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A birthday worth celebrating

By Judy Martel · Bankrate.com
Wednesday, March 9, 2011
Posted: 3 pm ET

As I type this, the Dow Jones Industrial Average is at 12,215, and the Standard & Poor's 500 sits at 1,319. Two years ago on this date, the numbers were much more dismal: 6,547 for the Dow and 677 for the S&P.  

When the market closed Tuesday, the Dow was up 86 percent from its low in 2009, and the S&P did even better, improving more than 95 percent since March of 2009.

Many investors might be breaking out the champagne in anticipation of a repeat of a 1990s-style bull run, when the market soared for nearly nine and a half years.

They could be a little premature. According to Standard & Poor's data going back to 1932, the average bull market run is just under four years. Still, most investment experts predict at least another year of gains in the U.S stock market, despite persistent stalls in a recovery for housing and unemployment, and brewing troubles with the Mideast and rising oil prices.

So are investors who buy into the market now just chasing returns? Some analysts think so, and foresee the market becoming overvalued with an influx of new investors; and there are still plenty on the sidelines. According to the Investment Company Institute, investors withdrew $96.7 billion from the U.S. stock market in 2010, and since the beginning of 2011, only $24.2 billion has been put in.

Other experts point out that the market is still undervalued: For instance, even factoring in the two most recent years of gains in the market, the Dow remains 14 percent below its all-time high in October 2007. Investors may also be suffering from low rates in CDs and money market accounts, and feeling ready to take on some risk to earn higher returns.

So what’s the best strategy given the stock market's performance? As always, the way to reach your investment goals is to consider your time horizon and risk tolerance and diversify your assets for steady growth.  

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March 10, 2011 at 3:55 am

I don't like your headlines. Is the general population concerned about Bill Gates and his wealth. I am very very low-income and am not interested in Bill Gates, Justin Beiber, Hannah Montana or whoever is popular. I don't keep up.