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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Wednesday, October 15, 2008 It's futile to predict stock market, experts say By Dave Carpenter Associated Press CHICAGO -- It may be the biggest trap in investing: trying to predict the direction of the stock market. Many frightened investors apparently fell into it late last week, bailing out of stocks as the Dow careened toward and briefly dipped under 8,000. As a result, they missed the biggest one-day rally since 1933 on Monday. Now they have to wrestle with another tough call: When to get back into stocks. Otherwise the more modest gains of their portfolios will be subject to heightened erosion from inflation, not to mention that they'll miss out on growth from future rallies. Experts say market timing is a futile exercise, especially for amateur investors, and mistakes can have serious long-term consequences for portfolios. "It's nearly impossible" to do it right, said Bryan Olson, head of portfolio consulting for Charles Schwab Corp, the nation's largest discount brokerage, on Tuesday as the market turned slightly lower again. "You've got to make two right decisions, and often the harder one to get right is the second one: when to get back in." Many people evidently are trying anyway. Financial planners and advisers report a steady stream of sell calls from clients toward what turned out to be the end of an eight-day losing streak that sent the Dow Jones industrial average down 2,400 points, or 22 percent. Unable to bear the continued paper losses, other individual investors shifted money in their 401(k) accounts from equity funds to bonds or cash on their own. "We got many, many calls all last week from people giving up, saying they'd had enough -- 'It's just going to get worse from here' -- wanting to get out," said Olson. "And what did they do? They locked in their losses and they lost out on an 11 percent gain in one day." One client of Jay Hutchins, a certified financial planner in Lebanon, N.H., sold $100,000 worth of exchange-traded funds at midday on Friday. By the close of trading Monday, they would have been worth $130,000. "With the market as volatile as it is right now, a day can make all the difference in the world," Hutchins said. "Timing the market is always like throwing darts, but right now it is like throwing them without a dartboard in the room." Investor angst can put financial advisers in an uncomfortable spot. They may have to sell clients' stocks counter to their own advice and what they feel are the customers' best long-term interests. Angela Thomson, a certified financial planner in Lincoln, R.I., said one client who had just retired sold a large amount of stock last week under pressure from his wife. Others also insisted on dumping stock despite her urgings. "I am sure they are all regretting it right now, but sometimes clients just don't listen to reason," she said. "But I can totally understand their feelings. When they see something like a Bear Stearns, a company that seems absolutely stable and then folds overnight, you have empathy." Investors obviously aren't too concerned at times like this about the small fees incurred when they buy and sell stocks, but there are other complications. For starters, there is added uncertainty when making transactions with mutual funds, since their net asset values are determined only once a day. Orders received by the end of market trading (1 p.m. Pacific) will use that day's closing price, while anything after that will use the next day's close. Since the market has been lurching wildly within a range of several hundred points on a given day, that can leave a troublesome waiting period between a decision and the time an order is executed. More important, though, are the long-term opportunities that can be lost sitting on the sidelines when stocks make their inevitable turn upward -- often in short bursts such as the one that occurred Monday. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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