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Published: August 24,1998

In Robert Louis Stevenson`s The Strange Case of Dr. Jekyll and Mr. Hyde, two very different men exist in one body. Dr. Jekyll is well-respected and law abiding. He is a typical staid Englishman with a predictable, if not boring, life. But his alter-ego, Mr. Hyde, is wild and unpredictable, prone to murderous fits. At first, Mr. Hyde only appears when Dr. Jekyll releases this evil side by drinking a potion. But, gradually, Hyde gets stronger and appears more and more often. In the end, Jekyll is almost completely consumed by this evil and kills himself in order to put an end to Mr. Hyde.

This split personality leaves the observer confused. How could this calm, quiet man become a raving lunatic in the blink of an eye? Why are we so surprised to see the ugly side of Dr. Jekyll? After all, the seeds for both personalities have always been there.

This famous story of a split personality came to mind as I have watched the stock market over the last couple of months. For almost three years now, we have enjoyed a steady climb in stocks. Not only have we enjoyed the double digit returns, but we have come to expect them. And just as we were getting used to this rewarding, if not boring, ride, out jumps Mr. Hyde.

The market drops 299 points in one day. And we are surprised. But Dr. Jekyll takes back over, and we see several steady good days in a row. Then out comes Mr. Hyde, and we lose another 112 points. Dr. Jekyll takes control and the market adds 90+ points the very next day. And the day after that, Mr. Hyde rips them away.

The seeds for both conditions in the market have always been there. Investing in stocks can be a rewarding business. It can also be a risky business. It has always been so.

It is not crazy to invest in the market. It is only crazy if you invest and expect to always have these wonderful, positive returns.

For Dr. Jekyll, the only solution was to kill off the good with the bad. And for many people, that may be the answer. For those who started investing in stocks in the middle of the bull run, they may need to find safer, more predictable holdings. But for most of us, the answer is to integrate both sides. Understand that stocks produce the best returns over the long haul over other securities.

Understand that stock investing is a long-term deal. Understand that ups and downs in the market are normal. Understand that the key will always be to pick good companies and behave like an owner, not a gambler.

Will the erratic behavior of the market continue? I don`t know. That`s the problem with erratic behavior…it`s unpredictable. I do know conditions are right for the Mr. Hyde of stocks to display himself more often.

That doesn`t mean I`m tucking tail and running. It means I`m on my guard, prepared for some rough spots. But unlike Mr. Stevenson`s story, I`m not willing to give up the positive rewards of the market just because of some inherent risk.

Bulls and bears. Jekyll and Hyde. They are all one and the same.

Nancy Lottridge Anderson, CFA, is president of New Perspectives Inc. in Clinton. Her e-mail address is NL2invest@aol.com.


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