How To Survive In A Volatile Stock Market

Until the market slowed, a bang-up start to 1998 had investors eager for more. Our experts map out what to expect now.

risk just like equities, while contributing a decent return to a portfolio. And with share prices skyrocketing, it’s a good idea to review how your portfolio is divided between stocks and bonds. If you’re a conservative investor who looks to have 30% of your money in bonds and 70% in stocks, an increase in the market is likely to throw that balance off. To keep things from getting too skewed, St. Claire Simmons recommends that you look over your portfolio twice a year, and move money from stocks to bonds to help look in the profits you might have made from this bullish market.

St. Claire Simmons’ take on the fixed income or bond market is pretty clear cut. Over the long haul, interest rates are probably headed downward. Applied to your portfolio, that means bonds with longer maturities of five to seven years or more look like a good bet. She recommends looking at your needs and structuring a laddered bond portfolio to meet them. For a child’s college education, a portfolio might include four U.S. Treasury bonds slated to mature in succession as your child turns from 18 to 21, annually. Th
at way, you’ll be able to cash in on your investment and protect your principal with safe U.S. Treasuries when particular financial obligations arise. ..IA.-

Randall Eley
It’s been a busy 12 months for Randall Eley, president and chief investment officer of the Edgar Lomax Co. He started the Edgar Lomax Value Fund (800-263-6438, www.edgarlomax.cihost.com), and signed on to manage another fund for Liberty Mutual Bank and Trust in New Orleans. Agencies that rank institutional money managers have placed Eley’s company in the top percentile nationwide, in part because his average annual return is 22.6% over the last seven years, compared to 21.8% for the S&P 500.

A stickler for value stocks, Eley’s come up with three interesting picks. The first is automotive giant General Motors (NYSE: GM). The company, which was selling at a price-to-earnings multiple of 8 as of press time, is a bargain. Meanwhile, GM sells at a price-to-book ratio of 2.8, and its dividend yield is almost 3%. Put together those two factors, Eley says, and investors get a solid 35 cents in assets for every dollar they put into GM stock, which he feels should return about 15% yearly over the next five years.

Health insurer Cigna (NYSE: CI) not only sells at a P/E of 13, but at a miniscule price-to-book ratio of 2.1. Eley says that brings investors almost 50 cents in assets for every dollar invested. Couple that with Cigna’s 1.6% dividend yield, and investors can look to an 11% yearly return even if earnings don’t grow.

Finally, Eley likes International Paper (NYSE: IP) as a restructuring play. The company has struggled through a down period; it currently sells at a price-to-book ratio of a mere 1.5. Roughly translated, investors get 66 cents of assets for every dollar they put in. On top of that, it pays a 2.3% dividend and could well generate

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