07/29/96 TABLE: How To Ride Out The Market's Gyrations

How To Ride Out The Market's Gyrations

DON'T PANIC: If you're well-positioned in light of your investment objectives, don't try to jump in and out of the market. Historically, over 10-year periods, stocks have always recovered and outperformed other investments. DIVERSIFY: There's nothing like a correction to reinforce the importance of owning multiple asset classes. It's the best way to reduce risk and enhance returns. So make sure your holdings include everything from growth stocks to income producers. REBALANCE: Find your ideal mix of stocks, bonds, and other assets, then sell your winners and add to your losers to get to it. In an equity correction, that usually means buying more stock. HUNT FOR BARGAINS: Use the slump in prices to pick up stocks in battered sectors such as technology. Also worth a second look: Financial services, pharmaceuticals, and energy. LOOK OVERSEAS: A stable dollar and rapidly growing overseas economies mean investors will likely get more bang for their buck outside the U.S. And emerging markets, down 20% total during 1994 and 1995, are presently outperforming the U.S. UPGRADE YOUR PORTFOLIO: Now is the time to buy stocks of higher-quality companies with proven earnings records. Avoid ``concept'' companies without products or one-idea wonders. THINK VALUE, NOT GROWTH: If stock prices continue to drop, value managers offer some downside protection, since they focus on lower-priced stocks, many of which pay dividends. DON'T FORGET TAXES: Before you take your profits and run, keep in mind how much you'll net after paying capital gains from the long bull market. What you end up owing in taxes may outweigh what you lose in any short-term market correction. DATA: BUSINESS WEEK