Skyrocketing Internet stocks require caution

The Ticker

April 09, 1999|By Julius Westheimer

"IT'S TOUGH to argue with the success of buying an Internet stock that gained 966 percent in 1998," says Financial Perspectives. "It's also tough to argue with executing stock trades from the comfort of your own home computer for less than $10."

But the publication also suggests that people shouldn't just jump onto the online bandwagon.

"For online trading, understand the considerable risks; don't risk `serious money'; don't borrow money for online trading; never buy stocks you don't know much about; keep taxes in mind; disregard rumors; use buy and sell `limit' orders," it warns.

If you're considering buying a mutual fund, here's a summary of "Do's" and "Don'ts" from Better Investing magazine:

DO: Invest mainly in stock funds, be skeptical of ratings, use index funds, consider closed-end funds, invest internationally, use automatic investment plans, read the prospectus and annual report, look under the hood.

DON'T: Follow the crowd, pay attention to the fund's name, try market timing, buy or sell a fund based only on recent performance, buy a fund with high turnover, ignore expenses, own too many funds.

"Diversify, because each category performs differently in different situations. Some are up one year, down another. Diversification smoothes out the ride." (Journal of Financial Planning.)

"Watch out for Y2K fraud as year 2000 approaches. Scams work on people's fears of computers crashing, etc. Be wary of investments claiming the `magic bullet' to fix Y2K." (Kiplinger's Washington Letter.)

Pub Date: 4/09/99

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