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CNN Live Today

Wall Street Tips for Small Investors

Aired June 24, 2003 - 10:23   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FREDRICKA WHITFIELD, ANCHOR: All right. Taking a quick peak at the board there, and we're seeing already that the Dow is up about 18 points. But it's early yet. Now 19 points. Moving rather quickly.
That's always good news, a good sign. And perhaps even better news for small investors, who might be considering getting back into the markets, since they seem to be rebounding from the previous lows.

Before you take the plunge, however, let's take a look at some of the top five tips from our own CNNfn's personal finance editor, Gerri Willis.

Good to see you, Gerri.

GERRI WILLIS, CNNFN PERSONAL FINANCE EDITOR: Good to see you, Fredricka. WHITFIELD: All right. Folks are really encouraged by some of the numbers these days and maybe they're feeling a little bit more confident about the economy overall and may want to take the plunge.

What's your best advice? You're saying go slow, be a little cautious.

WILLIS: Well, I think people just want to dip their toe in at this point, right? They're not ready to plunge.

So a good way to get started doing that is to put in a little bit of time, regular and periodic investments. It's also called dollar cost averaging. That means you average out the price of the stocks that -- the price you pay for these stocks and it makes more sense in the long run.

WHITFIELD: So how do you really go slow and really keep an eye on things? What do you really mean by that?

WILLIS: Well, the easiest way to do this is buy an index fund, and the favorite index fund has been the S&P 500. But guess what? That has become, like, a large cap fund. S&P 500 is, you know, Fortune 500 stocks.

If you want to buy something a little broader, think of the Vanguard Total Market Index Fund. This buys 5,000 stocks, small, mid, large cap, you get a real range of exposure. Makes a lot more sense in these volatile times.

WHITFIELD: The sleep sound method? Means what?

WILLIS: Well, you want to avoid the mistakes that you've made over the past few years. You don't want to overpay for stocks.

Look, the market is pretty expensive right now. It's gone up almost 24 percent. These stocks are not cheap in some cases. You're going to have to start paying attention to what you're paying for these stocks. The price to earnings multiple, if you're familiar with that, benchmark, 28 on the market more broadly. Not cheap.

WHITFIELD: And you really can't avoid some of the same mistakes you may have made in the past. And you're saying you've got to learn from that. Right?

WILLIS: Yes, you've got to learn from that. Start doing things differently. Pay attention to valuations. Pay attention, not just to, you know, the optimistic analyst earnings reports but do your fundamental research and roll up your sleeves.

WHITFIELD: And you say don't be put off by the volatility. What do you mean?

WILLIS: Well, you know, yesterday we saw a great big sell-off. And if you were just getting into the market, you might have been unnerved by that. But the experts that I talked to say we're going to see a lot of ups and downs. It's going to be very volatile, not a straight-up course from here.

And so you're going to have to have a little faith that over time stocks are going to perform well and stay in market to actually see the gains that you need for your 401(k) or whatever you're saving for.

WHITFIELD: And your tip number five, use pullbacks to find good companies at bargain prices.

WILLIS: Well, this is just continuing the theme I've been talking about, which is you want to make sure you're paying the right price for a stock. And the best way to do that is wait for a sell-off like yesterday. Look at those valuations. See if it's stocks that you really want to buy are really cheaper than they have been. It's most important that you not overpay for these stocks.

WHITFIELD: All right. CNNfn's Gerri Willis, thanks very much. Always good to see you.

WILLIS: Good to see you.

WHITFIELD: Thanks for the tips.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired June 24, 2003 - 10:23   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
FREDRICKA WHITFIELD, ANCHOR: All right. Taking a quick peak at the board there, and we're seeing already that the Dow is up about 18 points. But it's early yet. Now 19 points. Moving rather quickly.
That's always good news, a good sign. And perhaps even better news for small investors, who might be considering getting back into the markets, since they seem to be rebounding from the previous lows.

Before you take the plunge, however, let's take a look at some of the top five tips from our own CNNfn's personal finance editor, Gerri Willis.

Good to see you, Gerri.

GERRI WILLIS, CNNFN PERSONAL FINANCE EDITOR: Good to see you, Fredricka. WHITFIELD: All right. Folks are really encouraged by some of the numbers these days and maybe they're feeling a little bit more confident about the economy overall and may want to take the plunge.

What's your best advice? You're saying go slow, be a little cautious.

WILLIS: Well, I think people just want to dip their toe in at this point, right? They're not ready to plunge.

So a good way to get started doing that is to put in a little bit of time, regular and periodic investments. It's also called dollar cost averaging. That means you average out the price of the stocks that -- the price you pay for these stocks and it makes more sense in the long run.

WHITFIELD: So how do you really go slow and really keep an eye on things? What do you really mean by that?

WILLIS: Well, the easiest way to do this is buy an index fund, and the favorite index fund has been the S&P 500. But guess what? That has become, like, a large cap fund. S&P 500 is, you know, Fortune 500 stocks.

If you want to buy something a little broader, think of the Vanguard Total Market Index Fund. This buys 5,000 stocks, small, mid, large cap, you get a real range of exposure. Makes a lot more sense in these volatile times.

WHITFIELD: The sleep sound method? Means what?

WILLIS: Well, you want to avoid the mistakes that you've made over the past few years. You don't want to overpay for stocks.

Look, the market is pretty expensive right now. It's gone up almost 24 percent. These stocks are not cheap in some cases. You're going to have to start paying attention to what you're paying for these stocks. The price to earnings multiple, if you're familiar with that, benchmark, 28 on the market more broadly. Not cheap.

WHITFIELD: And you really can't avoid some of the same mistakes you may have made in the past. And you're saying you've got to learn from that. Right?

WILLIS: Yes, you've got to learn from that. Start doing things differently. Pay attention to valuations. Pay attention, not just to, you know, the optimistic analyst earnings reports but do your fundamental research and roll up your sleeves.

WHITFIELD: And you say don't be put off by the volatility. What do you mean?

WILLIS: Well, you know, yesterday we saw a great big sell-off. And if you were just getting into the market, you might have been unnerved by that. But the experts that I talked to say we're going to see a lot of ups and downs. It's going to be very volatile, not a straight-up course from here.

And so you're going to have to have a little faith that over time stocks are going to perform well and stay in market to actually see the gains that you need for your 401(k) or whatever you're saving for.

WHITFIELD: And your tip number five, use pullbacks to find good companies at bargain prices.

WILLIS: Well, this is just continuing the theme I've been talking about, which is you want to make sure you're paying the right price for a stock. And the best way to do that is wait for a sell-off like yesterday. Look at those valuations. See if it's stocks that you really want to buy are really cheaper than they have been. It's most important that you not overpay for these stocks.

WHITFIELD: All right. CNNfn's Gerri Willis, thanks very much. Always good to see you.

WILLIS: Good to see you.

WHITFIELD: Thanks for the tips.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com