Though market shows steady increase, investors down in Tri-Cities

Stewart Beach hasn?t fielded any calls from people demanding he steer their money onto Wall Street.

On one hand, Beach, a financial adviser with Clear Perspective Advisors, of St. Charles and Aurora, acknowledges such an admission may seem incongruous.

Since early summer, the stock market has risen steadily, with Dow Jones Industrial Averages hitting levels not seen since before the market crash at the beginning of the Great Recession in 2007.

But while the market appears to have resumed its historical upward march, Beach and others who help Tri-Cities residents manage their money said their clients are responding to the seeming market rally with a bit of incredulity.

?I?m not getting any calls from clients yelling at me because we?re ?missing the market,? ? Beach said. ?They?re not saying, ?Put more money in!?

?Instead, what we?re hearing is a lot of people being really, really cautious.?

After the 2008 stock market crash, even otherwise optimistic investors opted for caution, pulling money out of the stock market and seeking safer investment vehicles in which to place their funds.

Based on the Dow Jones Industrial Average, the stock market has nearly erased all losses associated with the crash, hovering above 13,000 recently, just shy of the all-time high of about 14,000 in 2007.

?For the people that held the course, they?re almost back to where they were [in their portfolio value] to before the crash,? Beach said.

Dave Brady, a finance adviser and owner of Brady Investment Counsel of Geneva, said the generally steady nature of the stock market in recent months has prompted him and others to move clients back to what he called a ?fully allocated? position.

For most investors, that means putting about 60 percent of their portfolio in stocks.

?If our guidelines say a particular investor should be at a 60-40 stock allocation, then we are very comfortable right now getting them back to 60-40,? Brady said.

For many investors, the stock market represents the best choice for clients? long-term investing plans, Brady said. While the market will always present some risk, stocks have ?far outdone? other investment vehicles in returning gains.

Beach agreed investors have few realistic alternatives, with traditional savings vehicles returning virtually nothing.

?We know that, unless they just want to make sure they can?t lose anything, they?re not really excited at putting their money in the bank,? Stewart said. ?They?re not even keeping up with inflation.?

Reports filed with the Federal Deposit Insurance Corporation reveal in the first half of this year, just before the months-long stock market rally began, most local banks reported declines of 3 to 27 percent in the amount of money invested in ?time deposits,? such as CDs.

While stocks have represented a better investment option, advisers cautioned against too much optimism.

Brady said he believes the market increases don?t necessarily represent economic growth. Rather, Brady said, it is merely the market returning to ?fair value.?

And Brian Green, a financial adviser at Capital Management Group in St. Charles, said the lack of healthy economic growth also has led him to counsel against investing too heavily in stocks.

?It?s really tough right now as a financial adviser for me to say, ?Everything?s going to work out as it always does,? ? Green said.

Recently, investors appear to be acting on their wariness.

A recent survey reported by the financial trends tracking organization, the Investment Company Institute, revealed investors continued in October to pull more money out of mutual funds than they put in, a trend that began in September.

During the seven-day period from Oct. 3 to 10, investors pulled $2.3 billion from mutual funds. That comes on top of more than $23 billion that flowed out of mutual funds from Sept. 12 to Oct. 3, the ICI report said.

Green said his clients are growing increasingly pessimistic about the market?s and economy?s future.

Green, Brady and Beach noted their clients have expressed worries over the upcoming presidential election, government debt, global political issues and the so-called ?fiscal cliff? ? a shorthand term that describes the mix of tax rule changes, regulatory changes, government spending cuts and higher tax rates for workers, businesses and investors that will take effect Jan. 1 unless Congress and President Barack Obama act to avert them.

Green said if investors are particularly worried, he ?doesn?t spend any time trying to talk them out? of increasing their cash holdings.

?If you are generally concerned, then earning 0.5 percent with no risk may not be such a bad thing, if it brings you some peace of mind,? Green said.

For now, advisers said they are counseling most clients to stay defensive and stand pat.

?The market right now is kind of like a traffic jam on a freeway,? Beach said. ?We?re jammed up, can?t see too far ahead, but generally moving slowly in a positive direction. And, just like in a traffic jam, now?s not the time to be trying to constantly switch lanes.?

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Source: http://www.kcchronicle.com/2012/10/24/though-market-shows-steady-increase-investors-down-in-tri-cities/ae82oan/

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