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Finance

Should baby boomers jump back into the stock market?

With the stock market hitting new highs, some are uncertain where it will go from here

When the stock market started skidding in late 2007, it didn’t take long for Alan Goldstein to pull his funds out of the market. The 61-year-old Falmouth resident has since gradually waded back in. But until last year, he still had much of his money in cash, because he feared the market could drop again.

“I’m fairly conservative,” said Goldstein, a retired marketing director for a health care software company. “I was nervous.”

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Many baby boomers such as Goldstein are finally beginning to move back into the stock market again as the Dow Jones industrial average and S&P 500 hit new highs. Overall, investors added an estimated $67 billion into stock mutual funds in the first quarter after pulling out $223 billion since March 2009, when the stock market hit its nadir, according to the Investment Company Institute.

But with the market at a new peak, analysts are divided over what will happen next. Some predict the bull market could continue to notch gains; others fear that after four years of increases the market might be due for a correction. The online investing site Motley Fool recently listed “3 Signs That the Bull Market’s Days Are Numbered.” The Daily Beast, meanwhile, warned that “when celebrities like [Black Swan actress] Mila Kunis talk stocks, it’s time to get out of the market.”

That’s leaving many Americans wondering what they should do next, particularly those who are retired or nearing retirement and don’t have decades to recover from another market crash.

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Hearts & Wallets LLC, a Hingham financial research firm, conducted a survey last fall that found many boomers were still anxious about the market.

“Give me the mattress at this point,” one investor from Chicago told the company.

A Boston resident raised similar fears: “It sure seems pretty volatile out there these days.”

But Hearts & Wallets principal Laura Varas also noted that stocks remain viable for many boomers who still need to boost their retirement savings and alternatives such as bonds and CDs yield so little interest.

“They need the income,” she said.

Stuart Goldman, 50, of Somerville, falls squarely into that category. Goldman said he keeps some money in stocks and mutual funds, but only because he doesn’t feel there are many alternatives to earn a decent return.

“I don’t care much for the stock market, because it generally doesn’t make sense,” said Goldman, who works part-time at an electronics store. “The value of a stock goes up or down not because of what the company actually does, but because what other people are willing to pay for a share.”

But, “with interest rates at rock bottom, you need to be in the market if you have any hope that your money will grow,” Goldman said.

Bob Ryan, a fee-only financial planner at Resolute Financial in Wakefield, expects the bull market will continue to rack up gains.

“I don’t think we’re anywhere near nosebleed territory,” Ryan said, noting that the stock market is still lower than it was in 2007 after adjusting for inflation, and that corporate earnings and revenue have risen over the past six years.

“It’s not like 1999 with the dot-coms,” Ryan said.

Ryan believes many investors have to keep money in stocks because they have historically yielded far more than bonds and other investments. And with Americans living longer, retirees will need to remain in the market longer to make sure they have enough to last their golden years.

Besides, Ryan pointed out, other alternatives, like bonds, can go down in value too — something many financial specialists predict will happen if the Federal Reserve raises interest rates. “There isn’t anything safe,” said Ryan.

Still, many financial advisers counsel investors that it’s impossible to predict market movements and urge investors to avoid getting caught up in the excitement of the record high. Many Wall Street wags already believe the average middle-class investor has a penchant for jumping in near market peaks, selling after market plunges, and missing out on the rebound.

Instead, many planners recommend investors figure out a good mix of bonds, stocks, and other investments for their age and life goals — and then stick with that mix no matter what the market does in the short term.

“You don’t want to run with your emotion,” said Lisa A. Dugan, vice president with Secure Planning Inc., a wealth management firm in Portsmouth, N.H. “We definitely don’t recommend trying to time the market.”

For his part, Goldstein said he finally sat down with a financial adviser from Fidelity Investments a year ago to work out a long-term strategy to cope with the market’s ups and downs.

The adviser persuaded him to move money back into stocks and bonds — rather than holding so much in the bank. But he also helped Goldstein to focus on investments that would earn a steady income while ­giving him peace of mind. He has put about 40 percent of his money into dividend-paying stocks and 40 percent in individual bonds he intends to hold to maturity, and 20 percent in stock or bond mutual funds.

The values of the bonds and stocks might fluctuate in the short term, Goldstein was warned, but they should guarantee a steady income. And as long as he doesn’t need to sell the bonds early, Goldstein shouldn’t have to take any losses.

“I’m actually pondering the market’s future right now,” Goldstein said. “But as long as my stocks pay dividends, I can live with the ups and downs.”

Todd Wallack can be reached at ­twallack@globe.com. Follow him on Twitter @twallack.
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