Relax through ups and downs stay invested, think long-term

The Ticker

October 16, 1998|By Julius Westheimer

ALTHOUGH THE Dow Jones average soared 330 points yesterday, the market has suffered many sharp declines.

Investors should relax.

"A 300-point Dow Jones drop is less than 4 percent with the Dow at 8,000," says Moneypaper. "Sure, it's painful, but not as rough as a 300-point drop in 1988 (14 percent) or in 1978 (22 percent). When a broadcaster says, 'The Dow fell 100 points today,' it translates to 'The Dow fell 1.25 percent today.' "

Did you realize that in the 1973-1974 bear market, the "Dogs of the Dow" strategy -- buying the 10 highest-yielding Dow Jones stocks and rebalancing the list one year later -- eked out a 2 percent gain while the Dow Jones average plunged 32 percent? Not only do the Dogs have relatively high yields, but many have low price-earnings ratios.

Kevin Goodman, Primerica Financial Services, sends this encouraging note: "Every decade is fraught with ups and downs, but through recessions, reversals and corrections, long-term investors came out on top.

If you invested $1,000 in the stock market in November 1929, that shrank to a mere $401 by 1932. However, if you kept it in the market, it would have been worth $931,335 by the end of 1997."

"Here are 'Golden Guidelines' to stick with when investing in stocks or mutual funds," says John Adams, mutual fund specialist. "Have a long-term horizon through bull and bear markets. Don't time the market. Instead, invest regularly. Diversification is crucial. Set realistic expectations and have a realistic tolerance for risk.

"In the 25 years through July 1998, stocks fell in 112 out of 300 months. Significant changes came without warning. Lesson: Stay invested. In those 25 years, a $10,000 investment would have grown to $270,000."

Pub Date: 10/16/98

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