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What goes down usually comes up
Published on Tuesday, Sep 30, 2008
From Beacon Journal wire services
Here's some basic advice for investors worried about the turmoil on Wall Street: Don't hit the panic button.
Instead, your financial adviser more than likely will tell you that you can ride out the trouble without major changes to your portfolio.
''For the most part, if they're already invested correctly, they should stick with it,'' said Jeff Burrow, a financial planner and co-founder of Valley Wealth Inc. of Modesto, Calif.
He and other experts said the turmoil, while not something they welcome, is just another bump for a financial system that has long-term strength.
They said bear markets give way to the bulls, as happened after the plunges of 1929, 1987 and 2001. And they said many companies are well-removed from the current problems — fueled mainly by bad mortgages — and remain sound investments.
Here's what they had to say:
• Terry Swehla, Waypoint Fi
nancial Advisors:
The turmoil is unusual in that it affects several financial sectors, including stocks, bonds and banks, Swehla said. This makes it more of a challenge to protect portfolios by diversifying holdings.
''There's almost no place to hide at this point,'' Swehla said.
Over the past 40 years, he said, bear markets have brought an average drop of 36 percent and lasted an average of 16 months, as measured by Standard & Poor's. The current downturn has cut stock prices about 24 percent over 11 months, on track with that average.
• Gene Carrillo, Ameriprise Financial:
Carrillo said the media has overstated the severity of the turmoil.
He also said the portfolios he manages are not heavily invested in real estate, one of the big drags on the economy. ''My job is to make sure my clients' portfolios don't drop as much as the market does,'' he said.
• David Mraz, Mraz, Amerine, Hirschler & Associates:
He urges clients to invest in ''strong, financially flexible companies'' that can weather the kind of credit crunch afflicting Wall Street. They include makers of ''consumer staples,'' from razor blades to soft drinks.
Some analysts ask what is the worse case?
The fear is of dying in the poorhouse, as Richard Schroeder, a certified financial planner with Schroeder, Braxton & Vogt in Amherst, N.Y., put it. And his answer to clients who articulate that nightmare is this: The markets will eventually recover.
''The individual needs to go back to that personal road map,'' said Sharon Rich, a financial planner with a doctorate from Harvard who studied women, psychology and education. ''Where are you right now, where do you want to be and how do you get from here to there?''
And then apply that to an investment portfolio.
''I think reminding people in this environment of why we've chosen the investment strategy that we have is a good thing for those who are a little bit antsy,'' said Constance Barber, a certified financial planner with Barber Financial in Natick, Mass., who got her start as a school psychologist. ''We've usually not set this up because it's money that you'll need tomorrow.''
Even if we don't need the money right now, it doesn't feel good to look at a retirement portfolio and find that it's down 15 percent from its peak a year ago.
''People rely on selective memory when they're only looking at losses from the high point that the portfolio reached,'' said Victoria Collins, who has a Ph.D. in social psychology from the University of California, Berkeley and has worked as a certified financial planner for more than two decades.
On one hand, it's certainly depressing to be down to $340,000 from $400,000, for instance. The basic math doesn't help the mood either, given that after a decline of 15 percent, a portfolio needs to gain 17.6 percent just to get back to $400,000 again.
''This is real money in people's lives,'' said Rich, who runs Womoney, a financial planning firm in Belmont, Mass. She noted that some people added up how many years it took them to save the money that just disappeared.
Put down the retirement account statement and consider the credit- and debit-card bills and the checkbook. Rich put some clients with job security anxieties through this exercise.
Even that support network might not be enough to bring the most anxiety-prone among us back from the edge.
''For those who cling to doomsday scenarios, we can also say, 'So what?' '' Schroeder, the financial planner in Amherst, N.Y., said in an e-mail message. ''If the markets go to zero, if the whole system crashes, there is no safe haven, so it doesn't matter whether you buy Treasuries. The currency will be worthless and there will be chaos in the streets. Your only alternative is to stock up on guns, ammunition and goods that are easily tradable and will become valuable, such as sewing needles, good Scotch, etc.''
Get the full article here.
Comments
Click here to post your comments
Barberton, OH
Posted 06:17 AM, 09/30/2008
I haven't made a whole lot off of my 401k investments this year, but I haven't lost either. I'll keep mine the same as they are now for a while since it has been rather steady so far. I'll wait until things pick up before I start changing thingas around in there again. Seriously, I don't believe this is as bad as people and the media are making it out to be. Granted, our current installation of Government has pretty much failed us and that doesn't really help much right now, especially a month before an election.
Barberton, OH
Posted 06:18 AM, 09/30/2008
OOPS, that words should be "things." I better change it before the Grammar Police come out and slap the cuffs on me.
Akron, OH
Posted 07:42 AM, 09/30/2008
I agree with Steve. Once the demoncritters took control of Congress two years ago, the government has spiraled downward to what we have today.
Bizarrebertucky, OH
Posted 08:47 AM, 09/30/2008
Have no fear, it's just a slight case of Trickle Down Economics, where the Dollars trickled right past middle class Americans, and down into Mexico, where they are now many,many more Pesos. I kinda liked the last financial expert's advice in the article about stocking up on ammunition and good scotch.
Posted 10:59 AM, 09/30/2008
either way leave it in or take it out, they win
Posted 03:05 PM, 09/30/2008
Steve - If you've had money in a 401k account, there is no possible way you've made money this year unless you've got everything allocated to a money market account. 99.9% of all mutual funds are DOWN this year. It's impossible to have a balanced portfolio and not be down in this market.
Posted 03:07 PM, 09/30/2008
Warren, Cleary you have no understanding of economics, so it might be best if you don't open your yap about it. Trickle down ain't the issue here, although the Reagan years clearly showed that the theory of TDE was at least partially correct. This so-called crisis was caused by overly aggressive lending to underqualified borrowers who defaulted on loans. Plain and simple.
Posted 03:08 PM, 09/30/2008
Diane, who is "they" and what did they win?
Sterling, Oh
Posted 04:55 PM, 09/30/2008
The only action needed: Demands President Bush and Congress comply with demands of Natural Law (what Mother Nature, God, or Whatever Power decreed to be the reality of the real world), God, democracy, capitalism, the US Constitution, and free, fair, and affordable commerce. Demanding every corporation, farmer, business, outsourcer sweatshop, and nonprofit, tax-exempt, organization and Church markets the cost in the wholesale and retail price of his or her product and service. Of every workers, consumers, and taxpayers living (including pension and health care). Enabling parents to love, nurse, nurture, discipline, protect, and provide, for every child (job) they conceive and fund schools, infrastructure, national security, government services, and etc.; with money derived from wages or independent business profit. And deny OPEC nations and Enron stockholders, Investors and stockholders in the Illegal Drug Business, Business owners stockholders, Financial Institutions investors and stockholders, Bulls on Wall Street, Hillarys, Wal-Mart stockholders, and foreign and domestic investors (money marketers) the liberty to market more stock dividends (money) quarterly. In the wholesale and retail price of every product and service Human Beings use for life. That gets only product or service. To measure and maintain the strength and growth of this unaffordable economy and prove that only money that can only be used to identify agreed value of sellers and buyers in the marketplace has value?
