Rather than invest in a few well-known growth stocks (the ones touted on TV), you should diversify within the equity market.
By market capitalization. In addition to familiar names, buy small and medium-sized companies, focusing on those with solid earnings.
By investment style. Purchase value stocks that might be considered well-priced, at current levels, as well as higher-priced growth stocks that are prized for outstanding future prospects.
By market sector. Instead of singling out technology companies, which had been the leaders, participate in many market sectors.
By holding a diversified mix of companies, you’ll be able to profit as different styles come into favor. In the difficult market of 2001, for example, small-cap value funds had an impressive 13% gain, through August, while large-cap growth funds lost 25%, according to Morningstar Inc., Chicago. As recently, as 1998, those same small-cap value funds suffered a 6% loss while large-cap growth funds returned over 33%.