Stockholders advised to hang on for the ride
By Joey Berlin
Originally published 12:58 p.m., January 22, 2008
Updated 12:58 p.m., January 22, 2008
As an investor faced with the prospect of an immediate drop in stock prices, it’s not about what you do today with your investments, a local financial advisor says — it’s about what you’ve already done with them.
After worldwide markets took a sharp drop Monday, financial analysts were expecting a plunge on Wall Street today. The Federal Reserve made an emergency interest rate cut in anticipation of the drop, slicing a key rate by three-quarters of a percentage point. By late morning, the Dow Jones industrial average was down about 95 points.
John Newland of the Emporia office of Edward Jones said he shies away from making short-term predictions about what the market will do. He said a recession, which many analysts feel the United States is heading toward, usually lasts about 10 months.
“Good-quality investments tend to bounce up and rebound out of those, and speculative investments do not,” he said.
So investors who have already set themselves up with those quality investments already stand the best chance of getting through a market plunge.
“If you haven’t rebalanced your portfolio and you have a lot of speculative investments, you certainly don’t want to be holding those at this point,” he said. “You don’t know if they will crash completely or if they will make it through it. That’s always tough.”
But for people whose portfolios are well-diversified, Newland said, a market drop is no reason to panic.
“Matter of fact,” he said, “it may present some opportunities for those that can afford to let this turn around and may be able to buy some of those good companies at a reasonable price.”