Investors' exuberance is for rationality

Gone are the outsize expectations of a few years ago, when annual returns of 10 percent or 15 percent were pooh-poohed and average investors poured their money into the wildly speculative investments that fueled the dot-com bubble. Instead, people now are investing deliberately, looking at factors such as earnings and long-term performance, and declaring themselves quite content with annual returns of 8 percent.

Take Colin Moore, 29, of Allston. Five years ago, when he first began investing, he put most of his money into a technology mutual fund, which, after initially soaring, lost nearly 80 percent of its peak value before rebounding. His biggest holding today: Coca-Cola Co., the Atlanta-based blue chip.

"I think it's less volatile," said Moore, a senior account executive at O'Neill & Associates, the Boston public relations and lobbying firm. "Over the long term, there's no way you can convince me I won't make money off of Coke."

As Moore shows, even with the Dow breaking the symbolic 10,000 barrier, the crash remains fresh in investors' minds. Few are looking to make a quick killing. Nan Sabel, a certified financial planner at Women's Financial Network in Bedford, said some of her clients, who a few years ago might have been looking for a hot stock, are instead investing in "plain vanilla" instruments, such as growth and income funds.

Words and phrases such as "long term," "balance," and "fundamentals" are back in vogue these days, financial advisers say, forecasting a far more rational market than in the late 1990s. Some investors are taking the Dow's move above 10,000 in stride, sticking to plans designed to make long-term gains by providing solid returns in good times and minimizing losses in bad ones.

But investors admit it wasn't easy to hold on during the market's long and deep slide. David Neuhaus, 52, of Townsend, a production planner for an aerospace company, said he held on to his stock investments and continued to make regular investments in his retirement account and children's college funds but admitted the market plunge "made me ill."

"As I rode it down, I kept telling myself, `You're not supposed to time the market, your investments are long,' " Neuhaus said. "But I was sick on a daily basis. It was such a downward burst that it scared the heck out of me."

Neuhaus is feeling much better today, as are many other investors who held onto their stock investments. Life is better for financial advisers, too.

At Eastern Investment Advisors, a unit of Eastern Bank, the phones are a lot quieter these days as the rising market -- and growing portfolios -- reduce the number of worried clients, said senior vice president Richard F. Moore, who is not related to Colin Moore.

Raymond Jacques, president of New England Schooner Registered Investment Advisors of Peabody, said it's a lot nicer telling clients they're making money, instead of losing it. In some ways, Jacques added, the stock market bust might not have been all bad, since the market and investors seem to be acting rationally, focusing on profits and economic news.

Ironically, Jacques said, he lost more customers in 1999, when the market was peaking, than in 2002, when it was near its recent bottom. The reason: Those customers didn't think returns of 15 to 20 percent were good enough.

"This is a market you can read, and we're managing money on fundamentals, like interest rates," Jacques said. "People are no longer coming in for the home run, but looking to hit singles and doubles."

Like many younger investors, Colin Moore, the 29-year-old Allston man, had never been through a down market until the recent crash. He decided to hold onto his technology fund, continuing to buy when the price was low, and has watched it rebound near his break-even point.

The lesson learned: patience.

"If you're going to be involved in the market, you have to be aware of the amount of risk," he said. "And once you've decided what you're comfortable with, you have to have the patience to stick it out."

Robert Gavin can be reached at rgavin@globe.com.