Bear Market Advice

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By Gigaman
July 30, 2001

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As for myself...I have taken a vacation from investment and viewing my portfolio as it only led to a state of sadness and presently resorted to lurking for the time being.

While lurking, remember to continue studying companies and looking for signs of improving market conditions. Your reaction to the market is common and many are going through this right now, but remember that by staying alert, you may benefit from seeing obvious investments that others may overlook during hard times.

Look at the valuation of some companies right now and remember the attitudes of analysts, TV hosts, newspapers, coworkers, and even TMF posters. Several years from now, many people will be kicking themselves for not purchasing some investments that were undeniably low, but we mass-convinced ourselves that to do so was dead money.

Remember back to the times when everyone talked about buying stocks and IPOs, and it seemed like you couldn't lose money in the market (you could, and we did). Now look at the current times when it seems impossible to make money in the market.

Things will improve. America is not going bankrupt. This has been a relatively small decrease in terms of output.

Look at stocks that have been major players and future major players who are now priced as medium- to small-cap stocks:  Corning (GLW), Gateway (GTW), Scientific Atlanta (SFA), Palm (PALM), Network Appliance (NTAP), JDS Uniphase (JDSU), Adobe (ADBE), Juniper Networks (JNPR).

Now I am not saying that these are all going to be definite leaders who will dominate their individual markets, but the risk/reward ratio is becoming quite attractive. Many people are only looking at the reasons why companies will not survive or dominate, and one can always find reasons why not (just look at this board, people have been predicting the end of Intel for years... NOT BLOODY LIK'LY). It is much more difficult to look for what people are ignoring, and that is the fact that certain companies are indeed going to be around for a long time, they dominate their market, and will be worth quite a bit more later than they are right now. Yes, you may lose money in the short term (thus the risk part of the risk/reward ratio), but a balanced portfolio of stocks will certainly hold more than enough winners as well (I provided just a few tech stocks above that I either watch or hold now).

Most important, don't quit investing new funds. Even if you are only able to save a small portion each month, begin by starting a DRIP or a mutual fund, whatever. The best way to outperform the market is to be constantly adding funds; this helps promote the idea that this is an ongoing, unending exercise of investing. The market downturn was so sudden, that many people looked back and wondered how they got caught up in it, only to see that it really wasn't that sudden -- people were just not paying attention.

So lurk, but try to avoid feeling saddened, like the market took something from you. Acknowledge the fact that your portfolio may be smaller than it was two years ago, but keep your investments in perspective. Remember to stay above the cycle that is our market and our economy; remember that your goals are bigger than a few years; remember that your life is not the sum total of your stock holdings.


"A market decline is as routine as a January blizzard in Colorado. If you're prepared, it can't hurt you. A decline is a great opportunity to pick up the bargains left behind by investors who are fleeing the storm in panic." - Peter Lynch