What Are People Doing With Their Money Now That The Stock Market Is Scary?

After the stock market decline of 2008, a lot of people are wondering what are people doing with their money. For the most part, I believe that most investors stayed put and rode their mutual fund values down and then held onto them. If they did that, they were rewarded by strong returns in 2009.

I think that if you are in a mutual fund with a long term investment horizon, you've got to ride out the storms of the ups and downs of the stock market investing. The reason I feel that way is because when you are invested in a mutual fund, you own shares of the fund and not shares of one or a few shares of stock. This means that fund can dump underperforming stocks and keep ones that are artificially depressed.

Mutual funds are great place to be as a long term investor. The main downside I see to being invested in funds is that they stay fully invested at all times. That means you are subject to the overall trend of the market. You've got to ride those out.

For individual stocks, I don't believe that you should buy and hold. You should buy with an exit plan. All stocks no matter how good will go down at some point and there is no need to give back all of your stock appreciation. You've got to have strong sell rules that prevent and limit losses and lock in gains.

Many people though, are scared stock market investing. They are so scared that they have sold out and are sitting on their money in savings accounts and certificates of deposit (CD's). I read a story the other day that their were some people so afraid of the banks even that they kept all of their cash at home in a safe. But, really they found out that it isn't much safer when it was stolen from their house.

While the stock market might be scary to those unfamiliar or unused to the ups and downs, it still remains one of the best options for someone to make money in the market but only if you have a long term investment horizon.