There are ways to make money in the stock market, as long as you are patient. The stock market is the best place to try and make money, because it offers many diverse companies (varying in size and sector) in which to invest. And while there will always be stories of those people who made their money in the market very quickly, the majority of successful investors are those patient people who employ a buy-and-hold tactic.

This approach is used most widely by mutual fund investors. They research the funds they are interested in, buy them, and then hold onto them throughout the good times and the bad. This is a very good approach to investing, but it does have a downside, too. Buyand- hold should be applied to those investments and equities that make up the core of your portfolio. Use this approach to building your core and to help provide some stability. Those funds or equities that are a part of this core are rarely traded and should be held for at least a couple of years.

If you chose to employ this strategy for your investments, be sure to research not only the mutual fund you will be using it for, but the manager as well. Although I do tend to look at past performance of a mutual fund as part of my research, I also pay close attention to the fund manager. Often times there are new, or newer, funds that don’t have any type of track record to go by. These same funds may have the same fund manager as another, successful fund. While this doesn’t guarantee that the new mutual fund will enjoy the same success that the other fund did, it will help calm those fears of investing in an unproven mutual fund. Chances are, the new fund will be subject to the same rigorous standards and practices that the other fund is. You also want to take a look at what the manager is doing with his or her funds. If the market is overpriced, as it was during the last few years of the 1990s, then you want to see that the mutual fund manager is taking steps to make sure that a market correction is not going to hurt the fund. However, knowing if that’s the case is not as easy as it sounds, since mutual funds are protected by the Securities and Exchange Commission and aren’t required to disclose what their positions are in their underlying equities at all times. The most recent information will either be in the fund’s annual report and prospectus or on the fund family’s Web site.

Whatever the market conditions are, though, you want to feel confident that your mutual fund manager will be able to react appropriately to help protect the mutual fund and its shareholders. Sometimes, funds will have a limit on what the managers can do. These limits will be listed in the fund’s prospectus. The more limits, the less action the manager can take and vice versa. Ideally, you want to see that there are few limits placed upon the fund manager. If there are few limits, the fund manager needs to have a lot of experience to deal with whatever the market throws at investors. The buy-and-hold strategy should be used the most during bear markets simply because it’s not a smart idea to be trading a lot when the market is down. Try not to be too worried about what happens during a down market. It’s just a time when investors aren’t buying a lot of equities. However, for many people it is the perfect time to jump in, which is why the market will go back up.

You should hold onto your securities because no one can predict the market, and thus, you won’t know when the market will begin to rebound. You don’t want to miss out on any potential growth just because you couldn’t wait for the markets to go back up. My advice for surviving bear markets? Don’t look. Don’t look at your statements, don’t look at how the markets are doing on a daily basis, and try to concentrate on other things. I know that is tough. I have many clients who are guilty of watching and charting their investments on a daily basis. These same people want to get out of their investments when the market goes down and then reinvest when the market begins to go back up. As I’ve said before, you don’t know when this will happen and by pulling out of the market, you may miss out on potential growth before you reenter it. (Again, please refer to Table 8.1 for a comparison of what happens when you miss some of the market’s best-performing days.)

Special note: Don’t be afraid to sell a mutual fund, stock, or other investment that is not performing very well and hasn’t been performing very well. Sometimes investments don’t come back from their poor performance, and sometimes they will. However, there are occasions when you need to evaluate your portfolio and cut your losses.