Money Market Funds, Gold or Stocks-What’s Your Risk Tolerance?
When the going gets tough in the stock market, investors move into money market funds to wait it out because it offers a steady, consistant rate of return, even if it’s very low. Recently however money market funds have been shrinking as investors are moving more confidently back into the stock market. The main reason for the migration is that investors are moving out of their more conservative positions into higher risk positions because they don’t want to miss out on the gains. America is on sale, after all, stocks and real estate especially. Although the trend is to move out of money markets the balances remain at all time highs which seems to indicate that there are billions still waiting to be injected into the market.
I find it interesting to watch stock market trends as it’s another facet of this complicated economy we are experiencing. Gold prices are another indicator worth tracking and the price of gold is at near record level highs. Like money markets, gold is a popular buy when moving out of the stock market. For this reason we have seen the price of gold soar to record levels. Some experts predict that gold is no where near its high and forecast a top of $1800 per ounce. The other reason gold is climbing is because of the sinking dollar. The reason for this decline is that as the economy recovers, investors are moving out of their conservative Treasury bonds, money markets and the dollar and back into stocks and commodities like gold to reap the higher returns. Gold is a seemingly contradictory analysis but to me it’s a great indicator of the lack of confidence one way or another. The stock market holds great gains but does it signal a long term recovery? We’ll see. There are plenty of places to stash with confidence and move boldly ahead if you’re a risk taker. That’s what makes this a very interesting time.
For more information on money market trends, check out this article from Smart Money’s Elizabeth Trotta…..
Please add your comments. Peace, Megan
Wed, Nov 25, 2009
Financial Planning