How to Play a Rotten Market

Don't dump your stocks now, except to diversify. And take heart: turmoil can also create bargains

Now what? Stocks have dropped below their post-Sept. 11 panic levels. Since March 2000, nearly $7 trillion of stock-market value has been destroyed--a chunk of it no doubt coming out of your 401(k). Far from sensing a bottom, sellers kept digging deeper last week, driving the S&P 500 to a level last seen in May 1997. A lot of folks long ago lost the casino's money; whatever they still have in stocks is money they earned on the job. Should you ride out the slide? Or bail out?

Some investors clearly have given up on stocks. A net $3.2 billion flowed...

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