These are the times that try investors’ souls, but certified financial planners and other experts have some advice for investors sweating the latest stock market gyrations: relax.
“It’s silly. I can’t believe what I’m hearing from some of the talking heads on television,” said Kevin Young, a certified financial planner and principal of Davis-based Young Wealth Management. “I tell (clients): ‘Don’t listen to these talking heads.’ I call it financial pornography … Market volatility is part of investing, and investing is a long-term process.”
U.S. stock markets have been sliding for more than a week, with analysts blaming a worldwide sell-off triggered by China’s faltering stock market and increasingly wavering economy. At last Friday’s close, the Dow Jones Industrial Average was down more than 10 percent from its springtime high, plunging 531 points for the day.
The bleeding continued Monday as China’s stock market fell by its biggest margin in eight years. Markets in London also beat a retreat, dropping to a three-year low. U.S. investors reacted predictably. A Monday morning sell-off saw the Dow tumble more than 1,000 points before rallying back to a loss of about 300 points by 11 a.m. But sellers ran wild in the last hour, and the Dow closed Monday at 15,871, down 588 points, or 3.57 percent, for the day.
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Even so, Young said he was not seeing panic among his clients: “I’ve had no clients call,” he said, adding, “I would characterize this as a minor correction.”
Young said he counsels clients to have diversified investments – as opposed to putting all their eggs in the stocks basket – and to be patient with the markets, which rose steadily over six years to see the Dow top 18,000 earlier this year. But he noted: “Human beings are not wired for disciplined investing.”
Young’s advice matched that of other local experts.
“These market fluctuations are a normal occurrence,” said Cynthia Meyers, a certified financial planner in Sacramento. “From an investor’s viewpoint, ideally you’re investing for the long term, and you’re going to see a lot of these fluctuations in the stock market and the bond markets. … If you’ve diversified your portfolio, you can weather these storms.”
Kelly Brothers, partner with the retirement planning firm Genovese Burford & Brothers in Sacramento, likens the recent stock market jolts to living in an earthquake zone: “If you lived on an earthquake fault line, you’d prefer to have some minor shaking every three to four years, rather than one big jolt. This is simply the markets letting off steam. … It’s a good thing.”
It’s also an opportunity for buyers, Brothers said. He was “heartened” that about a third of the calls he fielded on Monday were from investors saying, ‘Let’s buy Apple or let’s buy Facebook … or Tesla.’ They’re seeing bargains amid the carnage, and that’s good.”
Savvy, pragmatic investors don’t need to worry, said Patrick Gainer, a retirement plan specialist in Roseville. He said those most likely to be hurt are speculators, not regular investors: “… Those with a varied portfolio of stocks (large cap, mid-cap, international, etc.) and bonds, and are investing according to a well-thought-out plan, have little to worry about.”
At least one local investor was prepared to ride out the latest storm.
Michael Sarina, chief financial officer for a privately held coffee company, Rogers Family Co. in Lincoln, joked that his first reaction to Monday’s news was “panic.” Speaking of his personal investment portfolio, he added: “It makes all of us nervous, but panic is probably the worst thing anyone can do. It’s not like we haven’t been through these before.”
Financial analysts nationwide were saying similar things, and they pointed to sharp differences between now and the deep U.S. financial woes of 2008. They pointed out that the U.S. economy is much stronger than it was seven years ago, and key industries, including housing and auto sales, have been on the upswing. They also noted that stock markets are at levels far above what they were in 2008.
Most local stocks posted losses of varying degrees Monday. Sacramento-based Pacific Ethanol Inc. shares closed at $6.57, down 38 cents, or about 5.5 percent on Nasdaq. Also on Nasdaq, Rancho Cordova-based American River Bankshares lost 10 cents to close at $9.90 a share. Shares of the Sacramento-based McClatchy Co. closed at 87 cents, down 5 cents, or about 5.4 percent, on the New York Stock Exchange.