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Experts to investors: Calm down
As scary as the markets' throes are, take the long view, they say.
By GREG HAMILTON, Times Staff Writer
Published January 24, 2008
SPRING HILL - With stock markets around the globe seeming to implode by the hour, with the president and Congress devising emergency measures to shore up the economy, financial fear is thick in the air these days.
To worried local investors, Doc Hofmeister has two words: Calm down.
If you are a retiree fretting about cracks in your nest egg or a worker watching a 401k melt away, the message is the same. As long as you keep your wits about you, and have a diversified portfolio, you should survive this volatile period.
Besides, as Hofmeister noted Wednesday, your options are limited.
"There's not a whole lot you can do after the horse is out of the barn," the Spring Hill independent broker said of the recent plunge in the stock market.
Financial planners around Hernando County have been spending their days lately calming anxious investors and reminding clients to maintain perspective. The market has been up and down before, they say, but in the long run, the market trends are decided upward.
"Some people want to move out of their investments," said John Legner of the Legner Financial Group in Spring Hill, "but they should stay put. The market is being driven by emotions right now, people are selling stocks they do not want to sell. When people are in full fear, they're ready to throw in the towel."
Not only would that be ill advised now, Legner pointed out, but those who abandon the market today not only will lose money on their investments, they will be out of position when the market rebounds.
"There's a lot of money, almost $3-trillion in money market accounts, ready to come into the market," he said. When the tide turns, "it's going to be fast and furious. If you miss out on the first five days, you miss out on 80 percent" of the boom.
"Unfortunately, this is the time to buy, but we're all cut from the same cloth. 'What do you mean, buy?' But there are a lot of bargains out there. That's why they say, buy low, sell high."
Legner said it's not the mom-and-pop investors who are driving the market. "It's the program sellers, the institutional players," he said. "But the sellers will get exhausted. When certain levels are hit, the professional money will come in. They're waiting for the sellers to be flushed out."
While he has had to do some reassuring in recent days, Legner said his firm has taken steps to prepare investors for the roller-coaster ride they're on. They meet with clients every three months to review their portfolios and they have been warning folks since July that changes were coming.
"We had a client appreciation seminar last Friday, we had probably 400 people attend," he added. "We hit the issue head-on. We tried to calm people's fears."
John Rudestedt, a Spring Hill investment counselor, said that his clients have not been panicking. Which is just as well, because with bond yields down and the international markets tanking, "there are no safe places (for their investments) to go."
"The whole thing depends on whether you need your money today or in five years or more," he said. "If you need your money now, you may take a loss. If you don't need it, in the long term, it will go up."
As for the so-called economic stimulus package being crafted in Washington, the advisers were cautiously optimistic.
"When I first heard about it, I was not thrilled," said Hofmeister. "But when you give people money, they're going to spend it and that's going to create jobs."
Legner echoed those thoughts.
"Like tax cuts, if you give people money, their own money in this case, either by taking in less taxes or through rebates, they will spend it," he said. "That will create demand, and companies will hire people. There's a domino effect.
"If nothing else, there is a psychological boost," Legner pointed out. "It sends the signal that this government is not sitting idling by to keep (a recession) from happening."
Hofmeister added that the recent drop in interest rates, with more possibly on the way, should have a positive impact on the ongoing real estate slump and the subprime mortgage lending crises.
"Mortgages that were questionable now might be refinanced. How many people could be saved?" he said. "People will get a bit calmer."
The bottom line for investors, he said, is to have a well-thought-out plan and to stick with that plan. "The people who don't are the ones running around yelling," he said.
As Rudestedt noted, "These are interesting times."