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Stock And Stock Fund Investment Tips

- Alan Lavine and Gail Liberman

Hopefully, the cool weather will bring on hotter stock prices. Historically, the best periods to invest in the stock market are November through April, according to the Stock Traders Almanac.

Some of the reasons why? Investors go on vacation in the summer and this is a presidential election year---presidential years are positive for stocks about 70 percent of the time. Plus, according to the Stock Traders Almanac, next year, 2005, is the fifth year of the decade. The fifth year of the decade historically has been the best-performing year in the stock market. The average gain in the 5th year of a decade runs about 20 percent.

>As the economy gets stronger, look for large companies that show strong earnings growth to be the best performers. Business cycle data also point to higher large company stock prices. Small company stocks typically perform well when the economy comes out of a recession. They already have registered double-digit gains in 2002 and 2003.

Of course, there is no sure thing when it comes to investing in the stock market. Financial advisers recommend that you own stocks, bonds and inflation hedges, like gold, real estate and inflation-indexed U.S. Treasury bonds and/or inflation-indexed Certificates of Deposit.

How much should you invest in different types of assets? The rules of thumb:

  • Keep 5 to 10 percent of your assets in inflation hedges, such as gold or real estate.

  • Aggressive investors, willing to take on a lot of risk, can put 70 to 80 percent in stocks and 20 to 30 percent in bonds and inflation hedges.

  • If you’re willing to take on a moderate amount of risk, you should have about 50 to 60 percent in stocks and the rest in bonds and inflation hedges.
  • Conservative investors and those looking for income should have about 30 percent in stocks and the rest in bonds and other income producing investments.

    These are just benchmarks to consider. Every person is different. So it may be a good idea to get a financial check-up from an experienced advisor. Stick with someone who has at least 10 years of experience. Examine their designations, education and areas of expertise. Also, know how the adviser is getting paid and check out his or her background at www.sec.gov.


    Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).

    To read more columns, please visit the column archive.

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