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Internet Stocks Face Reality

Have you noticed? Internet stocks have been routed this summer. Many of the biggest Internet stocks have tumbled from their 52-week highs. Amazon.com is off about 59 percent. America Online and Yahoo have plunged roughly 50 percent.

By their very nature, such stocks are riskier and more volatile than tradition ones. Companies that stress growth and development, as opposed to stability and certainty, are always inherently more risky. The potential for more upside also means the potential for more downside. That's what so many people tend to forget. Blue chips can and often do get hit hard -- as many of them have been recently. But they rarely see the wild fluctuations of newly founded Internet companies.

Internet stocks fell victim to their dizzying heights. As they hit new highs, and as new offerings of Internet stocks doubled and tripled their values on the first day, a correction had to happen. It just did.

Internet stocks remain the epitome of speculation. These stocks trade on emotion, not fundamentals. And right now there is a significant amount of emotional fatigue.

Lurking somewhere in the Internet fog is the next Microsoft. The key is picking the right one while ignoring the 19 that will fail. If you're determined to keep trying, good luck. But don't kid yourself, it's a crapshoot. With the odds stacked strongly against you.

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