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The biggest boon, however, is the seemingly relentless bullishness of the market. The remarkable run of the Dow Jones industrial average began in August 1982 at the lowly level of 776.92. The Dow, having more than tripled in value since then, is now so high that investors sometimes get a kind of queasy altitude sickness that requires a retreat. That is what happened this spring, when a sizable sell-off sent the Dow tumbling 190 points from a record 2405.54 on April 6 to a low of 2215.87 on May 20. But then the Dow began a summer surge to new heights. Last Friday the Dow closed over 2500 for the first time ever, ending the day at 2510.04, up 54.05 points for the week. Since the beginning of the year the Dow has risen fully 614.09 points, or more than 30%, a bounteous half-year return by any standard. One reason for the latest rally is a huge improvement in company profits, thanks to corporate streamlining and a declining U.S. dollar, which has boosted export sales.
Yet the volatility of the market is inspiring a mixture of excitement and fear, since the Dow's stratospheric level gives it a tendency to sweep up and down from time to time by 50 points or more a day. When individuals reap an overnight windfall, they can become manic and even a little careless about where to put the money next. "Clients are calling about speculative stocks that they've heard about at cocktail parties over the weekend. I'm worried about this," says Jerry Tisserand, a broker for Thomson McKinnon Securities at a branch in Evansville, Ind. At the same time, many investors realize that a bear market could hit at any moment. Some become spooked by sudden downdrafts and sell too soon. "It's hard to keep people in the volatile blue chips. They're getting whipsawed," says Richard Geier, a broker for Reynolds DeWitt Securities in Cincinnati.
The disconcerting gyrations of the mainstream stocks, which are heavily played by institutional investors, have inspired many private investors to march to a different ticker. They prefer to find lesser-known companies whose stocks are undervalued or potential earnings overlooked. But to arrive at a hot property before Wall Street professionals is a feat that requires lots of homework, constant vigilance and a cool head. Says Investor Jeffrey Solomon, a hardware-sales representative based in Great Neck, N.Y., who carries a hand- held stock monitor at all times and studies charts and newsletters every night: "The astute investor can beat money managers. They are human. They panic, become euphoric or get emotional just like all of us." At 32, Solomon has accumulated a five-figure profit pile.
Nearly every investor develops a personal method or specialty. Investor Tedd Determan of Chicago, who puts most of his $1.4 million portfolio into small, fast-growing stocks, often invests in companies whose products he appreciates as a consumer. A confessed "popcorn freak," he savored the brand made by Golden Valley Microwave Foods, and so he bought the company's stock. It has gone up nearly 70% in value during the past year. In another instance, Determan was so impressed with the service at Jiffy Lube International, a franchised auto-service chain, that he bought 3,000 shares at 9 1/2. Current price: 15 5/8.