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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: sylvester80 who wrote (1613)	7/8/2002 6:47:06 AM
From: stockman_scott	Respond to of 89467

So you haven't sold yet Long-term investors are facing tough choices: Sell low or face more punishing losses. July 5, 2002: 11:26 AM EDT By Martine Costello, CNN/Money Staff Writer NEW YORK (CNN/Money) - Here's the bitter truth about this market. Back in March 2000, your 100 shares of Cisco Systems were worth about $7,700. Today, just $1,250. Your 100 shares of Lucent that had you feeling flush a couple of years ago would today fetch you about $150. Sure, you thought about selling in the past two years, but the price always seemed too low. Then stocks fell more. And more. You watched your money evaporate before your eyes. Now, you're a lot poorer, and wondering if you should give up on the market and throw whatever you have left into an index fund. "It's a tough call," said Deb Neiman, a certified financial planner from Wakefield, Mass. "It's hard to know when to pull the plug." Fish or cut bait? Part of the problem is that it's hard to tell a lousy stock that you shouldn't have bought in the first place from a quality stock that is just suffering with everything else. It's an easy choice if you own a dot.com that is struggling to stay afloat -- just sell and be done with it. And most planners suggest getting out of stocks plagued by scandals. There's just too much risk for a small investor. Neiman recently advised her clients to sell Xerox and Tyco, both of which have come under fire recently for accounting issues. But most cases aren't so easy. What about Cisco? Or GE? Or Merck? They're all down more than 50 percent. If your stocks have a solid history on Wall Street, with dependable cash flow and strong earnings growth, then consider hanging on, said Rick Applegate, a certified financial planner from Allison Park, Pa. While it might seem like it's time to rush into money market funds, the tenets of long-term investing haven't changed. If you buy solid stocks and hold them for a long time, you'll make money. An investor who has stayed in the market for at least 15 years has never lost money, according to research by Ibbotson Associates. (Click here for more on thinking long-term and other bear-market survival strategies.) A company such as GE might be trading near its 52-week low, but it is well diversified with its business units and has money "coming in the door," Applegate said. In technology, the keepers should be the leaders in their sectors, whether it's software or chips. That might mean you hold onto Cisco, even if you will wait longer than you expected for technology to wake up. Ditto for IBM. The stock traded as high as $130 in 1999 but is now trading around $70. But Mari Adam, a certified financial planner in Boca Raton, Fla., said she has clients -- a couple -- who are sticking with Big Blue. Whatever you decide, make sure emotion isn't getting in the way. I bought the stock at $100 and now it's at $5 and I'm just going to hold on. "You can hold it till your purple, and you're not going to get back to the top of the bubble," Applegate said. So forget about trying to get back to even -- that's not the point. Your job is to accept the fact that you made a mistake and then evaluate and move on. "Be ruthless," Neiman said. "Ask yourself: Is this a good investment going forward?" If you're not sure, you can always put your money in a mutual fund and stop worrying about whether you're right or wrong. Once you decide to sell If you have a loss, at least you can take some comfort in the potential tax break, using losses to offset gains. But the problem these days is that a lot of people don't have any gains. If that's the case, you can use losses to offset up to $3,000 in ordinary income. If you still have a loss left over after that, you can "carry forward" $3,000 of the loss every year until it's used up. (Neiman has a client who is down by $30,000 in 2002, which gives him 10 years to take advantage of the carry-forward rule.) money.cnn.com