IT'S IMPOSSIBLE TO ALWAYS BE WITH MARKET LEADERS (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

There is no shortage of categories in the investment world. You'll find large-capitalization growth stocks, large-capitalization value stocks, small-capitalization stocks, mid-capitalization stocks, international stocks and more. It can get confusing. And it can get even more confusing if you try to chase after whichever category is currently performing the best and leading the market.

Market leadership is a notoriously tenuous position. In 1994, international stocks lead the way, but in 1995, 1996 and 1997, they lagged behind most other categories. In 1995 and 1997, large-capitalization value stocks led the field, whereas large-capitalization growth stocks took their turn at the top in 1996 and 1998.

Obviously, if you wanted to keep most of your investment dollars in whatever asset class was on top at the moment, you'd need a crystal ball and fast reactions. In a matter of months, a particular category of stocks can slide precipitously. And the market leader at any given moment may already be in decline.

In short, it's virtually impossible to always be with the leaders and it makes little sense to try. You can't outguess the market, but you can spend a lot of time, effort and money trying to constantly move money around in pursuit of whatever's "hot" at the moment.

There's a better way to invest: diversify. A well-diversified portfolio will include the different categories of stocks that have led the market through the years -- as well as bonds, money market instruments and other securities.

Why is it such a good idea to diversify? Because at any given time different classes of investments will move in different directions. Large-capitalization growth stocks may be doing great, while international stocks are struggling. Small-capitalization stocks may be going through the roof, while large-capitalization value stocks are in the doldrums. If you have a diversified portfolio, you will always have at least some exposure to the best performers -- and some protection against the worst. And when the best and the worst switch places -- as they have often done in the past -- you'll still be covered.

Over time, you may well want to adjust your portfolio in response to changes in your life. But you'll have to discipline yourself not to overreact to changes in the market or even in the economy. Successful investing is a long-term enterprise. If you've constructed a diversified portfolio that is designed to meet your individual goals, then you'll be in good shape for tomorrow -- and you won't have to worry about who's at the head of the class today.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.