I'll bet many of my colleagues have this same experience: Wherever we go, we often end up talking about the stock market. Someone says, "Oh, you're a financial writer? Well let me ask you ..."

I don't mind it, partly because it helps me get a sense of what people are thinking. After the stock market started its descent on the express southbound train, I found myself in many interesting conversations. Here are some of the thoughts I ran across, along with my responses.

No stocks for me
One common refrain I've heard is, "See, this is why I don't invest in stocks." To this reply, I explain that though these occasional market dips and drops are unsettling -- and even sometimes panic-inducing -- they're to be expected. The market just does that now and then. And despite these downturns, over the long haul, the market has risen.

Yes, this year's roughly 40% drop in the S&P 500 is huge, and it gives us a negative average annual return over the past decade. But according to S&P data that uses year-end figures, we haven't seen 10-year negative returns since the 1930s! Every other 10-year period (1940-1950, 1941-1951, etc.) has shown a positive average.

And next to most other investment options, stocks have usually shone. Small-company stocks outperform larger ones, but both have done a lot better than safer investments such as bonds and Treasury bills. (And yes, it can certainly be worth your effort to park a portion of your portfolio in small caps.)

Aren't stocks risky?
People also assume that all stocks are risky. Sure, all carry some risk. But they're not all equal. A tiny company digging for gold or trying to develop a cure for cancer: That's risky. A big multinational beverage titan: much less risky. Check out the 10-year average annual returns for these companies -- during a decade when the S&P 500 averaged less than zero -- and ask yourself how much confidence you have that they'll still be around and doing well in the future:

Company

10-Year Average

Procter & Gamble (NYSE:PG)

5.3%

General Mills (NYSE:GIS)

8.7%

McDonald's (NYSE:MCD)

6%

Colgate-Palmolive (NYSE:CL)

5.3%

PepsiCo (NYSE:PEP)

5.6%

Nike (NYSE:NKE)

10.1%

Wal-Mart (NYSE:WMT)

4.5%

Source: Yahoo! Finance.

Risky funds
I'm also asked, "Are mutual funds dangerous, too?" My answer is that we should try not to paint investments with such broad brushes. Sure, some mutual funds are disasters. They're run by inept managers, or they charge ridiculous fees that wipe out much of their gains, or they suffer from any of a number of other problems. But there are good funds out there, too.

Remember also that there's a wide variety of funds. If you want bonds, there are bond funds. If you want large caps, or small caps, or Latin American companies, or energy companies, there are plenty of such funds to choose from. And for most of us, there are broad-market index funds, which deliver the market's average return.

Bad object lessons
Occasionally, I'm told about so-and-so, who "has lost most of her retirement money." To that kind of story, I point out that she probably hasn't actually lost anything yet, unless she's sold her holdings. My own retirement accounts are down very sharply, as are most. But it's important to remember that you may still be a decade or three away from retirement. And if you are, you have time for the market and your portfolio to recover. We haven't technically lost anything if we're sitting still and waiting. What ultimately matters in investing is the price at which you buy and the price at which you sell. If the market swoons halfway between those prices, it doesn't necessarily matter much in the long run.

Those who are planning to tap their retirement accounts now or very soon shouldn't have their entire portfolios invested in stocks. If you're going to want to withdraw 20% of your nest egg over the next five years, then park that money in more stable investments, such as CDs, bonds, or money-market funds. They probably won't appreciate as much, but they'll be less likely to lose value.

The bottom line is that many people are being fearful about investing -- just at a time when they'd probably do well to be greedy.

Check out some of my colleagues' thoughts on the attractiveness of our current market:

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Longtime Fool contributor Selena Maranjian owns shares of Wal-Mart, McDonald's, and PepsiCo. Wal-Mart and Colgate-Palmolive are Motley Fool Inside Value selections. Try our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.