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Kathy Panagopouloskathy.panagopoulos@morningstar.com
Morningstar Helps Investors Manage Financial Jitters

CHICAGO, Aug 14, 2002 – Today marks National Financial Awareness Day, and it falls at a time when investors are more uncertain than ever about the future of their finances. The market's wild ride this summer has left some investors feeling jittery. To help them cope with financial anxiety, Morningstar experts offer the tips below and other suggestions at the company's investment Web site, Morningstar.com

"Investors should not panic when they hear fund outflow figures or see outrageous fluctuations in the market on any given day," says Haywood Kelly, editor in chief of Morningstar.com. "History has shown that over the long term, the market evens out."

Some ideas include:

Remember that investing is a long-term commitment.
Sue Stevens, Morningstar's director of financial planning, tells long-term investors to limit how much they listen to day-to-day commentary. When the markets were up, people tended to think the markets would stay up indefinitely. Now that the markets are down, pessimism is taking hold. She warns people not to let their emotions overpower their sense of reason. 

Reassess your risk tolerance and review your expenses.
Stevens encourages investors to check their risk tolerance, especially those investors considering selling some or all of their stocks and putting their money in bonds or cash instead. She advises those taking on too much risk to change their asset mix, after considering immediate tax issues. For those in retirement, Stevens suggests adding some cushioning by keeping three to five years of expenses in cash or bonds. 

All investors can examine their personal expenses and identify unnecessary payments. Stevens found she was paying for some services she did not need or have time to use. This is also a good time to examine investment account charges, such as 12b-1 fees or expense ratios, to make sure they are not eating up what little positive returns investors may have.

Do your homework before buying a bear-market fund.
Bear-market funds make money from tumbling stocks. Bear-market funds short stocks, meaning that a broker borrows shares of someone else's stock on an investor's behalf. The investor promises to return the shares at a future date. The investor sells the shares, then buys them back when it is time to return them to their owner. If the stock falls, the investor's profit is the difference in the selling price and the purchase price, minus the broker's commission. A bear-market fund holds short positions, or may even short an entire index. If the index goes down, the fund makes money.

Peter Di Teresa, a senior fund analyst at Morningstar and author of the popular "Ask the Professor" column on Morningstar.com, makes his opinion on bear market funds clear. "Despite their recent gains, don't buy a bear-market fund." 

While some bear-market funds may be doing well with the recent market downturn, they will lose money when the indexes riseùwhich has historically happened more often than not, Di Teresa says. Instead of jumping into bear-market funds, Di Teresa recommends building a well-diversified portfolio that can prosper in favorable markets and stand up to ugly ones.

Consider money-market alternatives.
For investors troubled by low interest rates, ultrashort and short-term bond funds might make good money-market substitutes, says Eric Jacobson, a Morningstar bond fund analyst. They can generate more income, though it's important to remember that in contrast to money-market funds, bond-fund prices can fluctuate. Overall, Jacobson says, they tend to be a lot safer than intermediate- and long-term bond funds, and are a good choice for investors who don't need their money within a very short period of time.

SSgA Yield Plus (SSYPX), Vanguard Short-Term Federal (VSGBX), Vanguard Short-Term Bond Index (VBISX) and Vanguard Short-Term Corporate (VFSTX) are four bond funds Morningstar analysts recommend. Each fund offers investors low expense fees. More information on these and 13,000 other funds is available at Morningstar.com.

For more information on coping with financial anxiety, read Sue Stevens' column at: http://news.morningstar.com/doc/article/0,1,78451,00.html

For more information on investing in bear-market funds, read Peter Di Teresa's column at: http://news.morningstar.com/doc/article/0,1,78370,00.html

For more information on the importance of a balanced portfolio, read Peter Di Teresa's column at:

About Morningstar, Inc. 
Chicago-based Morningstar, Inc. is a global investment research firm, offering an extensive line of print, software, and Internet-based products and services for individuals, financial advisors, institutions, and the media. The company is a trusted source for investment information, data, and analysis of stocks, mutual funds, exchange-traded funds, and variable annuity/life subaccounts.

Morningstar.com is listed among the top investing sites by publications such as The Wall Street JournalBarron'sWorth, and U.S. News & World Report. Morningstar provides investment information for a number of leading Web sites, including Microsoft MoneyCentral, Quicken.com, America Online, Yahoo! Finance, and Netscape Personal Finance.

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