Go Slow, But Go

By Daniel Kadlec

Two weeks ago, I ventured a prediction to a colleague, in fun only: The NASDAQ has bottomed. But he wrote it down, demanded that I sign it and plastered it on the office wall. So I guess I'm on the record doing something no one should do--that is, call the market. If Wall Street has taught us anything in the past year, it's that stocks are wholly unpredictable in their behavior. Yet if the "experts" didn't predict the market, what would CNNfN and CNBC have to talk about?

Certainly, it's foolish to invest without some sense of when stock values are more or less compelling. And, for many reasons, I believe stocks are worth buying again. A host of hopeful signs has popped into view, and the plain truth is that if you don't buy stocks when they're down, you shouldn't bother at all. With the NASDAQ up 32% in 15 days, odds are the market will retrace a bit, or a bunch. But if you stay diversified with proved companies, near-term losses don't matter. Five to 10 years should be a minimum holding period.

I wouldn't jump into the market with a single leap just now. That would risk making a large bet at what might be the top of another sucker's rally. So go slow. Invest at regular intervals with the goal of having any cash earmarked for stocks in place by year's end. That ensures you won't jump in at just the wrong time and increases the odds of buying at rock bottom--a moment clear only in hindsight.

Why the outlook is suddenly rosy:

--ALAN GREENSPAN GETS IT In a shocker, the Federal Reserve chief cut short-term interest rates by a half-point last Wednesday, in effect acknowledging what investors have long sensed: the economy is more vulnerable than many think. The cut, which came between Fed meetings, signals that Greenspan will be aggressive in engineering a recovery. That's why long-term interest rates have been rising. The bond market is anticipating heightened credit demand in the coming expansion.

--TAX SEASON IS OVER A lot of folks sold tech stocks while they were up or yearlong winners like Philip Morris. To raise cash for taxes, they sold before April 15.

--PROS DOUBT THIS RALLY When the Fed cut rates unexpectedly in January, money managers jumped into stocks too early and got burned. They're sitting this one out--just the wall of worry a bull market needs.

--CORPORATE BUYERS ARE BACK Honchos who know their companies best seem to be gaining conviction. Insiders filed to sell $5 billion of stock in March, the lowest total in 18 months. Takeovers hit a four-year low last quarter but are on track in April for the first $100 billion month since November.

--ANALYSTS HAVE GOT REAL They've slashed earnings forecasts. Now weak results get a positive spin. J.P. Morgan and Apple, for instance, last week reported steep earnings declines that topped expectations and rallied.

--THE BAD NEWS IS OUT Intel reported one of its worst quarters ever but said demand for computer chips had stabilized. Cisco reported an awful quarter, and the stock rallied. Meanwhile, IBM and General Dynamics posted strong earnings gains.

The news isn't all good. UPS says it's bracing for a protracted slowdown. But by the time everyone agrees things are good, the biggest rally in stocks will be over.

See time.com/personal for more on investing. E-mail Dan at kadlec@time.com See him Tuesday on CNNfn at 2:15 p.m. E.T.