Learn how to prosper when the market declines

The Ticker


HOW DO YOU make -- and save -- money in a "down" market?

John Rothchild, author of "The Bear Book: Survive and Profit in Ferocious Markets," advises:

"Re-allocate your assets. No one should be anywhere near 100 percent in stocks, especially in this high market. Cautious investors should keep 50 percent in stocks, 30 percent in bonds and 20 percent in cash.

"Cut back on aggressive growth stocks with high price-to-earnings ratios and buy stocks that do best in tough times. Examples: consumer goods, electric utilities, household products and foods.

"Buy stocks that pay high dividends. Dividends often account for a third of a stock's gains and support a stock in 'down' markets. Also, buy mutual funds that hold high-dividend stocks, like public utilities."

MONEY MAILBAG: Mrs. Iva Gott Gardner of Sykesville writes: "I have tried to explain to my daughter how you can make two half-payments on your mortgage each month and save money. I'm sure I heard you say this somewhere. How do I do this?"

Here's the idea behind a bimonthly mortgage: Instead of making your payment once a month, make half a payment every two weeks. That totals 26 payments a year, the equivalent of 13 monthly payments rather than 12.

All of the "extra payment" is applied to the principal, accelerating the payoff. So a 30-year loan is reduced to about 20 years. That sharply cuts the amount of interest you pay during the life of the loan.

IN BRIEF: "A low-risk way to buy stocks is through dollar-cost averaging -- investing in the same stock or fund with equal sums of money at regular intervals. Over time, this smooths out the market's ups and downs." (Clifton Gunderson's Insights.)

"A Value Investor's Dream Stocks" in Money magazine are Aflac Inc., Canadian Pacific Ltd., Halliburton Co., Nucor Corp. and USA Waste Services."

If you open an IRA for a 14-year old child -- provided the child earns $2,000 a year -- and contribute $2,000 a year for only six years, the tax-deferred compound earnings at 10 percent will top $1 million by the child's 65th birthday.

"Buy a stock like you would buy a house. Like it so much that you'd be content to own it in the absence of any market." (Warren Buffett)

Pub Date: 7/24/98

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