Newspaper article St Louis Post-Dispatch (MO)

Market Fluctuations May Not Be All Bad

Newspaper article St Louis Post-Dispatch (MO)

Market Fluctuations May Not Be All Bad

Article excerpt

When the financial markets take a nosedive the way they have in early 1994, hardly anybody watching mutual funds has a good word to say about volatility.

Just look, the pundits say, here's proof both stocks and bonds are traps waiting to be sprung on unwary investors. The discussion then turns to hfinding "safe" funds.

But there is another school of thought that short-term volatility in the markets - from week to week, quarter to quarter, even one year to the next - isn't as evil as it looks, iespecially if you discipline yourself to take a long-term view.

There is even a plausible situation in which investors could benefit from this volatility.

"Risk isn't bad," said Jeff Malet, manager of the Pacific Horizon Aggressive Growth Fund in San Diego. "The reason people buy stock to begin with is they're accepting some risk.

"It's not for everyone," Malet acknowledged. "There are some people who can't accept volatility, but there are others who can."

Acting on behalf of the latter investors, Malet says he devotes little attention to trying to gauge the ups and downs of the markets as he manages his fund.

"We don't try to time the market," he said. "We tend to be fully invested at all times, and we try to buy the highest-potential stocks we can. The key decision is to pick your stocks intelligently.

"Historically, in any 10-year period stocks are seldom down. The good years more than offset the bad years. The idea is not to confuse one-year risk with 10-year risk."

Malet says one situation he especially wants to avoid is adopting a defensive position, with a lot of money held out of the market, just when stocks rally.

"Losing potential gains, to me, is almost as bad as losing money that you have," he said. "You're missing an opportunity."

As long as you assume that the long-term trend of the market is up, you can deal with the interim fluctuations through a strategy known as dollar-cost-averaging - investing identical amounts at regular intervals, regardless of the current price. …

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