Advisors suggest diversified portfolios, long-term goals
At the start of last week, Duncan Frazier was spending more time on the phone than usual.
The investment advisory representative and owner of Anacortes Financial Associates was busy letting his clients know how their investments were doing in this extended financial turmoil.
“People call me or I call them. I have a client base I want to take care of. People are experiencing a certain kind of fear about what is going on in the marketplace,” Frazier said.
On Sept. 15, when the Dow lost more than 500 points (its biggest drop since the September 2001 terror attacks), people got worried.
“They’re paying attention to these large global failures and are concerned obviously,” Frazier said.
The stock market fluctuations are just part of the current economic equation — home prices here are decreasing, many across the country are dealing with the mortgage crisis and companies aren’t hiring at best, laying off workers or downsizing at worst.
Local financial advisors say the best way to weather the current economic storm, called by some the biggest financial crisis since the Depression, is to stay calm and have patience.
“Keep a cool head. This is not the time to panic,” Frazier said.
The stock market fluctuated wildly last week. Stocks rallied Friday, with the Dow rising. The two-day percentage gain for Thursday and Friday was around 7 percent, its biggest gain since October 2002.
Over the weekend, news of a government bailout plan for financial firms had people feeling more optimistic. But then on Monday the Dow fell 380 points, and most experts say we’re nowhere near being out of the sluggish economy yet.
“We’re just going to have to wait and see here for the next six months or a year and see how this plays out,” said Steve Henery with Skagit State Bank.
He said the bank has been providing more council to customers about FDIC protection for their money and how to structure their accounts to maximize it.
“We’ve had a lot of customers coming in inquiring about what’s going on with the economy, is my money safe, is the world coming to an end,” Henery said.
With no sub-prime lending and no investments in lending companies Fannie Mae or Freddie Mac, Skagit State Bank is sitting good.
“We do know some banks in the state and nationally of course did own that stock ... It has hurt some banks terribly,” he said.
Henery said the bank tries to diversify its loan portfolio to minimize risk.
“We’re pretty conservative when it comes to lending,” he said.
Diversity is one thing individuals can do too to make sure their investments are safer.
With most of Frazier’s clients preparing for retirement or already retired, their investments tend to be more conservative.
“Most of our clients have felt just a fraction of the pain of the broader market indexes because they’re not all in stock,” he said.
A good diversification of investments, a long-term goal and not looking at the market every day are keys to financial success in hard times.
“If you’re diversified efficiently you will get through this cycle,” Frazier said. “Keep the focus on the long term.”
Mark Burpo, senior financial advisor and owner of Ameriprise Financial, said his effort to educate his clients about how investment works has paid off.
“There have been a few calls and people are anxious but generally calm,” he said. “I don’t think that there’s a need for a lot of concern.”
Burpo said the underlying issues are in banking and lending and most things people own are not directly related to those.
There is no one size fits all in investing, but diversity is something everyone can strive for to come out of the harder times.
“There are certain things some people can do. In general as long as people stay diversified they are less risk than others,” Burpo said.
For those looking to get into the stock market, now could be a good time to buy.
Frazier said some of his clients pulled out of the stock market in 2006 and 2007 and are sitting on a fair amount of cash. He spent last week pushing some of that back into the market.
It’s human nature to invest when you feel comfortable and safe and that’s not now, he said. But if investors wait, the market will go up.
As the old advice goes: buy low, sell high.
“The hard part is this market does generate so much fear right now that people don’t want to be associated with anything that scary,” Frazier said.
There is some light at the end of the tunnel.
Frazier said the country has been in a recession since late last year.
The average duration of a recession from market peak to market bottom is about 12 months. Cycles of downs and ups happen regularly, he said.
“The higher you fly the further you have to fall,” Frazier said.
Once the country gets past the November election and the sub-prime mortgage crisis slows, there is hope the market will rebound.
“I think we’re in a more serious financial crisis than we’ve seen. I’m hoping we can see some kind of recovery in the first quarter next year,” he said.
