Playing It Safe In a Sluggish Market
By Jerry Knight
Monday, July 12, 2004; Page E01
Six months down, six to go and so far this year money-market funds are giving Washington investors about as good a return as they are getting in the stock market.
So personal portfolios may seem ripe for a mid-course correction. But four of the mid-Atlantic region's top market mavens caution that this is not a time to make bold moves.
"No investors want to hear this, but sometimes the name of the game is 'Don't Lose Money,' " said Steven East, chief economist at investment banker Friedman, Billings, Ramsey Group Inc. in Arlington.
"There are not a lot of good alternatives," said Richard E. Cripps, chief market strategist for Baltimore's Legg Mason Inc., the region's biggest investment firm.
"Conservative" is the word used by Randall R. Eley, chief executive of the mutual fund firm Edgar Lomax Co. in Springfield.
And Michael Farr of District investment advisers Farr, Miller & Washington talks about "great old safe standbys."
These days, when you talk to these professionals, hot stocks and hyper returns don't come up. But they all argue that investors can, with care, beat the return of the Standard & Poor's 500-stock index, the traditional benchmark for the overall stock market.
The S&P is about as flat as you can get -- up by less than one-tenth of 1 percent this year, although that is better than the more volatile Dow Jones industrial average, off 2.3 percent, and the Nasdaq Stock Market composite index, which has lost 2.8 percent.
Reinvesting dividends, the S&P so far this year has produced a total return of 0.9 percent. That's an annual rate of about 1.8 percent, barely better than the 1.3 percent that money markets are paying.
As East puts it, "You could have gotten returns somewhere around there in a money-market fund and saved yourself all the ulcers."
© 2004 The Washington Post Company