John Edwards III Chats on AOL

<I>TSC's</I> markets editor talks about volatility, options, Y2K and more.
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John J. Edwards III chatted on AOL MarketTalk on Aug. 2. AOL's MarketTalk is hosted by Sage Online (Keyword: PF Live).

SageCrystl:

Live from New York, Sage is proud to introduce John Edwards, Markets Editor at

TheStreet.com.

John can answer your questions about the markets and investing. For more information visit www.thestreet.com. Welcome to MarketTalk John!

JEdwards:

Thanks very much. Great to be here!

Question:

How should investors view the current volatility in the market?

JEdwards:

There's pretty much always volatility in today's market, so your view should remain based on your own investment objectives. If you're a sophisticated trader, you might find good opportunities to take advantage of short-term price movements.

JEdwards:

If you're an investor with a longer-term focus, assess your favorite stocks but don't be driven to buy or sell just because of some short-term noise.

Question:

Do you think that we will revisit the type of market that we had last fall?

JEdwards:

While we don't have in place some of the particular factors that drove last fall's activity (Asian crisis, Long Term Capital Management), I think there's enough discomfort with the valuations we're seeing that we could indeed see more downward-focused volatility in the fall. Concerns about Y2K seem to be growing.

Question:

John, is there room in the market for the street and zdz?

JEdwards:

I won't comment directly on our relative prospects, but I certainly think there's room for all sorts of players in Internet journalism and information delivery.

Question:

Should the average investor consider options for their portfolio?

JEdwards:

Options should be handled with care. If you plan to invest in options, you need to be aware of the great volatility in the options markets and the high level of risk. That said, options can definitely be a valuable part of a sophisticated investor's strategy. I urge you to check out TheStreet.com's Options Buzz every day, along with the options lessons in TSC's Basics section.

Question:

Why would an investor consider a limit order as opposed to a market order?

JEdwards:

A limit order can be an investor's best friend in handling volatile situations. When you place a limit order, you set a price beyond which you will not buy a stock. With a market order, your order is filled "at the market" -- whatever the prevailing price happens to be when the broker is able to get the trade done.

JEdwards:

That market price can be a lot more than you were hoping to pay, especially in the case of first-day IPOs. With a limit order, you limit how surprised you can be by the price you pay.

Question:

Can you explain exactly what a REIT is?

JEdwards:

A REIT is a real estate investment trust, a form of corporate organization frequently used in the real estate industry.

Question:

With current weakness in the domestic market, do you think it is a good idea to start diversifying internationally?

JEdwards:

International diversification can be a good strategy, but as with domestic investing, it's very important that you do a great deal of research before diving in.

JEdwards:

In fact, research can be even more important in approaching international investments, as you have to bring yourself up to speed not just on the companies but on the political and social environment of the various marketplaces, especially in emerging economies.

Question:

How much more of a correction are we gonna have in this market?

JEdwards:

I'm afraid it doesn't look very good for those seeking a major bottom and rebound here. Right now we're seeing the failure of what looked at first glance like a solid rally (in fact, market internals such as breadth and volume have been poor all day).

JEdwards:

The kind of action we're seeing suggests that we're likely to get a series of these suckers' rallies for the next month or so, but most people we're talking to see the downside limited to about 10,400 on the Dow.

SageCrystl:

Thank you for joining us today John! We appreciate your insights! We have been speaking with John Edwards, Markets Editor at

TheStreet.com.

JEdwards:

Thanks a lot for having me. Great chatting with you, and I'll see you at

TheStreet.com!