

“The only asset class that really outpaces that inflation, or taxes or more importantly helps you save for retirement, or put your kids through college is the stock market.”
-Anthony Altobelli, E*Trade

Bottom line? You should never find yourself in panic mode no matter what the stock market’s doing. And if you do find yourself panicking, then probably you either need to decrease the money you have invested, or increase your knowledge.

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