The weather is finally getting better and it is that time of year again when we all start to plan or attend some spring BBQs. At many of these social occasions it is often discovered that I happen to be a "finance guy" so I inevitably get cornered and asked numerous questions involving "the market". The question I often hear these days is: "The market has really rallied. Am I too late? What do I do now?"

What is now starting to compound the angst amongst investors is the frustratingly low level of returns that have been provided by money market funds. Many investors these days are disgusted with returns now being offered by bank CDs and or other short-term fixed income products. They want more than 0.10 percent on their money per year but do not want to get burned again (after suffering two massive bear markets in 10 years). This angst and trepidation is understandable and is also reflected more broadly in the retail money flows. According to US fund flows since January 2007, almost $600 billion has been directed to the bond market while nearly $200 billion has been withdrawn from the equity market. Recent data from Morningstar also indicates 95 percent of the $377.4 billion flowing into mutual funds last year alone went into bond funds. So if you haven't been buying stocks lately it is safe to say you are not alone. This can be viewed as a contrarian indicator and actually may support further gains in the market as retail investors clamber on board.

So let us first briefly review what has happened and assess where we may find some interesting opportunities now. Over the past 12 months low quality stocks (those ranked C&D by Bank of America Merrill Lynch) returned about 133 percent. A+ quality stocks have rebounded about 60 percent. Clearly the junky stuff has outperformed significantly. This is not unusual since it generally falls the most in severe economic downturns. Many lower quality stocks now looked quite extended and are pricing in an incredibly robust recovery already. On the other hand many blue chip, high quality US multinationals remain attractively priced. These higher quality stocks sport incredibly solid balance sheets, growing cash flows and defensible business models. Many of the larger multinationals also offer investors exposure to emerging market growth and growing dividends. If the economy does stagnate or slow considerably the high quality stocks will offer a far more defensive position. A recent research piece by GMO suggests the asset class with the highest future seven year real return per annum was US high quality equities. We would have to agree. At this juncture in the economic recovery and given the explosive rally in the market it would seem prudent to enter the fray slowly over the next six to 12 months by buying some of these large cap quality companies. Purchasing these shares over time eliminates your need to time the market in the short run and offers you the benefit of averaging in at various prices: buying more when they fall and less when they rise. For those more inclined to capture a rebound in growth we would suggest stocks like Microsoft, Cisco, Google, Chevron, and Bank of America.

For those who want to start establishing a more defensive position with an income kicker its worth considering Proctor and Gamble, Pfizer, Johnson and Johnson, PepsiCo, Lockheed Martin, Wal-Mart and McDonald's. Many of these companies are household names and offer little for those who want the "hot" glamour stock to brag about. They are unlikely to offer spectacular short-term returns (but they should not offer heart stopping plunges either). They are in a word "boring".

So when everyone starts "talking stocks" you might not be the most popular guy at the barbeque this summer. You may, however, turn out to be the richest guy in the end.

Full disclosure: Mr. Kowalski and/or clients of Anchor Investment Management may own some or all of positions mentioned in this article.