What To Do When the Market?s Down

In today’s turbulent market, short-term investors may hold their breath while watching the market pitch. Swaying from its perch at 11,260 shares trading on Sept. 5, to a low of 9,970 shares on Oct. 18, the Dow Jones Industrial Average causes some investors to constantly gobble antacid tablets.

Analysts heartily disagree about what the future will hold.

“Realistically, we can’t have a bull market for 100 years,” said Rebecca Garner, owner of Garner Asset Management Co. in Fayetteville. Patterns of rises and falls vary, possibly avoiding abrupt drops, but the market can’t climb forever, she said.

The Great Reckoning, written and updated by James Davidson and Lord William Rees-Mogg, compared the then-coming 1990s to the 1920s before the stock market crash.

Pollyanna might call the book The Great Rubbish. Eternally optimistic, Pollyanna is the pen name Mary Ann Greenwood uses in her company newsletter. She owns Greenwood and Associates Inc. in Fayetteville. Short of a governmental coup, Pollyanna said, the U.S. market will ultimately withstand fluctuation.

Computers now routinely make market trends obvious by organizing data that were previously stored in basement filing cabinets. Some analysts believe the data could eliminate recessions and depressions.

Partisans of either point of view can use some conservative practices to prepare for market whims.

• Sleep soundly. Analysts said that determining risk tolerance should be the first step for investing.

Some folks check their stock standings hourly, but Chuck Britton, a professor of finance at the University of Arkansas’ Sam M. Walton College of Business Administration, said he will go several weeks without looking at his stocks. Picking low price-per-earnings ratios, Britton said he engages only in lower-risk, lower-return market ventures. Highly adventurous dot-com businesses never tempt Britton’s stable portfolio, and he slumbers peacefully.

• Stay diversified. Analysts agree that investing in more than one company helps protect overall assets. Even if one investment dissipates, others can flourish and bear the loss.

• Protect a long-term perspective. Booming in unison from financial offices everywhere, financial managers agree that investing in the stock market should be long term.

“Always remember, stay the course, focus long term, and worry less about being in the next 25 percent downtick and more about missing the next 100 percent uptick,” wrote Kerry Watkins of Garner Asset in a recent company newsletter.

Greenwood agreed: “Long-term investors don’t focus on the short-term noise.”

• Do the homework. Investors should know what stocks they own and why they own them, an analyst said. Checking company track records is important.

The Dun & Bradstreet Corp. supplies credit reports for businesses worldwide, outlining a company’s background information, financial and public records, and credit history.

Even investors using financial managers should be involved in their assets. Some financial managers themselves, analysts said investors should quiz their financial staff.

New companies sport business models to detail their value in the market. Internet sites such as www.finance.yahoo.com also describe stock market businesses.

• Don’t invest solely in the market. Capitalism offers many opportunities for financial gain. Balancing assets between stocks, bonds and cash gives a portfolio a strong, conservative backbone.

Relatively safe, insured investments include government options such as bills, notes and bonds; bank options such as certificates of deposit and money market funds; and real estate options from commercial building to private leasing.

Preparing for an uncertain future helps ensure financial security above daily market turmoil.