For Long-Term Investors, the Proof Is in Holding On.

IN times like this, people find out whether they really are long-term investors.

Surveys taken during bull markets for stocks and stock mutual funds always draw about a 98 percent "yes" response to the question, "Do you consider yourself a long-term investor?" Nobody answers, "Actually, no. I prefer to make important decisions on impulse."

But the label means nothing merely in the speaking. It's like the naval expression "shellback," for a sailor who has traversed the equator. Events, not words, determine who does and who doesn't qualify.

To be a long-term investor, sooner or later you have to ride out seasick moments like the present, when the Nasdaq Composite Index looks as though it's heading for zero as fast as it can go. The index, which includes many great glamour stocks of the 1990s bull market, was down 43 percent for the year just before Christmas. At one point in December it fell 22.6 percent, which coincidentally is the same percentage drop the Dow Jones Industrial Average suffered on Black Monday in the October 1987 crash. That meets the traditional definition of a bear market with 2.6 points to spare.

So for anybody lately who's been a "long-term investor" with some secret short-term goals in mind, the final score is in, and the news isn't good.

Just as you can't think yourself across the equator, it's impossible to become a long-term investor in your head. Sure, you've read the books that tell you to curb your emotions. You listen to such sages as Bradlee Perry, former chairman of the Cambridge, Mass. money management firm David L. Babson & Co., who observe, "Overreactions cause many investors to buy and sell stocks at exactly the wrong times. All successful investors, over the long run, have discipline."

But someone else's wisdom is no substitute for the actual experience of having a meaningful chunk of your money on the line when a severe market drop sets in.

Meaningless chatter

The usual commentaries aren't much help. Whatever happens, you hope you never hear another person say, "The market hates uncertainty." The future is always uncertain, and the stock market handles that problem with aplomb quite a bit of the time. Only, for some reason, not now.

The mail recently brought a newsletter saying the Nasdaq's reading of 2523 on Nov. 30 "more than likely represented the absolute low for this year." Wrong before it got out of the envelope -- the index has already gone 200 points lower than that.

Another market letter talks about buying in the depressed junk bond market when "trends stabilize." Great -- let's be brave, as soon as things look less scary.

For a more useful observation, we turn to Greg Smith, chief investment strategist at Prudential Securities, who recently said of the late-2000 stock market: "You really get tired of feeling stupid. So you stop doing anything."

As a strategy, that may not sound like much. While both bulls and bears may have their day, you tell yourself, there's never a good time to be the deer in the headlights.

The thing is, if you want to be a long-term investor, you have little choice but to sit tight. You know it's futile to try to time the market, jumping in and out at just the right moments. To succeed at timing, you have to be right, or lucky, over and over again.

The idea you went into the game with, remember, was to buy low and sell high -- or at least not to buy high and sell low.

So you invoke the adage, "Don't just do something, stand there." If necessary, you stop looking up stock prices or mutual fund net asset values for a while. Or you call a financial adviser and ask to have your hand held -- whatever it takes to avoid being stampeded by the crowd.

"People are social beings," says Perry. "They like to believe they have made prudent decisions because many other people have made the same decisions."

For buy-and-holders in stormy markets, the reassurance provided by fellow sufferers has grown scarcer lately. There are fewer other long-term investors around than there used to be.

Chet Currier is a columnist for Bloomberg News.

Long-Range Market Indicators? Don't Bet on It

For a New Year's resolution in 2001, I'm giving up stock market forecasting gimmicks.

The Super Bowl indicator. The January barometer. The political stock market cycle. Others so numerous I can't think of them all right now.

It won't be easy to do this cold turkey. The indicators are often ingenious, occasionally quite persuasive, and nearly always fun. They appeal to my yearning for a simple answer to a complicated problem.

But like many other easy answers, they don't ultimately satisfy. Though I think they're going to simplify my life as an investor, they actually complicate it. They distract me from what I'm trying to do, which is to make my money grow over a period of many years.

The first indicator I bid goodbye to, the Super Bowl stock market predictor, is the easiest to forswear. It has suddenly and completely stopped functioning, down like a rusty old car.

The idea was this: If a team from the original National Football League before its 1970 merger with the American Football League won the Super Bowl, a good year for the stock market was in store. Conversely, if a team with AFL origins triumphed, tough times lay ahead.

An awareness of this pattern would have been especially helpful in the bear-market years 1969, 1970, 1973, 1974 and 1981, all of which began with wins by a team from the wrong side of the tracks.

As the years rolled by, though, the novelty of the Super Bowl indicator wore off, especially-as analysts picked it apart looking for corollaries. Was the margin of victory important? What about which team scored first?

Going into 2001, that leaves the Super Bowl indicator facing fourth and long, in football parlance. No choice but to punt.

A seasonal indicator with a stronger rationale, the January barometer long espoused by investment adviser Yale Hirsch, gave a better performance in 2000. In line with Hirsch's doctrine that "as January goes, so goes the year," it foreshadowed a down year for the market when the stock-price averages posted minus signs for the first month.

Most years, I readily confess, I find myself checking in January to see how it's shaping up.

But when the time comes to figure out how to put it into use, I'm at a loss. Trading on it seems impractical. Any long-term investor who sits out each January to await a signal misses a lot of gains: Measuring by the Standard & Poor's 500 Index, 3.3 percent in 1996; 6.1 percent in 1997, 1 percent in '98 and 4.1 percent in '99, before January 2000's 5 percent drop.

Maybe you've got some favorite indicators of your own. If so, you're welcome to them. From now on I never touch the stuff.