What to do when market gets frisky

The Ticker

October 31, 1997|By Julius Westheimer

After a record crash by the Dow Jones industrial average Monday, a record climb Tuesday and volatility ever since, where should you put your money now?

NOVEMBER NUGGETS: November has historically been one of Wall Street's best months, with the S&P 500-stock average rising 1.4 percent on average over 46 years. Only December has been stronger, ahead 1.8 percent.

TURKEY SHOOT: "The 1997 Stock Trader's Almanac" says, "It's easy. Be invested the day before and after Thanksgiving. These two days combined gained about nine Dow Jones points for 21 straight years without a loss until the 1987 crash. In 44 years, there were only six losses."

SMALL IS BEAUTIFUL: Should you buy "small cap" stocks now? A small cap company is one with less than $1 billion "market capitalization" -- price per share times the number of shares outstanding.

According to Mutual Fund News Service, "The first quarter of 1997 saw small-company mutual funds drop 7 percent, but by mid-September they were up 22 percent. Small caps swing wildly."

Recommendation: Buy and hold some small-cap stocks, but be flexible to catch rapid swings. Promising areas currently include technology, business services, consumer products and health care. Examples of local small cap stocks: Guilford Pharmaceutical, GTS Duratek and Micros Systems.

TAX TIP: "Owning shares jointly is acceptable when you don't own much, but as you acquire substantial property, joint ownership can wreck estate planning. For couples with over $1.2 million jointly, separate ownership of $600,000 apiece significantly lowers estate taxes when second partner dies." (Armstrong, Welch & MacIntyre "Financial Strategies.")

FALLING LEAVES: "Insiders have recently shifted to the sell side. Seventy-eight percent of insider transactions over the last eight weeks have been sales." (Mark Hulbert in Forbes, Nov. 3.)

"Your 401(k) plan is a 'forced savings' opportunity. Maximize 401 (k) contributions as much as you can. It's one of the best investments. It's tax-deferred and many companies match at least part of your contribution." (Better Investing.) Next year, the 401(k) limit rises from $9,500 to $10,000.

"The worst mistake investors make is taking their profits too soon and their losses too long." (Michael Price, Mutual Shares Fund.)

Pub Date: 10/31/97

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