Investors

Confused? So are the best and brightest on Wall Street as they try to make sense of a housing recession and credit crunch that many experts failed to anticipate. The intense ups and downs in the stock market in recent weeks are a symptom of the confusion as the economic threats play out in a script analysts haven't read in the past. It doesn't help that even the Federal Reserve has had to amend its views. Fed Chairman Ben S. Bernanke, who previously estimated the subprime mortgage loss at $50 billion, recently pegged it at $150 billion.

Veteran money manager Brian Kroneberger Jr. didn't sleep well last week — and neither did his clients — as markets whipsawed and the Dow Jones industrial average posted Tums-popping losses and heart-pounding gains on a daily basis. Nervous clients phoned incessantly, he attended frequent meetings to discuss developments, and investors emailed him in the middle of the night, apparently unable to sleep and seeking advice. Do we sell now? Do we move it all to CDs? Is this a buying opportunity?

Once again, investment professionals are urging investors, spoiled by the best three-year stock market run in history, to lower their expectations.Coming off the tremendous, if somewhat unexpected, performance of stock funds in 1995, mutual fund experts predicted 1996 would see something closer to the market's historical return of about 11 percent. They were wrong.Then, a year ago, the experts looked at history -- which had never seen three 20-percent-plus years in a row -- and again predicted a return to the norm.

NEARING Election Day, we note that investors are usually winners in November:WINNING TICKET: "November and Wall Street team up well together. The 11th month is historically Wall Street's third best of the year, rising an average 1.4 percent over the past 45 years." (Stock Trader's Almanac.)TAX CUT AHEAD? "No matter who wins the House, you'll probably get a better capital gains tax break on the sale of your home. Both parties are pushing for this."If Democrats win, you'll get a $500,000 exemption once every two years vs. today's one-time $125,000 exemption for those over 55. If Republicans win, $250,000 for a home you've lived in for three years, plus up to $250,000 more if you owned the home for 10 years.

Investment guru Peter Lynch once advised ordinary folks to "invest in what you know. " For many small investors, some of the companies they are most familiar with are the e-commerce and social media sites they use every day. Now some of these private Internet companies, such as Facebook, are expected to go public this year or next and will likely attract a rush of fans to their stocks. But even if you feel like you know these companies well, there is a risk in investing in them.

You may not see a lot of black armbands or be wearing one yourself. But many of us are in deep mourning — for big stock losses going back to 2008. And our sorrow is so similar to what we feel after a divorce or death in the family that we're likely working through the five stages of grief, says Andrew W. Lo, a finance professor at the Massachusetts Institute of Technology who has studied investor behavior. The stages for investors are the same as for the grieving: denial, anger, bargaining, depression and acceptance.

Derek Gabbard wasn't dreaming of California when he sought to raise investment capital for his Baltimore-based cybersecurity firm. But the CEO of Lookingglass Cyber Solutions lucked out with a connection to venture capitalists in the state that dwarfs all others in terms of venture capital. With a San Francisco investment firm taking the lead on the investment and a Maryland firm following, Gabbard recently raised $5 million. Such deals, where Mid-Atlantic technology companies straddle both coasts for investors, have been cropping up lately, though the dynamics underlying them vary.

Most investors make the same deadly mistakes, says Harry R Tyler, a financial planner in West Chester, Pa.For example, they hold losing investments long after they should cut their losses."

BUY A GALLON of ketchup, a gross of cat food or 10 miles of duct tape and you expect to get a price break. But people may not be aware that by investing a sizable amount in certain mutual funds, either all at once or over time, they're due a discount, too. The discount involves "breakpoints," the levels at which investors have purchased enough shares that they get a reduction on the upfront sales charge. "No load" funds don't carry sales charges, so breakpoints don't apply to them. Breakpoints are a hot issue since the National Association of Securities Dealers' Philadelphia office discovered in a routine review last fall that investors weren't getting the discounts due them.

Investors are willing to pay for financial advice but hate to pay mutual funds' loads. And they dislike, and misunderstand, commissions. They claim to prefer a flat dollar fee for services, but a quick reality check finds that usually isn't the case.Dalbar Inc., a Boston financial services industry research and publishing company, has been conducting a nine-part survey of investors and how they seek financial services. The latest part of the survey, on how customers prefer to pay, is interesting but curious, since the most popular choice -- dollar-based flat fees -- is rarely offered in the form most investors would like to see it. And, experts say, they would probably reject it after they saw it.As defined by the 4,103 consumers questioned, flat fees were dollar amounts charged for the services offered, but independent of the amount of money invested or the transaction executed.