Do You Dare Buy Stocks?

Picking companies is another matter. You're sick of the analysts who touted techs and Nets (they're either brilliant or crooked, depending on which side of March 2000 you're speaking from). You're no longer willing to own "great" companies at any price--think AT&T, Lucent, Microsoft, Xerox, Cisco, Intel. Cincinnati planner Michael Chasnoff says he has a lot of Procter & Gamble clients who have postponed retirement due to their losses in P&G's profit-sharing trust. (Moral: diversify away from employer stock.)

How about pouncing on stocks whose earnings are going up? "Even under the best of circumstances, quarterly or annual earnings are very poor predictors of subsequent stock performance," says Baruch Lev, professor of accounting and finance at New York University. Three- to five-year growth projections aren't any better. "Forecasters still haven't lowered their long-term forecasts for the big tech stocks," says Wharton professor and growth-stock guru Jeremy Siegel. "Those techs are still overpriced."

Lev says that individuals should make sector bets. Pick an industry you think might outperform, then undertake an old-fashioned analysis of each promising company's financials, management and R&D. Do you like cyclicals, auto, financials? Do you know why? If you can't do the heavy lifting, he says, stick with index mutual funds.

The '29 Crash ruined Wall Streeter Benjamin Graham. Eking out a college instructor's living, he figured there must be a better way of investing--and produced, with coauthor David Dodd, the seminal book on valuing stocks, called "Security Analysis." Today they're called "value stocks," as opposed to no-value stocks. Try them, for a change.

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