Word: beared
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Among all the things that drive stock prices, basic market psychology is the hardest to figure. Are you a bull or a bear? For many investors, the answer is based on little more than a gut-level premonition of where stocks are headed. Yet market psychology, or sentiment, can with little prodding shift so decisively to one side of the fear/greed spectrum that it dictates the course of stock prices for months or even years...
...logic goes, there's nothing left to keep the stock up. Better sell. The scary thing is that there is no way to tell how long this irrational gloominess will rule. Investors should come to grips with the possibility that we have entered an old-fashioned bear market--one that lasts six to nine months before reaching bottom, is marked by frequent suckers' rallies that pull bargain hunters in too early, and fails to recover quickly off the bottom. Give me a crash anytime; the next day is a buying opportunity. A slow bloodletting demoralizes. It doesn't end until...
...come to that. When the Fed is about done raising rates, which could be soon, market psychology will improve. But the way the economy is growing, there's a good case for rate increases extending well into next year, and that's a bear-market recipe. In such a period, better turn off CNBC and quit reading the stock tables. Stay diversified. Keep contributing to your 401(k) plan. Dollar-cost-average into favorite blue chips and funds. In five years, you'll be happy you bought cheap. Investing is a long-term game. That's been easy to forget...
...time.com/personal for more on bear markets. E-mail Dan at kadlec@time.com See him Tuesdays on CNNfn...
...comics 42. New Hampshire's motto, "Live Free or __" 43. Populous area, for short 46. Its third secret was not what Vatican critics said it would be 48. Sierra Leone's captured rebel chief Foday __ 51. When 7-Down bought in, she walked out 52. Most tender 53. Bear's exhortation 54. Glaswegian...