When the Dow Breaks: Insights & Strategies for Protecting Your Profits in a Turbulent Market
In contrast to Wall Street's hold-forever theorists, author Donald Cassidy believes wecanunderstand stock volatility, and, subsequently, dodge market downturns and capitalize on bargain-basement prices. Buying and "holding forever," writes Cassidy, "is like suggesting you wear the same clothing year-round despite known radical changes in temperature and snow depth." By learning the history of market patterns and understanding that emotions drive prices, he continues, rational investors can profit greatly from the mistakes of the masses.Of course, predicting stock runs is easier said than done. Cassidy attempts to do so by charting market patterns from 1950 through the 1990s, profiling market and individual stock behavior at their peaks as well as their valleys. As for risky markets, he observes these patterns: "Two years or longer with no correction of at least 10 percent in the major averages; a long period of economic expansion already in place; large numbers of new companies going public."  Cassidy, a senior research analyst for Lipper Inc., also pays special attention to the psychology of investing, especially that of dealing with a market on the brink of change. He cites internal factors (greed, ego, perfectionism) and external influences (media, friends, brokers) that influence emotions, and, ultimately, drive markets. Finally, he offers clever ways to manage taxes as investors--ideally historically aware, rational investors--shift their portfolios toward low-risk, high-reward results.--Rob McDonald