It’s been up and it’s been down. The seemingly never ending waves of the stock market have caused a lot of distress and anguish. The biggest question lingering now is whether to put money into the market, leave the stocks alone, or pull money out. The stock market is a representation of the value of stock in the market. The future profits a stock will be making is what drives the value of any given stock. When the stock isn’t worth as much, investors begin selling and this drives the price down, making the market cheaper. This drop in value often scares investors because a drop in value means a drop in profit. “It’s trying to catch the wave,” said Richard Warr, associate professor of finance in the college of management. “You jump out of the wave when it’s not looking good and jump back in when it is.” The recently plummets of the market have many scared in addition to the looming recession.”It’s pretty clear we’re going to be in a recession,” said Warr. “The problem is investors are trying to figure out how deep the recession is going to be.” Warr said everyday new information comes out, sometimes it’s positive and sometimes it’s negative, and the market reacts dramatically to either piece of information. Warr said another problem with the market is that there are certain investors who are forced to get out, such as hedge funds specialist investment groups. “A lot of their investors are pulling money out,” Warr said. Hedge funds were forced to sell stocks in order to give money back to their investors. So, if you have money in the market, should you pull it out? Warr says no. “The market is down so a lot of people have lost money, so they pull out to protect their money.” However, Warr says that at some point the market is going to recover and rise again. Pulling out your money would cause you to miss out on that gain. Warr actually suggests investing in the market now since stocks are quite cheap. “This is a time to continue to invest, continue to buy stock at really cheap prices.” It may take two, three, four, or even five years to see a return said Warr, but the money will come back eventually.Michael Walden, William Neal Reynolds distinguished professor and extension economist, however, disagrees. “I would not recommend people to invest yet,” Walden said. “If you’ve already pulled out, keep it out. If you haven’t, keep it in.” “Companies are performing poorly,” Walden said. “Stocks tell us what companies are worth and when their profits are falling, their stocks are worth less.” Walden said that agriculture and health care are some of the sectors that are doing better off, but most areas of the country are already experiencing a recession, meaning the economy is producing less. The rising unemployment rates, increases in food prices and faltering businesses are all traits of a recession. Alexander Santago, senior in engineering, believes like Warr that now is the time to invest. “Find a business with a strong business plan and financial record and invest in them,” Santago said. Santago has investments in various mutual funds, foreign growth funds and in a 401K with the U.S. government. Santago also believes that leaving money in the market would be wiser than pulling out. “I’m leaving my money in and waiting for the market to rebound.”
Trouble riding the stock market wave
By Cheyenne Autry
Deputy Features Editor
Deputy Features Editor
October 26, 2008