Have you got cash sitting in a bank account earning 1/2 percent interest? Unsure of where to put it? We’ve got some suggestions.

Stocks, bonds and cash. Financial advisors generally recommend you have a mix of all of these investments.

But if you’re like most of us, still licking your 401(k) wounds of the past few years, none of these investments seems like a good way to go.

Investing today couldn’t be more confusing. In the late 1990s, everyone was a stock market genius, getting what seemed like guaranteed returns of 25 to 30 percent per year. Now, we’ve just experienced the worst 3 year bear market in history. The question on every investors mind. What do I do know?

“It’s like hitting a 3 year speed bump with your transmission ripped out and your investments just completely left on the roadside,” says Sandy Lincoln, of Wayne Hummer Investments.

No wonder individual investors are sitting trackside. Riding the stock market rails just doesn’t seem as exciting when your 401(k) is still down 40 percent and the road ahead is full of potholes.

“I have money sitting in a savings account that’s earning less than 1 percent at this point,” says Frank Kocich, an individual investor.

Although each stock market investment you make is actually an investment in a company, which boils down to dollars and cents, it feels more personal than that. When you lose a large portion of your retirement cash, your first instinct is to do nothing.

“I’m really hesitant about getting involved in any sort of stock market investments,” Kocich says.

“You don’t want to panic in a time like this. This is a time when investors frequently make the wrong decision at the wrong time,” Lincoln says.

So what should you do? Experts say you should fight the impulse to leave your retirement dollars in cash.

“It’s safe from the perspective that you won’t actually lose money,” says John Miller, Nuveen Investments.

But your return is being eroded by inflation. Instead, invest your long-term money so that your investment return is a combination of dividends and stock appreciation.

“What could you expect? Maybe you could expect something in the 8 to 10 percent range. And you might get 3 to 4 percent of that in dividend yield and the rest in appreciation,” Lincoln says.

Which is about the return the stock market has generated over the past 75 to 80 years.

“Half of that return has come from dividend yield. It’s a very powerful component,” Lincoln says.

Which is why financial advisors continue to say you’ll do better with a large portion of your money invested in the stock market.

The best places to research companies and the dividends they pay is through information published by Morningstar and Lipper, both available online or at your public library.

RESOURCES

www.whummer.com

www.nuveen.com

www.morningstar.com

www.lipperweb.com

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