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As Stocks Slide, Advisers Go Shopping

As the Dow plunged 162 points on Monday, some investors were receiving surprising advice from their financial advisers: Keep shopping.

Despite an earlier report today predicting a global economic slowdown, some advisers say they still expect the stock market to finish up this month and are using the recent dip as a chance to buy shares of quality companies at discounted prices. They may have history on their side: Known as the “Santa Claus” effect, the S&P 500 has gained in December nearly four out of five times since 1945. 

On average, stocks rose 1.8% each fourth quarter during that period. As of Friday, the index was up about .6% this month.

Others see better stock-market returns next year and are position their portfolios early. “I expect stocks to be off to a solid start in 2012,” says Frank Fantozzi, president of Planned Financial Services, a wealth management firm based in Cleveland, who says he’s been snapping up large-cap dividend-paying stocks because they tend to lead rallies after a downturn.

Still many advisers remain skeptical Santa will come to market this year and are staying put with their equity allocations or cutting back. Historical market trends also carry less weight, they say, since investors are likely to reacting to every piece of economic news.  “You can throw that seasonal [data] out the window,” says says Scott Wren, a senior equity strategist for Wells Fargo Advisors. “Because it’s a headline driven market and that’s not going to go away.”

Even advisers who aren’t bullish on next year’s prospects, but see more market volatility ahead, are abandoning the traditional buy-and-hold strategy of investing for what’s known as “tactical management,” or making regular tweaks to client portfolios by buying stocks on downturns and selling them during rallies.  In Midland, Texas, adviser Mickey Cargile is buying with the expectation the Dow Jones Industrial Average will trade in a range between 10000 and 13000 over the next year (it currently trades just below 12000).

Wren says he expects market volatility to continue into early next year, recommends investing in a mixture of defensive stocks, such as large-cap dividend paying stocks and consumer staples, which should hold up better during market drops, along with more aggressive stocks like industrials and materials, which should get a boost from any pickup in economic growth. He recommends selling bonds to buy more aggressive sectors next year if the European crisis moves closer to a solid resolution.

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    • Merry Christmas ,Christmas top gift

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    • Whatever you do remember the main way you make money in the market is to take it from someone else. You might should consider also, that’s how they make money too!

    • “Third straight day of losses?” The Dow gained 186 points Friday!

    • “Past performance is no guarantee of future returns.”

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