July 18, 2002 — If your clients are concerned about the current market crunch, hold fast and stick with a diversified portfolio built for the long-term. So say financial advisors contacted by Fund Advisor.
“Investors who panic will miss out” on an upturn, says Michael Darden, a Lexington, Ky. financial planner. Seeing current fears as overblown, Darden feels that investors who sell now may not be able to recoup their losses later.
Changing your portfolio because of short-term factors is market timing, says Scott Leonard, an El Segundo, Calif. financial planner. “I don’t know anyone who can time markets,” he adds. Like other financial advisors we spoke to, he recommends a broadly diversified portfolio. Leonard believes people currently suffering deep losses don’t have “truly” diversified portfolios.
Investors who sell now are selling at the bottom of the market, claims Peggy Cabaniss, a financial planner with HC Financial Advisers in Orinda, Calif. As a result, Cabaniss recommends that investors stick with their allocations, although “the downside is very hard emotionally.”
Individuals should realize that equity investing is a long-term endeavor because downturns periodically hit the markets, notes Anthony Ogorek of Buffalo, N.Y.-based Ogorek Wealth Management. He notes that the current environment underscores the need for several strategies to minimize risk, including asset allocation, diversification, and “looser” correlating investments.
A weak market is “just part of the game,” said Ogorek, who feels it stems from the market “coming off of a speculative mania.” He thinks that a subsequent adjustment may lead to a “sideways market for a number of years.” That outlook has led him to “reasonable” areas of the market, such as small-cap stocks, particularly international small-cap stocks, where he believes the opportunities are more favorable.