Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : InvestRight - Short Term Trading St -- Ignore unavailable to you. Want to Upgrade?

To: Jeffrey L. Henken who wrote (371)	10/10/1998 4:57:00 PM
From: Ray Tarke	Read Replies (1) \| Respond to of 939

Bear Market: A Bargain or a Boondoggle? By Jerry Ryan Given the recent decline in the US and foreign stock markets, the Bears have come out of hibernation and stand toe-to-toe with the Bulls on Wall Street. Big decisions must be made: whether to buy into this volatile market, hold for the long haul or get out all together. The recent market correction may or may not technically constitute a bear market, but a 20% drop in the Dow Jones industrial average puts a serious halt to the bull market's hysteria. The definition of a bear market varies depending upon who you talk to. However, a drop in the Dow or Standard & Poor's 500 index of 20 to 30% is a sure bet for one. Sometimes the best example of what course of action to take in a bear market is to look at the last major bear market. That occurred in 1973-74. The market lost about half its value. Wise investors like Warren E. Buffet bought into the market while many where getting out. Buffet's contrarian views proved profitable and made him one of the most renowned investors in the world. Lately, market corrections in the Dow Jones industrial average has been seen as a buying opportunity—a way to get good, quality stocks at a fire-sale price. Even after the 512 point plunge, a percentage loss of 6.4%, in the Dow on Aug. 31, investors summoned the courage to buy stocks and created a 288 point rebound the next day. In addition, most corrections follow a period of excessive growth in the market. From September, 1986 to Aug., 1987 the Dow rose 1,000 points only to give back that gain by mid-October. During the next three years, the market nearly doubled its size. Investors must weigh many factors before buying into a stock. The most important factors are profitability and management. Is the company well-managed? Does the company spend capital on research and development? Is the company a market leader with a niche that is untouchable by it competitors? Does the company have a solid plan for future growth? Basically, will the company make money? The next question to ask should be, does volatility fit my investment strategy and goals? Market downturns and volatility have a greater impact on short-term investors than long-term investors. Investors should be wary of economic conditions which effect the stock market and corporate profits. Changes in interest rates, gross domestic product (GDP), and earnings reports can profoundly enhance a market downturn or up tick. Even unsettling political news can disrupt market—at least temporarily. Good companies can weather temporary setbacks, poor companies may not. Look for strong companies with a solid management philosophy, a proven track record and a strong consumer market if you chose to buy stocks. Remember that good stocks rise and fall like the rest of the market. Holding stocks when a market goes south can be heart-breaking—watching a stock drop from $50 per share to $40 per share makes any investor uneasy. Before unloading the stock, refer to your investment strategy. Are you in for the long haul? Also, look at why the stock lost value. Is it a loss in corporate profitability or is the stock just following market momentum. Remember your supposed loss may be someone else's fire-sale bargain. Getting out of stock is the option for the faint at heart, but that depends on your financial strategy. If your goals are short-term, a large correction could diminish your portfolio by 20-30%. That could put a pinch on your retirement plans or your child's education funds. You should consult your investment advisor to see what is best for you. A flight to safety by moving investments from stocks to bonds or cash may inevitably be a good bet, but returns over the long-term are better in the stock market. Good research and a strong investment strategy will not insure profits, but it can get you through the down time and position you when the bulls run again. informedinvestor.com