News from the Tennessee Valley Business

Spread investments to reduce market risk

By Joe Bel Bruno
AP Business Writer

Q. With the big swings recently in the stock market, would it be better to pull my money out and put it into something more stable?

A. Money managers have always recommended that clients spread their investments among a variety of securities, including stocks, corporate bonds and U.S. Treasury bonds.

Just how much should be split depends on the investors, their appetite for risk and the state of the markets.

Donít get scared

But donít let the recent volatility seen in the Dow Jones industrials and Standard & Poorís 500 index scare you, even if the indices swung from the worst percentage loss in nearly five years last week to gains early this week.

Brett Hammond, chief investment strategist for TIAA-CREF, said this kind of volatility isnít a sign of some kind of market implosion.

Instead, it could present
opportunities for savvy investors.

ďThereís more of a chance to make smart stock picks that you can take advantage of,Ē said Hammond, whose financial organization manages private pension funds for educational and nonprofit organizations.

ďThis is something that markets do. In reality, the big moves in the market is really just a return to normalcy.Ē

The bull run of the past few years has seen very few days where the market has made a 100-point move, and thatís given investors a certain amount of confidence. But, the recent steep pullback presents opportunities for investors with a long-term vision.

There are some specific sectors that have been particularly hard hit in recent weeks, and could show some upside as the markets begin to work through its current jitters. For instance, financial services stocks — everything from investment houses like Goldman Sachs Group Inc. to big retail banks like Bank of America Corp. — are trading near lows of the year. As an added bonus, the group is also known for paying dividends — which offer investors an regular income, regardless of how the stock performs during a given quarter.

If youíre taking a broader approach, money managers continue to suggest that anxious investors keep their money in large-cap stocks — like the big companies that make up the Dow, such as General Electric Co.

Blue chips offer a certain degree of safety because a growing amount of their profit comes from overseas. And, thatís a good thing since economies in Asia and Europe are growing at a faster clip than in the United States.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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