Local finance experts: Think longterm

By Sharna Johnson: CNJ staff writer

Remember to have a long-term view.

That’s the advice area financial advisors are giving their clients as daily news coverage highlights financial woes in the U.S. markets.

This week, the nation watched unprecedented upheaval in the markets, marked by several hundred-point gains and losses in the Dow Jones industrials, leading to one of the most tumultuous times in Wall Street’s 216-year history.

The past few weeks have included Lehman Brothers’ bankruptcy filing, Merrill Lynch being driven into the arms of Bank of America and an $85 billion government bailout of insurance giant AIG.

By the end of the week, hope spurred by promises of government bailouts as high as $1 trillion had the markets bouncing back.

But what do the spikes and plummets mean to the average investor?

Check to make sure investments are fundamentally sound and well diversified, and then stay the course, Bob Waters, financial advisor with Edward Jones said.

Investors on the High Plains tend to take fewer risks, he said, helping them weather financial uncertainty in the markets.

“The most important thing is having the long-term view and not take emotional reactions to what’s happening (daily) in the stock market,” he said.

That’s not to say there’s immunity from recent fluctuations, but there’s comfort in the fact that it will eventually settle down.

“Certainly it’s not pleasant to see the value of our accounts decline, (but) as far as someone being financially ruined by this environment, I’ve not personally seen that,” he said.

Local financial advisor Larry Erwin said individual investors have been nervous but need to understand it’s not a time to react. “The whole year’s been kind of an up and down ride … individual investors, they’ve been a little nervous,” he said..

More than likely, by the time an individual investor makes the decision to pull their money, the losses have already mounted. When they have the confidence to buy in again, the markets are up and prices are high. It’s a recipe for loss.

“Statistics show if you try to time the market you’ll probably lose 50-75 percent,” he said.

The market places thrive on the future, looking six to eight months down the road, Waters said.

Troubles in the mortgage and real estate industries, compounded by the political uncertainty of a close presidential election have led to the shake-up, he said.

“Marketplaces do not like uncertainty,” Waters said.”

But the recent events are not the worst he’s seen in 21 years in the business, Waters said.

In October 1987, the market declined almost 25 percent in one day but then bounced back and went into an 18-month upturn, he recalled.

Erwin too said he has seen worse in his 30 years of practice. The markets during the administration of President Jimmy Carter “(were) terrible” and the mid-1980s were pretty rough too,” he said.

Politics, problems in the international markets, issues in the mortgage industry and heavy media coverage — 24-hour news and financial channels were not nearly as prevalent two decades ago

“A lot of things are causing this right now. There’s more emotion than anything, but our economy really is fundamentally very sound,” he said.

The Associated Press contributed to this report.