NO BULL? SPREAD RISK; BALANCED PORTFOLIO CAN RIDE SEESAW.Byline: Deborah Adamson Daily News Staff Writer It's enough to drive investors batty: The market drops 96 points one day, dives 300 points the next and rises 59 points on the third day. Those with heavy exposure to stocks - just about every investor given the long-running bull market - probably are biting their nails, seeing their portfolio teeter-totter. With a possible bear market coming, many investors likely feel a strong urge to sell all their stocks and park the money in cash or other stable haven, such as bond mutual funds Bond mutual fund A mutual fund which primarily or exclusively holds bonds. . But before doing anything rash, consider the following advice from the experts: If you're well-diversified with at least five years before you need to tap into your portfolio, then you might not have to do anything, said Charles Carlson, editor of The DRIP Investor in Hammond, Ind. Re-evaluate portfolio A diversified portfolio holds many different types of stocks - large-cap to small-cap, domestic and international - and includes bonds, said Percy Bolton, a certified financial planner Certified Financial Planner (CFP) A person who has passed examinations accredited by the Certified Financial Planner Board of Standards, showing that the person is able to manage a client's banking, estate, insurance, investment, and tax affairs. in Los Angeles who has been named among the top 200 U.S. financial advisers by Worth magazine. If your risk is not spread out, look for pockets where you're vulnerable, such as an overexposure overexposure too long an exposure time or too high a milliamperage causing too black a picture, loss of detail and some anomalies of translucency. to a stock or industry, like technology. It's generally unwise to put more than 25 percent of one's portfolio into a stock or sector. Consider dumping speculative stocks that have underperformed in a bull market because they probably won't do well in a bear market, Carlson said. But hold high quality stocks, especially those that carry above-average dividend yields. Speading risk For investors with a time frame of five years or longer, Bolton recommends holding 33 percent in domestic and international bond funds and 67 percent in stocks: 28 percent in U.S. large-cap stock funds, 25 percent in international and the rest in small-cap funds. A few no-load mutual funds No-load mutual fund An open-end investment company whose shares are sold without a sales charge. There can be other distribution charges, however, such as Article 12B-1 fees. A true no-load fund has neither a sales charge nor a distribution fee. he favors: Dodge & Cox Stock Fund, Vanguard World - U.S. Growth, T. Rowe Price T. Rowe Price (NASDAQ: TROW) is an independent global investment management firm and mutual fund manager based in Baltimore, Maryland. It was founded in 1937 by Thomas Rowe Price, Jr.. T. International Stock Fund, Payden & Rygel Global Fixed Income Fund and Columbia Fixed Income Securities. For investors with fewer than five years, their portfolio should be 67 percent bonds and the rest in stocks. Don't get out of stocks completely, since they historically outperform other securities. Don't be afraid of bear markets, since history shows they last an average of 13 to 18 months compared with 23 to 31 months for bulls, Carlson said. When a market goes down, it's time to look for bargains, said Elissa Buie, a certified financial planner from Falls Church, Va., who also made Worth's list of top financial advisers. It's a wonderful opportunity to add to your portfolio, she said, providing you properly allocate your investments. ``In the long-term, the market goes up,'' she said. Defensive funds Some people might want to consider putting money into mutual funds that have weathered downturns well. A Value Line survey identified eight funds that held up through the 1987 and 1990 downturns. These, however, trailed the average stock fund in the subsequent bull market. For the last three years, the funds recorded average annual returns ranging from 8 percent to 20 percent. The funds: Lindner Dividend Fund, Vanguard Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. Fund, Analytic Defensive Equity Fund, Greenspring Fund, Vanguard Wellesley Income Fund, USAA USAA United Services Automobile Association USAA Urban Superintendents Association of America USAA United States Achievement Academy USAA United States Arbitration Act of 1925 USAA United States Axemen's Association USAA United States Air-Table-Hockey Association Income Fund, IAA IAA abbr. indoleacetic acid Noun 1. IAA - a plant hormone promoting elongation of stems and roots indoleacetic acid auxin - a plant hormone that promotes root formation and bud growth 2. Asset Allocation Fund asset allocation fund An investment company that varies the proportion of its portfolio devoted to stocks, bonds, and money market securities in order to reduce the variability of returns and to take better advantage of different segments of the securities , American Aadvantage Balanced Fund Balanced Fund A mutual fund that invests its assets into the money market, bonds, preferred stock, and common stock with the intention to provide both growth and income. Also known as an asset allocation fund. . CAPTION(S): Drawing Drawing: (Color) no caption (Bull market) Bill Deener/Dallas Morning News |
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