There are periods of time where there is almost no reliable way to invest money; where the risk of losing money is just too high. So, how do you invest in an uncertain market? Choosing not to invest is usually the best investment choice during such difficult financial times. Unfortunately, not investing in any of the traditional options (like U.S. stocks, overseas stocks, real estate, commodities, fixed income) is a good-looking alternative in the short term. The stock market is about 20–25% overpriced and major yet-to-be-resolved problems in real estate, jobs and in government debt make investing at this time unreliable.
Given these elements, the best bet is to be primarily in cash for now—no-load money market funds and very short term CDs. Temporarily taking a defensive position and saving as much as possible is likely to turn out a lot better than the losses involved if the stock market drops. Sometimes it’s best to be patient and wait for the next opportunity. For now, making the choice not to invest may be your best investment.
Read more detailed advice and my current take on the stock market, real estate market, and more in my Market Evaluations section of www.MoneySmartOnline.com.