Should you buy, sell or hold stocks? Look at facts, figures

The Ticker

September 24, 1997|By JULIUS WESTHEIMER

WITH THE Dow Jones average this morning up 23.6 percent this year but 3.4 percent below its record high, should you buy, sell or hold stocks? Consult your broker for specifics, but here are some general guidelines:

"Markets are never wrong; opinions are," investor Jesse Livermore once said.

I agree. Although I review dozens of opinions, predictions and curbstone advice, facts are the most useful thing to remember when deciding how to invest your money.

Here are a few facts and figures:

In each stock market correction since 1990, investor buying turned the market around once the decline approached 10 percent.

Over the past 75 years, stocks returned an average 10.5 percent a year -- part growth, part income -- double bond yields and triple T-bill returns.

As Black Enterprise magazine says in its October issue, if you put only $25 a month in stocks that gain 9 percent a year -- which is under stocks' average return -- $7,500 would grow to $28,238 in 25 years, before taxes. In retirement programs, there are no taxes.

Here's why you'll need inflation protection. At 3 percent inflation, your 1997 dollar will be worth 74 cents in 10 years, 55 cents in 20 years and only 41 cents in 30 years.

Although many people were discouraged from investing after the Oct. 19, 1987, crash, the market recovered in 19 months -- then tripled.

Seventy-four percent of adults rely on a financial professional for investment advice, according to a survey by the Phoenix Fiscal Fitness Service. Only 22 percent take advice from friends and relatives.

If you had bought Coca-Cola stock 10 years ago, you would now be receiving an 11.2 percent dividend return on your investment, plus increasing your principal 12-fold.

Despite nine recessions since World War II, corporate profits rose an average 9 percent a year. At 9 percent compounded, profits double every eight years, quadruple every 16.

If a stock drops 50 percent, it then has to double just for you to break even.

Pub Date: 9/24/97

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