Investment pros remind clients to keep goals in mind

Published 12:00 am Monday, August 15, 2011

By Emily Ford
SALISBURY — As Wall Street lurches up and down like a roller coaster, local financial experts say long-term investors should stay the course and even do a little bargain shopping.
The stock market yo-yo’d dramatically this past week, producing alternating days of sharply falling, then rising prices that left investors bewildered and nervous.
“You feel kind of helpless,” said David Setzer, executive director for the Blanche & Julian Robertson Family Foundation. “But you really do have to take the long view, even though on a daily basis it is traumatic.”
Wall Street took investors on the wildest ride since 2008, starting Monday when the Dow Jones industrial average plummeted 634 points only to rise 429 Tuesday and fall 519 Wednesday. On Thursday, the Dow recorded one of its biggest gains of all times after investors seized on any sign the economy might avoid a double-dip recession.
Stocks ended higher Friday but didn’t quite recover from one of the most tumultuous weeks on Wall Street in years.
Talk about whiplash.
Jolene Philpott of Edward Jones said she tries to prepare her clients for such gyrations in the market.
“I work with long-term investors who are conditioned not to allow the short-term market fluctuations to derail their long-term investment strategies,” Philpott said.
She said she teaches investors to view market volatility as an opportunity to buy quality investments at a lower price.
“When they see the market go down, they know this is a great buying opportunity,” Philpott said.
Still, watching an investment portfolio go up and down so drastically in a single day can fray even the calmest investor’s nerves.
“It can be a little gut-wrenching at times,” said Bob Wright, executive director for the Rowan County Chamber of Commerce. “But if you’ve been in the market for a long period of time, you just know that’s the way the market works.”
The stock market’s wide swings heightened fears of another recession. But amid the turmoil, unemployment figures released Thursday helped ease some concerns, showing the number of people applying for unemployment benefits fell below 400,000 for the first time since April.
Dramatic fluctuations in the stock market came at a bad time for the Robertson Family Foundation, where Setzer was already busy writing checks to local grant recipients when Wall Street began to zigzag.
“It’s difficult to watch, especially when we are in the time of people getting their grants,” Setzer said.
The foundation approved $1.9 million in grants for the spring 2011 cycle. While he’s happy to give away money to recipients, Setzer said he hates to see the foundation’s assets lose value on Wall Street.
“But we have been low before in the total amount of funds we have invested, and thank goodness the market has always worked its way back up,” Setzer said. “We’re just in one of those valleys, and we’re looking for the mountaintop.”
The foundation has a current operating investment base of about $16 million. In May, before grants were issued and before Wall Street’s recent roller coaster ride, the foundation had assets of $18.4 million.
Regardless of market volatility, investors with well-diversified portfolios and a long-term investment perspective should stay the course, Philpott said. Those who are concerned should contact their financial adviser.
“They may need to rebalance, but don’t make wholesale changes unless their financial goals have changed,” she said.
Market fluctuations for the past three weeks have been fueled by fear over U.S. and European debt, not by market fundamentals, Philpott said.
“I believe market fundamentals are strong,” she said, pointing to job growth, corporate earnings and lower oil prices as good indicators.
People who Wright has talked to blame politics more than economics for the market’s volatility, the Chamber president said.
“This is more about politics in Washington D.C. with the debt ceiling debate,” he said. “People are hoping that this will settle down pretty quick.”
The debt ceiling impasse in late July, which eventually led to a downgrade in the credit rating for U.S. Treasury bonds, came while European leaders once again bailed out Greece. Around the same time, sharp revisions in recent economic data raised concerns that the U.S. economy might be entering a new recession.
Last week, borrowing costs shot up for Spain and Italy.
It didn’t take much to send Wall Street rocketing higher last week. Investors reacted to pieces of lukewarm news that together raised confidence in the country’s ability to avert another recession: Layoffs are easing in most states. Some economists predict mild job growth. A few companies said profits were better than expected.
No matter what caused the roller coaster ride, investors should keep their long-term goals in mind, Philpott said.
“It doesn’t matter what we think caused it,” she said. “What we can control is how we react to it.”
The Associated Press contributed to this story.
Contact reporter Emily Ford at 704-797-4264.