Newspaper article THE JOURNAL RECORD

Beware of Bull-Market Greed

Newspaper article THE JOURNAL RECORD

Beware of Bull-Market Greed

Article excerpt

NEW YORK -- At a time when bull-market fever seems especially contagious, advisers recommend a few simple preventative measures to protect your financial health.

To take these steps, it isn't necessary to pull all your money out of stocks or stock mutual funds, incurring possible tax problems and costing yourself the opportunity to profit if the market keeps climbing to new heights.

Instead, the strategy focuses on keeping yourself from getting too greedy by staying diversified and going easy on the leverage. In recent years, as in any powerful bull market, stocks have repeatedly brought much greater rewards for investors than any other primary class of investments, including bonds, money-market securities, most real estate and collectible and tangible assets. Statistical studies increasingly show that stocks, over the long haul, are usually the best place to put your money in a growing, vibrant economy. But just because they most often get the best results doesn't automatically mean you should entrust all your money to the market. With stocks, you also face the risk of sustained intervals of poor performance. Case in point: the bear markets of the late 1960s and 1970s, which left the Dow Jones industrial average no higher in 1981 and 1982 than it had been 15 years before. Even in rising markets, investors also must recognize the possibility that any single stock or group of stocks may founder. Hence the standard advice to diversify by spreading your money among a broad array of different stocks, or by investing through a mutual fund that holds such a diversified portfolio. This often means settling for comparatively moderate returns in a bull market, while stories abound of others' striking it rich. In the 1990s, in particular, it has also often meant owning a fund that underperforms the market averages, partly because the manager may maintain a cash reserve rather than dumping every dollar that comes in the door into stocks the minute it arrives. …

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