You should keep buying stocks, the historic trend is upward

The Ticker

March 04, 1998|By Julius Westheimer

JUDGING FROM letters and calls, many young and middle-age people are afraid to put -- or keep -- money in stocks at this high level.

Stocks have shot straight up recently. This morning the Dow Jones industrial average stands at a record 8,584.83, up 676.58 points, or 8.5 percent, since New Year's Day and ahead 2,136.56 points, or 33.1 percent, since Jan 1, 1997.

So, should you invest now?

Yes. Feed every nickel you can into any retirement fund you are offered. Buy only stock mutual funds -- no bond or "income" funds, no money market accounts. Your contribution not only escapes income tax, legally, it grows twice as fast as money outside a tax-deferred plan.

Despite today's high market, you will see stocks go much higher. Young people without retirement plans should buy stocks, too.

Why the optimism? For one thing, young and middle-age people have time to ride out Wall Street's "bumps," which we will surely suffer from this stratospheric level.

Second, the long-term outlook appears bright. Over the years stocks on average doubled the "total return" -- gain plus income -- of bonds and tripled the return from Treasury bills. And those are average figures, with no special selection employed.

"The Great Boom Ahead," by Harry S. Dent Jr., includes a graph that predicts an astonishing climb ahead, based on the past Standard & Poor's 500-stock index correlation with the number of 49-year-olds in the United States. If that relationship continues, the S&P would double in the next 12 years and the Dow Jones average could soar to 15,000 by 2010.

More optimism: S&P Outlook says, "We're encouraged by this latest display of buoyancy. We stay with a long-term bullish investment policy. Enjoy the ride."

Goldman Sachs' investment adviser John Campbell, in Fortune, March 16, says, "Invest in the best businesses and top managements, pay a fair price, and over your life span your stocks will do better than market averages."

Working Woman, March, advises, "Build a sizable nest egg by buying stocks and sticking with them through thick and thin, without trying to 'time' your investments."

If you fear fully investing now in stocks, try "dollar cost averaging," whereby you put a set amount, $100 or so, into a stock fund every month.

Always keep a 10 percent cash reserve to use for buying opportunities.

Many years ago, presidential inaugurations occurred on this date. When FDR was inaugurated on March 4, 1933, the Dow stood at 53.84. Wall Street then closed for 11 days during a banking moratorium.

Pub Date: 3/03/98

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