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Word To Investors: Take It Easy

If you are a small individual investor, don't act too fast. That's the advice of Bill Glasgall, senior editor of Business Week magazine.

In an interview with CBS 'This Morning' Co-Anchor Mark McEwen, Glasgall cautions small investors against pulling the plug and telling themselves, "I've got to get into cash."

He advises them to "remember that the stock market is up a huge amount. Over 20 years, it's up eightfold, and certainly it's doubled in the past few years. You can probably afford to give up some of the gains."

If, like most small or medium investors, you're a mutual-fund holder, it may be time to look at your portfolio and ask some questions:

  • Is my fund down more or less than the market?
  • Is my fund underperforming because the manager is bad, or is it because this particular sector of the market is doing badly?
  • Do I need to move more from growth to blue chips?
Glasgall advises investors to get on the phone and ask questions, or go to the Internet and get information.

Remember: Selling has big tax consequences, because it's been a long bull run. While you may be down 20 percent in the last two months, if you sell now, you may still have a huge capital gains tax at the end of the year. One good excuse for selling is if you have capital gains that you want to offset with some losses now, says Glasgall.

Also keep in mind: Overall, the U.S. economy is still in good shape. Interest rates are low and, in the long term, that should support blue-chip stocks. T-bills are still giving low returns, which drives people into the market, and the housing market is still hot.

"By any standard, however," says Glasgall, "this is a pretty sharp drop - close to four percent or more across the board in all big markets of the world. We're certainly in a period of a more volatile market.

"A lot of people in the market have only seen stocks go up. Now they're learning stocks go down, too," Glasgall continues. "However, the history over the past 75 years is that stocks still outperform bonds. But anyone who thinks we're going to see 20-percent returns all the time is just crazy."

About buying tomorrow. Glasgall says a lot of good stock got hit hard this week, such as Intel, Boeing, and Coke, and so these would be good buys. But, even more important, he adds, it is not necessarily time to rush in and buy.

His overall advice: Never buy in haste, and never sell in haste.