Tech stock correction hits fund values

The plunge in the Nasdaq stock market has hit high-flying Science & Technology funds hard, but investors need to keep the events of recent days in perspective.

As of the market close on April 12, The Nasdaq Composite Index had fallen more than 25% since hitting its high in mid-March, a major correction by any standard.

The impact on technology funds was predictable. Almost all of them have suffered double-digit losses in the past 30 days. In several cases, the drop was more than 25%; a few were down more than 30%. So it’s a real gut-check time for investors in these funds.

But let’s keep matters in perspective. The S&T funds as a group have recorded huge gains in the past year. It was completely unrealistic to believe this could go on forever.

For example, look at the Talvest Global Science & Technology Fund. It was down 26.1% for the 30 days ending April 12. Stomach-turning! But this same fund shows a one-year advance to March 31 of 220.4%. Looked at from that perspective, the recent decline is a blip on the radar screen.

You’ll find much the same pattern across the whole range of technology funds. So if you’vbeen in them for a while, you’re still way ahead.

The turmoil on Nasdaq may not be over yet. But I believe it would be a mistake to sell your fund units now. Ask yourself this question: Do I believe that technology stocks will be higher or lower three years from now? If you believe they will move higher over that time, as I do, then hold tight to your fund units and ride out this storm.

New investors may wish to wait until we see signs that the technology market has stabilized and then take an initial position. At this time, a dollar cost averaging approach (spreading the new investments over a few months) looks like a sound strategy. (April 13/00)