STOCKS Experts: Think of the long term

Financial advisers say investors with a long-term outlook can still make money.
By CYNTHIA VINARSKY
and DON SHILLING
VINDICATOR BUSINESS STAFF
YOUNGSTOWN -- Stock broker Marvin Manes says he knows how investors feel as they watch stock markets fall as if there were no bottom.
"Last year you were feeling good about your 401K plan, but this year you have a deep hole in your stomach and you think, 'Should I be doing this?' But you have to because it's your future," said Manes, branch manager at McDonald Investments in Canfield.
Manes said local investors are staying in the stock market despite the uneasy feeling created by the declines of the past year. They are convinced that the stock market will provide them the best opportunity for long-term gains, he said.
The Dow Jones industrial average dropped about 4 percent Monday, pushing it about 10 percent below where it was a year ago. The Dow rose 82.55 Tuesday, or less than 1 percent, to 10,290.80. The Nasdaq closed up 91.40 at 2,014.78, a 5 percent gain. The Nasdaq lost 6 percent Monday, lowering its value to 62 percent of its all-time high.
Bargains: Local investors know a drop in the market means there are some bargains out there, Manes said.
"They are conditioned to buy on weakness," he said.
The telecommunication industry has some attractive prices, he said. Nokia's stock is trading at about $21 a share, compared with a 52-week high of $62, and Ericsson's stock is trading at about $6 a share, compared with a 52-week high of $25.
Manes said he thinks companies such as Home Depot and Wal-Mart should do well because lower interest rates should lead to more home building and home repair.
Although the days of easy 20 percent annual returns may be over for now, investors with a long-term outlook will make money in the stock market, he said. Eventually, annual returns of between 8 percent and 12 percent will return, he said.
Mutual funds: Financial planner Jill B. McCullough said she advises most of her clients to choose mutual funds, which are made up of stocks from several different companies, as an alternative to buying individual stocks.
"Mutual fund managers are paid big bucks to do the research," said McCullough, a financial adviser for Joseph & amp; McCullough Financial Advisers in Boardman. "They can get on planes and go visit companies. Company presidents return their calls. They do the work for you."
Because they are stock-based, mutual funds can also fluctuate with the market, but she said funds labeled "growth" or "income" funds are generally the most stable.
"With specialty stocks mutual funds, like energy funds or tech funds, you get a more exciting ride," she said, "but over time the value-style mutual funds, funds with stocks that are relatively low priced compared to their company profits, won't go up and down as much."
Philip Morris stock, for example, was priced relatively low last year because of negative publicity related to tobacco court cases. "People dumped it and the price went down, but the company was still making a profit despite the bad press," she said.
Sometimes McCullough advises investors to sell off their stock, even when the price is low. "If you own stock, ask yourself if you'd buy it at this price today," she said. "Cisco is low now, but it's a good company. I would buy the stock today."
Hold on: Doug Thorpe, vice president at Butler Wick & amp; Co. in Youngstown, agreed that the key is to buy quality companies and hold onto the stock.
"The markets will turn around six months, 12 months, 18 months from now. No one knows when that will be. But they will," he said.
He said he hasn't had clients looking to dump stocks because they are investing for the long term and have diversification in their portfolio to cushion against these rough times.
He advised people to use this time to check their portfolio to make sure they have the proper allocation of stocks and bonds and the proper diversification within their stock holdings.