PLAYING WITH RISK THE TRICK TO INVESTING THESE DAYS IS KNOW WHEN TO GET IN - AND OUT - WHILE YOU CAN.

Byline: Barbara Correa Staff Writer

With the bear market refusing to hibernate, investors have started to wonder if they're missing something - some secret strategy or market trick - that would help them profit in bad times.

The short answer is no.

Certainly, there are people making money, even in this market. But the average investor simply doesn't have access to the expertise required to do that, though pure luck can be effective temporarily.

But that doesn't mean ordinary people should just throw their nest eggs into randomly chosen mutual funds and hope for better days ahead.

But let the buyer beware: Most of the alternatives involve some risk and a significant investment.

At discount commodities brokerage Redlands Futures and Options, plucky investors can set up a trading account for $1,000 and speculate on how the war premium impacts everything from wheat (Iraq will need it) to gold (it's down) to oil.

Too risky?

Brokerage firm RBC Dain Rauscher has a portfolio management tool that monitors specific stock positions and automatically adjusts them according to which direction the market's moving.

Investors using the tool can cut their risk by 80 percent, according to Robert ``Rocky'' Mills, a senior vice president and financial consultant in RBC Dain's Woodland Hills office. Mills says his clients are ``marginally up'' for the past two years, a period that has seen the Dow Jones Industrial Average decline almost 20 percent.

But don't get too excited: An account that includes MAP tool service requires a minimum balance of $1 million, although in the last year, RBC has started offering the tool alone, without full management service, to account holders with $250,000 invested.

Assuming Joe Investor doesn't have anywhere near that amount on hand and ready to invest, smart choices fall to looking at what's been performing reasonably well during the downturn.

Real estate is one of the first sectors that comes to mind.

Publicly traded Real Estate Investment Trusts - think of them as real- estate mutual funds - ended 2002 up 5.2 percent and are 3.8 percent ahead year to date, according to data from the National Association of Real Estate Investment Trusts. Based on analyst reports for 2003, returns are expected to come in at 3 to 12 percent, said Jay Hyde, a spokesman for the association.

But investing in real estate now, which some see as the peak of the market, does require a high level of risk tolerance, said Joe Rubinstein, a financial consultant at Diversified Securities in West Covina.

``Real estate has done so well because the stock market is down,'' he said. ``In the '70s, REITs crashed, so that's not a panacea for investment strategy.''

Still, real estate securities might make sense for people who don't already own any and want to diversify, said Darcene Meyers, a private client consultant at Charles Schwab's downtown Los Angeles branch.

Shifting more investment funds into bonds may be risky now as well, said Diversified's Rubinstein. Considered a safe haven the last few years, the sector is at risk now because interest rates are so low and, if the Federal Reserve starts raising them, bonds could decline.

Theoretically, free resources available over the Internet and through industry newsletters provide everything a smart investor could need to do his own research and stay on top of his investments, making adjustments when necessary.

But the truth is, by the time Joe Investor learns about trends, it's probably too late to take full advantage.

``It's like with gold - people were buying into it, and it was already falling,'' said Don Stalker, senior financial adviser in Waddell & Reed's Whittier office, referring to the precious metal's $40-an-ounce drop in the past month and a half.

``Institutional investors seem to know when to get in, but, by the time we read about it ... a rearview mirror is a great thing.''

Attitudes about investing have fundamentally changed since the market went sour three years ago. Wall Street wisdom is increasingly questioning the basic buy-and-hold style that worked so well for so long.

``Buy-and-hold doesn't mean you buy something and hold on to it for years,'' said Darcene Meyers of Schwab. ``Gone are the days when you can really justify doing that. People need to know what they own.''

Which means that any proactive investment strategy will inherently require more work and research - whether it focuses on a particular sector of stock or a totally different investment vehicle - on the part of the individual investor than it has in the past.

``We used to be (strictly buy-and-hold),'' said Dain Rauscher's Mills.

``But we saw several years ago that things are changing and you have to be more like a a triage officer'' in terms of reacting to changes in the market quickly. That's when they started using the proprietary monitoring tool.

Short of hiring your own portfolio manager (Schwab branches offer a la carte management services, ranging from $250 to $1,000, depending on the complexity of the recommendation), one of the most impactful strategies investors can follow is also the simplest.

It involves pegging the mix of stocks and bonds to your age.

A 35-year old investor would put around 35 percent of funds into fixed-income and 65 percent in stocks; a 50-year-old would be in half and half, leaving space to tailor the numbers according to ratio of income and expenses and how much risk you're willing to take.

The age allocation system is all about avoiding putting all eggs in a single basket, a simple concept that many investors overlook, said Mills.

Once the assets are allocated, there isn't too much more an investor can do - other than keep track of what the investment is doing, and staying prepared for the inevitable adjustment.

``I wish I could tell you there's a magic pill, but there isn't,'' said Diversified's Rubinstein.

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Photo illustration by Warren Huskey/Staff Artist