No panic needed at stock downturn
Tuesday, March 6, 2007
Yes, the stock market is down. But there’s no need to panic yet, some of Emporia’s financial advisors said Monday.
“What I’ve been telling people is that market drops are often good times to buy a good investment at a reduced price,” said Jon Geitz of Edward Jones Investments. “They’re normal, and they’re not a good reason to sell good investments.”
After an up-and-down day on Monday, the Dow Jones Industrial Average finished the day down by 63.69 points, closing at 12,050.41 points. Last Tuesday, the Dow fell by as much as 546 points, the biggest drop since just after the Sept. 11 attacks.
And it may have been overdue, Geitz said.
“If you go back historically, this is the second-longest rise in the Dow Jones and the Standard & Poor’s 500 without a 10 percent correction in 100 years,” Geitz said.
Todd Osborn of Raymond James said part of the uncertainty right now is because people still have very sharp memories of when the tech bubble burst.
“Most people remember 2000, when the market went down for a couple of years,” Osborn said. “That’s fresh in everyone’s minds.This is something that had all this momentum building up and then had some recent reverses. But they’re probably still ahead (of where they were).”
Both suggested that if investors are nervous, it may be time to look at their portfolio and see if they’re still comfortable with the level of risk they’ve chosen.
“Now is the time to think it through — are they in the right investment?” Osborn said. “You might do a lot of transferring to less volatile dividend stocks. If they think they’ve got too much risk involved, now is the time to deal with that. But it shouldn’t be a knee-jerk decision.”
Of course, hanging tough may be easy to say and hard to do for an investor who’s near retirement and just wants to protect his investment. At least, that’s the classic view. But that may be the wrong way to look at it, Geitz said.
“The advice that’s been given over the years is that you want to be conservative when you retire, but that’s not true,” he said. “If you’re 65, you’ll probably live for over 20 more years. You want to make some dividends ... Make sure you have a good mix of investments that are going to deliver some rewards for the risk you’ve taken.”
Osborn agreed. When people get anxious, he said, he looks for ways to make the transition more comfortable and within their risk tolerance. But getting out entirely would be a mistake.
“People are going to have some amount of money in investments or they’re going to run out of money in retirement,” he said. “They can’t just all run to safety.”