Reduce risk with diversification, dividends

The Ticker

September 29, 2000|By JULIUS WESTHEIMER

If you're like most investors," says American Funds' newsletter, "you understand that stocks are inherently volatile with prices rising and falling daily. How can you reduce the volatility of your portfolio?

"First, make sure your assets are diversified. Often, when one market segment slumps, another may be strong - and vice versa.

"Second, invest in mutual funds that stress dividends. While growth stocks grabbed recent headlines, dividends have played a key role in building investors' total return [gain plus income].

"Dividends offer some downside protection. They give you a reason to invest besides higher stock prices. Stocks without dividends are worth only what the next person will pay you for it - risky business."

SOME OF EACH: "Would you like to have both growth and value?" asks Charles Jordan, CEO, Jordan Advisory Corp., a $105 million money management firm. His list includes Cisco Systems Inc., PE Biosystems Corp., Intel Corp., Citigroup Inc. and Corning Inc.

TAX TIP: "Protect against tax problems when funds take big capital gains," says Bottom Line. "Look for `tax-managed' funds. Check funds' distribution dates so you don't buy just before a capital gains payout."

STOCK WATCH: "Bull markets last longer than bear markets. The longest bull market started in 1982 and lasted through 1999, with the market up over 1,300 percent. The longest bear market was January 1973-December 1974 when the market lost 45 percent." (Ibbotson Associates)

"We're seeing craziness of traders, not a ... downtrend. Use the Nasdaq sell-off to put reserves to work at lower-than-expected prices." (US Investing Report)

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