TCS Daily


Keep Buying!

By James K. Glassman - May 29, 2000 12:00 AM

Will NASDAQ close the year at 5,000 or 1,500? Will the Fed raise rates again in 2000? Will this year follow the pattern of previous Presidential election years and be kind to investors? You can't possibly know the answers to any of these questions right now. So it's a waste of your time - and potentially harmful to your financial health - to try to answer them. Specifically, trying to predict the market's next move can be harmful if uncertainty about the future causes you to sit on the sidelines instead of saving and investing your money.

As we've discussed before, U.S. stock markets are perhaps the most efficient markets in the history of the world. Unless you have inside information - which means you can't trade - the price of a stock already reflects just about everything there is to know today about the company and the markets. So in times of declining prices, it's absolutely crucial that you don't start trying to time the market. In the end, you cannot know whether NASDAQ is headed north or south.

What you do know is that, in general, stocks are very volatile in the short term and they deliver tremendous gains over the long haul. If it matters a great deal to you where your stocks are at the end of December 2000, then you should not be investing in stocks. Any money that you will need in seven months should be invested in a money market fund. However, if you're playing for the long haul, perhaps saving for retirement 10 years out, then ignore everything the doomsayers tell you about current risks. This is a terrific buying opportunity! NASDAQ is almost 40% below its high. Could it fall much further this year? Of course, but it's almost certainly well below where it will be trading in five years.

We often use the NASDAQ as a proxy for the tech economy, but let's be a little more specific, and let's assume that you want to put some kind of screen on your tech investments. For example, you don't want to buy any money-losing companies with unproven business models. Still, you're bullish on the future of technology. Recently I told you about investing in the NASDAQ 100 (ticker symbol: QQQ) as a way to make a long term bet on tech. I'm still a big fan of QQQ, but there's an even more precise tool out there for tech investors.

The NASDAQ 100 has an excellent representation of leading tech firms, of course, but it also includes some non-tech companies and obviously it only includes companies whose shares are traded on the NASDAQ. If you want a pure, unfiltered investment in America's leading tech companies, no matter on which exchange they trade, you might consider buying Technology Sector SPDRs (Standard and Poor's Depositary Receipts). These are shares, trading under the ticker symbol XLK, which represent partial ownership in America's 94 leading tech firms.

The list is similar to the NASDAQ 100 - both feature heavyweights Microsoft, Intel and Cisco - but XLK also includes Glassman Tech 30 companies like IBM, AOL, AT&T and Lucent, a recent addition to my list of America's greatest techs. Trading at a recent $47 per share, this collection of America's leading tech firms is roughly 28% below its 52-week high.

I believe that buying shares in XLK is a terrific long-term technology investment, no matter where NASDAQ closes on December 31st, no matter what the Fed does, and no matter who gets elected President.
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