Don't bail out of good stocks if anything, add to positions

The Ticker

August 05, 1998|By Julius Westheimer

WITH THE Dow Jones industrial average having plunged 299.43 points yesterday and this morning standing 9.1 percent below its all-time high, are you thinking of dumping your stocks? Here's some advice: DON'T PANIC: Never bail out of good stocks when things look bleak, although it's the hardest time, psychologically, to hold on. Resist the urge to sell.

Remember that even the best investments go through depressed periods. Don't sell when there's a sale going on. If anything, buy more.

Be patient. Over the long run, good stocks have weathered many storms.

If you're still panicky, give your broker a "stop loss" order. The broker then sells your stock when it drops to a certain price that you select.

MONEY SAVER: Are you thinking of refinancing your mortgage? "Rates are wonderfully low now," says Keith Gumbinger, mortgage specialist. "The rate for 30-year fixed-rate mortgages is around 7 percent, lowest in the last five years. Consider refinancing if your rate is over 8 percent and you plan to stay in your home for at least three years."

MONEY MAILBAG: Mrs. Rose Geers of Baltimore writes: "Would you explain the 'Rule of 120' I hear you talk about?"

Take the number 120, subtract your age and that's roughly the percentage of stocks you should have in your portfolio. If you're 40, have about 80 percent in stocks. If you're 70, only 50 percent. The stock percentage declines as you grow older, but remember, that's just a guideline; it is not carved in stone.

STARTING OUT: Are you starting to invest? Here is advice from a new book, "The First Time Investor" by Debbie Harrison: "If something looks like a fad, avoid it. Learn a lot by studying the number of shares bought and sold by company directors. Absorb know-how by joining an investment club. Although annual reports appear dull, they provide valuable information -- and they're free."

NEWSSTAND NOTES: "Are you about to sell stocks to pay tuition bills? Giving the assets to your student first can cut the tax bill in half." (Money.)

"It's over, finished, kaput. The Dow and S&P 500 tops of July 20 confirm our prediction that those peaks marked the end of the great bull market." (Carolan's Spiral Calendar in this week's Barron's.)

"Don't be swayed by announcements of stock splits, higher dividends or brokerage recommendations. They have little impact on a stock's price in the long run." (Investor's Business Daily.)

Pub Date: 8/05/98

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