WASIK COLUMN - Three smart money moves for 2013

Mon Jan 7, 2013 11:50am EST
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By John Wasik

CHICAGO Jan 7 (Reuters) - Using the non-courageous power of hindsight, it's easy to look back on the previous year and see where the "smart" and "dumb" money flowed.

The direction of money last year tells a well-worn tale: When fear dominates, money moves into safer vehicles such as bonds and money-market funds.

After 2008, you can hardly blame anyone for still wanting to avoid volatility. But those who retreated mostly to fixed-income have missed the better part of a bull market that's been running since 2009.

Although the S&P 500 index ended up about 13 percent in 2012, most investor funds flowed away from stocks during 2012. Investors redeemed money from stock funds for the 19th straight month through November, 2012, according to Lipper Research, a division of Thomson-Reuters. Nearly $4 billion was pulled out of U.S. stock funds in the week ending January 2.

Bond and money-market funds were more like mirages and less like oases last year. In November, for example, some $95 billion was added to fixed-income, while $14 billion was redeemed from stock and mixed-equity funds. The NASDAQ Index climbed more than 1 percent in November, its best showing for that month in three years.

I know Washington will throw investors into a lot of pot-holes on the way to negotiating debt ceiling and budget issues. But it's still a good time to buy stocks.

The employment recovery is still on track, with more than 150,000 jobs added last month, the Labor Department reported on Friday. Gains are also being posted in personal income, housing and corporate earnings. If you can ignore the relentless noise from Capitol Hill, it'll be possible to make some more intelligent money decisions.   Continued...