You might think it’s a stupid idea to buy stocks right now. And I’ll admit, things are a bit bleak. Seasonal hiring is disappointing and unemployment remains stubbornly high. Inflation is eroding famly budgets while wages and personal income are stagnant. Debt woes in Europe are in focus, but the “supercommittee” ensures that debt problems in America will be the subject of ridicule sometime soon.
It’s indeed ugly on Wall Street. September saw us shed about 4% from all of the major indices — and if we hadn’t seen some big up days last week, we could have languished at lows that were off about 6% on the month. And who knows what October will bring after a flop earlier this week and a rally off of the lows in the last two days.
But the risk you should be focusing on right now isn’t the risk of owning stocks. No, the real risk could be what will happen if you are not invested in the market.
Here are three reasons why you should stop fretting and start investing now, with investment opportunities to prove the point to consider:
1. Cash Is Losing Value Fast
The myth of going to cash is that you will protect your money. Maybe it’s true that you won’t see a red arrow next to your bank account unless you make a withdrawal, but the sad reality is that if your money is just sitting there, it is losing value every day. The U.S. Labor Department reported recently that consumer prices were rising at a 3.8% annual rate — the hottest pace of inflation since November 2008. In short, your money can buy about 4% less now that it did a year ago.
Still think it’s wise to let your cash just sit there?
The solution is to seek shelter in sectors that profit from inflation. For instance, the Market Vectors Agribusiness ETF (NYSE:MOO) focuses on agriculture and food companies that feed the farm industry — companies that are benefiting handily from selling higher-priced corn, soy and other grains to both consumers and packaged food companies alike.
For mutual fund investors, consider the PIMCO Commodity Real Return Strategy Fund (MUTF:PCRAX). With $16.5 billion under management, this is one of the largest and most respected pure-play commodity funds out there, buying and selling futures on hard commodities ranging from oil to grains to gold and everything in between. This is a broad-based way to play inflationary trends, and a more direct investment on inflation. The downside is that the expense ratio is a bit steep at over 1.2%, but the active management and sophisticated trading by PIMCO’s staff might make the premium worth it to some folks who want to deal in commodities directly this way.