Think of buying when big stocks fall 30 percent

The Ticker

October 23, 1998|By Julius Westheimer

SHOULD YOU BUY stocks in a falling market? "When great stocks fall 30 percent or more," says Personal Finance, "it's time to buy."

Of beaten down companies such as Coca-Cola Co., Disney Co. and Gillette Co., it says: "Each of those giants is hurt by slow

international growth and the strong dollar, but short-term problems are nothing in light of long-term positives."

Although many people know a bear market is a decline of 20 percent from its recent high, some investors may wonder what causes a sharply "down" market.

David Dreman, the dean of Wall Street investors, gives these reasons: Global unrest, weak profit and unrealistic valuations. He says, "build cash reserves, don't panic by selling 'willy-nilly' and stick with the asset allocation you used before the bear growled."

Looking for safety and growth? "Balanced mutual funds are important parts of any portfolio," says John Rekenthaler of Morningstar Inc. "They provide stability in turbulent times by holding blue-chip stocks and high-quality bonds. In August, a typical balanced fund dropped 8.48 percent, compared with a 14.47 percent decline for the S&P 500. In 1987 balanced funds slid half as much as the market as a whole."

WALL STREET WATCH: "Get fully invested. Prepare for a market that will rise 25 to 40 percent in the next 18 months." (Kenneth Fisher, money manager.)

Pub Date: 10/23/98

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