Stock Smarts: Cash or Stocks?

If you had invested $10,000 in the S&P 500 (search) three years ago, you would have $6,839.40 today – clearly a bad bet. But what about that same $10,000 if you invested it today? At current rates, that ten grand won’t be worth much more if you put it in a savings account. So is it the right time to think about stocks?

Wayne Rogers of Wayne Rogers & Co. is getting positive right now and thinks that you are better off buying stocks. As he has stated in the past, the formation of the market bottom is a process, and we have finally come to the point where we can say we are at the bottom of the curve. Wayne looks towards real estate in terms of an alternative investment to stocks.

Hilary Kramer of A&G Capital also thinks we have seen the bottom. Comfort used to be in cash, but now it is back in stocks – there are comfort companies out there, especially ones with dividend yield and ones that are undervalued. She also thinks there is a bond bubble.

Dagen McDowell of FOX Business News says that one reason you should be looking to stocks instead of cash is that the bond market doesn’t look that strong right now (meaning you won’t necessarily lose money in treasuries, but you certainly won’t make money). The easy money has already been made in the bond market. But you don’t have to have an all or nothing strategy – you can still have cash on the sidelines.

Jonas Max Ferris of Maxfunds.com thinks that the story is the resiliency of the individual investor, as opposed to the often talked-about resiliency of the consumer. Investors have hung tough and are now ready to get back into the market, and their fear is on the wane.

Jonathan Hoenig of Capitalistpig Asset Management thinks there is money to be made – but not necessarily in the major indicies. He has a lot of money to work right now, but not in U.S. stocks. He does think there is still room to grown in the bond market, and is looking toward bond funds for that action. And he is still bullish on gold and silver.

Cashin’ In Challenge!

You asked – we challenged! Our viewers wanted to know which member of the crew was the best at picking a portfolio – so we’ve created the ultimate test for them – the Cashin’ In Challenge.

The Rules:

Everybody gets $10,000 in "play money" to invest
Each stock trade costs $15; funds pay fees and loads
We'll follow every move until the end of the year 

You can track the performance of each portfolio at www.foxnews.com/challenge

Money Mail

Wayne, Jonathan and Dagen answered some of your questions.

Question: “I'm retired and want to invest in the market. My sons say buy Intel (INTC) or Microsoft (MSFT). Which is better?”

Wayne thinks Intel will potentially get a better rise, but Microsoft is a safer play. The real issue for Jonathan is that the viewer is retired and living on a fixed income. The viewer shouldn’t be looking to stocks for income, but to fixed income instruments. Dagen thinks these are “mad money” investments if the viewer has money to play with.

Question: “I don't understand reverse stock splits. Can a company just decide to have one? Please explain”

Dagen says a company needs approval from shareholders for a reverse stocks split – but they (reverse splits) are really cosmetic – they don’t change the value of your investments, and they don’t really help the company.

Question: “I inherited $80,000 worth of General Motors (GM), Hughes (GMH), Raytheon (RTN), Delphi (DPH) and Electronic Data Systems (EDS). Today the stocks are worth $61,000. Should I sell?”

Jonathan doesn’t love these stocks – he would place stop loss ordered on them. Wayne’s not crazy about the portfolio – the stocks aren’t leaders in their respective industries. Dagen says if she doesn’t want to worry about having to deal with the stocks, she could dump them now and put the money to work in a fund.