Don't try to time the market buy and hold for the long term


January 17, 1993|By JANE QUINN BRYANT

NEW YORK — New York--A financial writer I know moved her retirement investments out of stocks last year. Based on her interviews with experts, she concluded that the stock market would fade in 1992.

For three-quarters of the year, she was right. But in the last quarter, stocks rallied handsomely.

For the year as a whole, the average mutual fund invested in stocks once again beat out most taxable bond funds. Small-company stock funds rose 12.5 percent; equity-income funds (which specialize in high-dividend stocks), 9.4 percent; FTC and growth-stock funds, 7.8 percent, according to Lipper Analytical Services. That compares with 7.2 percent for A-rated corporate-bond funds. The best bond funds were the most speculative -- a 17.7 percent gain for funds invested in high-yield (junk) bonds.

As for 1993, some of Wall Street's finest professional investors are warning clients off the market. Merrill Lynch's longtime chief market analyst, Robert Farrell (just retired), sees a tough year of "step down and then rally"; work by Steven Leuthold, a Minneapolis analyst, suggests a possible dip of 25 percent to 30 percent; Norman Fosback, editor of the Mutual Fund Forecaster in Fort Lauderdale, Fla., says he's still half in stocks (to catch any rise) but also half in cash (to buy more stocks, on the assumption prices will fall).

On the other hand, Farrell -- good as he is -- isn't always right.

Even Leuthold's "sell" signals erred four times out of 18 since 1960.

The moral of all this: The average investor cannot guess what the market will do, so shouldn't bother trying.

Long-term investors should keep making regular deposits in stock-owning mutual funds.

If the market does fall, you'll get stocks more cheaply.

Eventually, prices will rise.

Much depends on whether consumer confidence keeps growing and interest rates stay down.

Here's the 1993 investment outlook:

* Certificates of deposit. At only 3.4 percent, CDs you buy now will get you nowhere in 1993. Instead, use Series EE savings bonds.

You earn 4.25 percent on bonds cashed in after one year and a guaranteed 6 percent or more annually if you hold for at least five years.

* Bonds. In a rising economy, high-yield (junk) bond mutual funds should continue to outperform, Leuthold says. If you prefer higher-quality bonds, go for Ginnie Mae funds; they own Treasuries and government-backed mortgages.

* Real estate. Even in the weakest parts of the country, real-estate prices have probably seen bottom.

* U.S. stocks. Here are Norman Fosback's "best buys" in mutual funds, ranked from the most to the least volatile: Twentieth Century Ultra, Janus Twenty, Kaufmann, Janus and Fidelity Low-Priced Stock.

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