Column -- guest or staff

Balance Needed in These Wild Financial Times

May 1, 2000 – Jack Sirard contributing writer

If there's one lesson that investors should have learned from the stock market's actions this week, or this month or this year, it's simply the need to be diversified and to keep things in balance.

For the last several years, the blue chip stocks have ruled the roost but last year and this year, the Nasdaq market has been king.

In recent trading sessions there have been signs that the old economy was staging something of an economic comeback at the expense of the new economy issues that are expected to make a profit sometime in the distant future.

Then, of course, there was the market plunge that took both Nasdaq and the Dow down in the middle of April.

The question that many on Wall Street are asking is whether the clamor for the time-tested blue chips is a serious round of bargain hunting or is it a basic change in investment strategy?

The answer for most investors is quite simply, "Who cares?"

Individual investors, whether they're picking stocks or mutual funds, need to keep everything in balance. And that means everything from their tolerance for market risk to their selections.

Certainly, investors in their 20s and 30s can afford to take more risk and typically are supposed to have a better understanding of the world of technology.

But as they build their high-tech-oriented portfolios, they'd be wise to include a small dose of the Colgates, Cokes and Mercks for diversification.

At the same time, those in their 40s, 50s and 60s who have had the good fortune to enjoy an 18-year run of the bull market with the likes of General Electric, Intel and American Express would do well to diversify.

No one in good conscience would advise an investor near or at retirement to take a significant plunge with an Amazon.com or one of its dot-com brothers, but there's room in every investor's portfolio for proven tech companies like Cisco Systems, Dell and Amgen.

While the bricks-and-mortar companies have solid balance sheets, profitability and benefit from the country's heated up consumer spending, the high-techs, biotechs and med-techs clearly are our future and as such should be a long-term holding. Not only should investors have a balance of new and old economy stocks in their portfolio, it also makes sense to have some of your invested capital in bonds and cash.

While its timing certainly leaves something to be desired, A.G Edwards drives home this point with its model portfolio that today calls for 55 percent in stocks, 35 percent in bonds and 10 percent in cash.But the point here is that investors ˜ particularly those over age 40 ˜ should keep some cash available to make timely purchases if the new valuation levels in the market prove to be unsustainable.

If they are, those with a well-diversified portfolio not only won't be as hard hit, but they'll have the money ready to invest to pick up some bargains.

Jack Sirard is an investment columnist for McClatchy Newspapers and a senior softball player.