by Archie M. Richards, Jr., CFP^®
February 26, 2001

Nasdaq stocks seem bottomless, but the downdraft won't last.

On October 12, 2000 , the Dow took a terrible pasting, bottoming out during the day at 9700. The next day, Friday the 13th, the Wall Street Journal headlines read, "Bears Maul Many Stocks as Dow Plunges 3.6%." "Telecom Sector Has Become a Black Hole for Investors." "Fear Spreads About Brokers' Exposure to Junk Debt."

On Monday, October 16, I submitted a column saying that headlines like those spell B-U-Y S-T-O-C-K-S. The Dow, now 10,442, hasn't come close to 9700 since. The more pessimistic people become about the market, the more likely it is to rise.

Yes, I know, the Nasdaq Composite exceeded 3000 on October 12, and despite a higher Dow, has continued down to the current 2263. Colin writes, "My once sizable nest egg has plummeted without mercy over the last year, shrinking almost in half. Will it ever come back? Help!!"

Some Nasdaq stocks won't come back, Colin. But index funds covering a broad variety of stocks worldwide will certainly do so. Why? Because technology is advancing faster than ever before, the electorate is becoming more suspicious about big government, a couple of billion people have been released from the shackles of Communism, and the Fed has reversed the policy that caused the slowdown in the first place. No one knows the short term, of course, but during the next ten years, I expect the world's stock markets to perform astoundingly well.

The more pessimism you observe among investment professionals and the press, the more likely the market will rise. Don't wait for the economic news to hit bottom. Stock prices will have started rising long before.

Do not try to outwit the markets. Give up picking stocks you think will outdo the others. They may outdo them for a while, but then they won't. Let the markets of the world carry you along. You'll have a wonderful ride, believe me.

With credit cards so easy to obtain these days, many people are deeply in debt. During the heyday of big government in the last thirty years, American morals have been cast adrift. The popularity of Dr. Laura's radio show indicates that standards of morality are once more gaining ground. I don't happen to agree with Dr. Laura about abortion or homosexuality, but I'm nuts about her effort to transform the nation from an "I want" society to an "I should" society.

If you're drinking, gambling, or buying compulsively, knock it off. This is easier to say than to do, I realize, but it's essential. Get religion. Attend a twelve-step program; whatever works. Just do it.

If you're buying more than necessary, look in the yellow pages for a credit and debt counseling service. It will probably consolidate your debt in a single loan, tear up your credit cards, and provide counseling - exactly the right remedies.

Barring those problems, here's how you can cut your costs. Credit card companies, competing hotly, are smacking themselves silly with low interest rates these days. If one company lifts the rate to an exorbitant level, request a reduction. If this doesn't work, call other companies and ask if they can do better.

Keep a list of your creditors, showing the maximum credits, current balances, and interest rates of each card. To those with favorable rates, be sure to make the payments on time. Stay on top of it. Read the fine print. Take charge. If you let things ride, you lose.

Let's say a company gives you maximum credit of only $200, with zero interest for several months. (The company intends to raise the credit limit if you make timely payments.) But your first bill reveals a monthly fee of $6. This amounts to $72 a year, an effective interest rate of 36 percent ($72 / $200). Either the company raises your credit, or you'll transfer the balances to another card, thank you. Ask about transfer charges, too. They add up.

Do not, of course, use any interest savings to buy more of what you probably bought too much of before. Use the savings to pay off the debt sooner, so you may embark upon a lifetime of saving.

If your expenditures are under control, try to lower your interest costs. The credit companies are in heavy competition. Make it work for you.