<FOOLISH FOUR PORTFOLIO>

More Market Timing
And a lecture on Foolishness

by Ann Coleman (TMF [email protected])

Alexandria, VA (January 6, 1999) -- I received lots of interesting email after yesterday's column on market timing. Opinions were about equally split between "what you are proposing is too risky" and "what you are proposing is too conservative." Hey, I must be on to something!

The only really important point yesterday was not that you should follow my suggestion about putting money you will need in the next five years into something safe and money you won't need for a while into stocks, the point was that you should evaluate your own situation and make your own decisions. Even if you want a guideline, you have to decide whether or not to adopt it.

Here at the Fool we provide guidelines somewhat reluctantly. For one thing, every time we come up with a nice neat guideline, people want to argue about it. Hey, it's a guideline! You don't lose points from your Total Foolishness Score if you don't follow it. In fact, if you disregard it for well thought-out reasons, you might gain a few points.

The reason we provide guidelines is because people ask for them -- rather persistently. But we would much prefer that you make your own informed, educated decisions about where to put your assets. At best, a guideline should give you a starting point for thinking about your own situation and how it might or might not fit that guideline.

So to those of you who wrote to point out that keeping a large chunk of money out of the market just because you would need it for living expenses over the next five years was too conservative, you're right. To those of you who thought that a carefully diversified portfolio containing stocks, bonds, and cash is the best way to protect yourself against the slings and arrows of outrageously overpriced markets, you're right, too.

You (both) are right because you have thought carefully about your situation and your risk tolerance. But you are wrong if you think that your personal decision can be generalized for everyone. That's another problem I have with the Asset Allocation Industry. They seem to think that they have all the answers.

If you want a guideline, I gave my opinion yesterday of a good, conservative guideline. Personally, I lean toward a more aggressive approach, keeping more money in the market. I am comfortable with that, and I know that I am running a risk of needing that money at the very time when it has just dropped 30%. I can live with that, but I couldn't ever suggest that someone else live with it.

If you can't live with those guidelines -- don't. (Please!)

Fool on and prosper!

Today's Stock Lists | 1998 Dow Returns

01/06/99 Close

Stock Change Last -------------------- CAT +1 1/4 48.50 JPM +3 7/8 111.25 MMM +4 7/16 79.50 IP + 1/2 43.31

Day Month Year History FOOL-4 +3.35% 4.93% 4.93% 6.48% DJIA +2.51% 3.96% 3.96% 3.55% S&P 500 +2.22% 3.51% 3.51% 4.90% NASDAQ +3.09% 5.85% 5.85% 7.30% Rec'd # Security In At Now Change 12/24/98 24 Caterpilla 43.08 48.50 12.58% 12/24/98 14 3M 73.57 79.50 8.06% 12/24/98 9 JP Morgan 105.51 111.25 5.44% 12/24/98 22 Int'l Pape 43.55 43.31 -0.55% Rec'd # Security In At Value Change 12/24/98 24 Caterpilla 1034.00 1164.00 $130.00 12/24/98 14 3M 1030.00 1113.00 $83.00 12/24/98 9 JP Morgan 949.62 1001.25 $51.63 12/24/98 22 Int'l Pape 958.12 952.88 -$5.25 Cash $28.26 TOTAL $4259.39 </FOOLISH FOUR PORTFOLIO>