Jumping in and out of stocks can cause you to miss the big moves

The Ticker

November 13, 1998|By Julius Westheimer

SHOULD YOU jump in and out of the stock market?

"In the 25 years through July, 1998, stocks fell in 112 out of 300 months," says Mutual Fund News Service. "Because big monthly changes come without warning, the most important lesson is to stay invested.

"In those 25 years, a $10,000 investment would have grown to $270,000, including reinvested dividends."

The article explains that an investor who bought stocks right after the October 1987 stock market crash would have enjoyed sevenfold growth through July 1998 and if the investor had invested just before the crash, that money would be worth 5 1/2 times what the investor put in.

Here are "Well-Known Professionals' Investment Approaches," from the Association of Individual Investors magazine, November.

Warren Buffett: "It's simple. Buy excellent companies with long-term rising earnings and dividends. I favor consumer monopolies."

Benjamin Graham: "Buy and hold long-term. Buy companies with share prices below intrinsic value, giving 'protection' against unfavorable developments."

T. Rowe Price: "Invest in companies with long-term growth prospects in early stages of their life cycle, before they're 'glamorized.' "

Peter Lynch: "Buy companies you're familiar with. Other positives: The company is boring; it has special niche and makes a product or service people buy in good times and bad."

Al Mirachi of Jarrettsville writes: "Your column said that if you owned Coca-Cola stock for 10 years you get an 11 percent return. Don't all stock owners get the same dividend, regardless of when they owned the stock?"

Yes, but if you buy the stock today, you don't receive the same yield as a buyer 10 years ago. If you buy Coca-Cola now. you get a tiny 0.8 percent dividend. But if you bought a decade ago -- and held it -- the return on your original investment would be 11 percent. The reason: Coca-Cola Co. has raised its dividend substantially over the last 10 years.

ENDPAPERS: "Tax-free bonds are the value of the decade. Investors are getting more value today than at any time in 10 years or more." (The Informed Investor.)

"Use just one insurance agent and one financial adviser." (Russ Levin, financial planner.)

"The stock market is that creation of man which humbles him the most." ("1998 Stock Trader's Almanac.")

Pub Date: 11/13/98

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