SUCCESSFUL INVESTORS STAY FOCUSED

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.

The performance of the stock market this year has tested the mettle of investors, especially the thousands of new stockholders who entered the market within the past few years. For these investors, Wall Street's record-breaking run of ups seemed the norm, and 1998's market correction came as a rude awakening. More seasoned investors, however, know that the market performs in cycles, and a downswing is a natural and expected occurrence.

Experienced stockholders know how to steel themselves mentally during market downturns. They've done their homework and know that anyone willing to invest long term in the U.S. economy through the stock market historically has been rewarded with good returns that beat the low, single-digit returns from some other investments.

Some people believe that creating a winning stock portfolio is a matter of luck, but successful investors don't rely on chance for results. They know how to build a strong portfolio and how to prepare for varying market conditions.

For example, successful stock investors seek out leading companies from diverse industries with a history of providing solid returns over the long term. This is most easily achieved by investing in a broad-based mutual fund with proven management ability. Good mutual fund managers prepare for market downturns and protect shareholders to a limited degree. When checking a fund, see how it's weathered previous market corrections.

Successful investors also make sure their investments are properly allocated. The well configured portfolio should maintain a balance among stocks, bonds and cash. How much of each depends upon your objectives, risk tolerance and age. A financial professional can help you work this out.

After a long stock market advance, savvy investors look at the equity balance of their portfolios. Have equities grown beyond the preferred proportion in the investment mix? Consider the tax consequences. Some profit taking may be in order.

Don't forget tax-free or tax-sheltered investments. Consider tax-deferred accounts such as an IRA or 401(k). Tax-deferred investments can boost your savings potential because the earnings accumulate "tax free." You don't pay taxes until you withdraw the money.

Finally, experienced investors turn a market drop into an advantage by looking for bargains. When stocks are closer to their lows than their highs, buying usually makes more sense than selling. Or, as one wise investor put it, "Buy your straw hat in the wintertime."

Investors who have "been around the block" know that stock market peaks and valleys are part of the investing terrain. The key to navigating through all market conditions is to stay focused on your ultimate destination.

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