Investor in high-quality stocks needn't fret over market swings


WHEN THE Dow Jones industrial average had sunk 693 points, or 9.7 percent, from its all-time high before Monday's and yesterday's brisk rallies, many worried investors asked thoughtful questions. The queries are still timely this morning:

Question: How low can this market go?

There's no limit. My experience, dating back to the Depression, convinces me Wall Street goes to extremes. When the Dow Jones average closed 1991 at around 3,000, stocks appeared undervalued. When the Dow moved above 7,000 several months ago, I said the market seemed overpriced and could drop 10 percent, which it did. Many people said, "You're an old fuddy-duddy. Things are different now."

Some things are different -- the huge inflow of baby boomers' money flowing into stocks through 401(k)s, other retirement plans, etc. -- but many fundamentals remain unchanged, such as cyclical stock markets. And if the market plunges, many Wall Street newcomers might dump stocks and mutual funds as quickly as they bought them.

My advice: Don't worry about daily ups and downs. Concentrate buying and holding high-quality stocks. Then you need not worry about how low the market tumbles. Over 75 years, stocks handily outpaced bonds, T-bills, CDs, money funds, inflation, etc.

Question: In this volatile market, what questions should I ask a financial planner I am considering using?

Samples: How long have you been in the business? Have you lived through a bear market? What are your performance results in both down and up markets? What annual growth rate can you show me? How much income can I expect? Are you a long-term investor or short-term trader? How often will you meet with me personally? What is your fee structure? How are you compensated?

Timely tidbits: "A market is at its worst when it looks like it is at its best, and it's best when it looks like it is at its worst." (Jim Rogers in Worth, May.)

"Our portfolio shows little change. We continue to make more money when snoring than when active." (Warren Buffett)

Pub Date: 4/16/97

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad