Are stocks still the best investment option?

An electronic board shows stock movements. The 2008 stock market crash sent folks walking away from Wall Street. Even today, an air of fear still holds some from re-entering the market. Have investors come around?

The stock market crash of 2009 landed a lot of people in crisis. Investors, big and small, lost money and faith that money is safe in stocks was lost as well. Plenty of people walked away from Wall Street then. Even though stock prices have largely recovered, an air of fear still holds some of us back from re-entering the market -- particularly younger investors in their 20s and early 30s. Russell Pearlman wrote a story about investing while terrified for the New York Times, and he says some folks have come around.

"You look at 401(k) participation among the 20-something set and it is pretty high, says Pearlman. "Obviously they are working off a very low base, so there's not a lot of money compared to folks in their 40s and 50s, but the participation rate is actually pretty high for the 20-something set. I think they've come to the realization that when you look around at the timeline that folks in their 20s and 30s have, they don't have to worry about as much about the 2008 crash. Plus, if you lose 40 percent off of $1,000, but you're going to be investing for the next 40 years, you've got a lot of time to make that up."

Pearlman says people who have quit stocks are now buying bonds of all forms. He says to some extent -- at least on the international and corporate side -- those types of investments can offer OK returns. However, he warns that people going into U.S. Treasuries right now are running the risk of not seeing their money go anywhere over the next few years because the Federal Reserve has made it clear that it's going to keep interest rates low and investors in Treasuries also face an inflation risk.

"You put in $1,000 and five years later you have $1,200," he says. "But inflation has gone up a lot faster and loaves of bread are $4-5 and you've actually lost ground, even though you think you've been a diligent investor."

Pearlman says people have also been investing in gold and other commodities, despite the fact that financial advisers believe gold should be more of an insurance option -- maybe 4-5 percent -- in one's portfolio.  That's because as an investment it's a very volatile commodity that has big swings.

While it's not possible to bulletproof one's stock portfolio, Pearlman says there are ways to make it so that you can sleep better at night.

"The good news is that the stock market right now is reasonably priced based on historic valuations," says Pearlman.  "Corporate America also realizes that people need stocks as an investment and are giving folks incentive to buy their particular stock by raising dividends."


For more on dividends and dividend recapitalizations -- click here

About the author

Tess Vigeland is the host of Marketplace Money, where she takes a deep dive into why we do what we do with our money.

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