Investor reactions worry consultants

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Investor reactions worry consultants

09/30/2008 01:11 PM

By: Ilin Chen

 

Financial planners are spending another day watching the rise and fall of the stock market after Congress failed to enact a $700 billion bailout package. But with their clients watching the markets intently as well, some financial consultants say they have other concerns.

 

"We're worried not just about the markets, but we're really worried about our clients' reactions," Chip Hymiller, with Beacon Financial Strategies, said. "Now is the time when mistakes are made. Now is
the time when people act emotionally."

 

Despite the 777-point drop of the Dow Jones Industrial Average Monday, experts said the markets have seen worse times. "When the dot-com burst came in, the S&P 500 dropped about 46 percent. We're now down 26 percent from our high," Lorraine Johnson, with Triangle Financial Advisors, said. "While 26 percent is hardly reassuring -- I don't mean to minimize it -- but put it in perspective, it's not even as bad as 2000-2001, much less 1987."

 

But during uncertain times, financial consultants like Hymiller and Johnson said they actually see a benefit. Both firms have doubled their monthly business prospects as more investors turn to professionals for advice. And they work with their clients to develop a strategy that allows them to ride through the market's downturns. But Johnson said she did have problems with the way the downturn is being characterized. "If I could do anything right now, it would be to ban the word 'unprecedented,' because it's not," she said. "The second thing I would do is ban the breaking news ticker, because it scares people to death."

 

But experts understand that people are concerned, and their advice for clients is to stay calm and ride out the storm, if they have time. "Throughout history, a diversified portfolio, as most investors have a diversified portfolio for mutual funds -- it's always rebounded," Hymiller said. "It may take some time, but it will rebound." Investors expect the markets to be bumpy for the next few days, which is when lawmakers are expected to resume talks about a bailout plan. They also advise investors who have more time on their hands to make investments now because most stock prices are at low points.