Not All News Bad For Growth Stocks.Some investors are scared or future earnings drops. Some think the economy won't recover. Some lost so much money in technology stocks and mutual funds that they're frozen in place. How nice. The more investors worry, the warmer the climate for buying stocks. The tax cut will soon be putting a little extra money. into consumers' hands. And the Federal Reserve's aggressive interest-rate cuts are working their way through the economy. Still, the market remains a good news/bad news story. Suddenly, value stocks Value stocks Stocks with low price/book ratios or price/earnings ratios. Historically, value stocks have enjoyed higher average returns than growth stocks (stocks with high price/book or P/E ratios) in a variety of countries. pulled ahead of growth stocks in the fastest turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. I've ever seen. When the tech bubble broke in early 2000, the market took a ferocious fe·ro·cious adj. 1. Extremely savage; fierce. See Synonyms at cruel. 2. Marked by unrelenting intensity; extreme: ferocious heat. turn. Value stocks made the greatest gains on growth stocks ever. The value index rose more than 7 percent in the past 12 months. Growth stocks are still off by 25 percent, even counting their recent gains. That's the bad news. The plunge The term Plunge has multiple meanings:
So far, investors have hugged their tech stocks during the entire wipeout -- dreaming of a total comeback. They also kept most of their shares in the aggressive growth mutual funds Aggressive growth mutual fund A mutual fund designed for maximum capital appreciation that places its money in companies with high growth rates. that specialize spe·cial·ize v. 1. To limit one's profession to a particular specialty or subject area for study, research, or treatment. 2. To adapt to a particular function or environment. in techs. Historically, bubbles don't pop and rein-flate. Nevertheless, there's an argument for buying (or holding) growth funds and techs. You're supposed to "rebalance" your investments from time to time. That means selling stuff that's hot and reinvesting the proceeds in sectors that fell behind. Growth-stock mutual funds have definitely fallen behind |
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