Investment advisers are ready to give you the best advice possible to help you protect your money in today’s volatile financial markets.
But don’t expect it all to be the same. There are common threads that connect their thoughts -- like not panicking, looking at the big picture, diversification and trusting in historical patterns.
But beyond that, the advice depends on the person asking for it and their particular situation and also philosophical differences among advisers.
As the stock market began its free fall Monday, Tom Kubik was jokingly tempted to tell a caller, “If it gets down to 1,000 points and you hear a bang, my wife will continue the conversation.”
Never miss a local story.
Kubik is a big believer in alternative investments and is moving some of his clients out of the market and into vehicles like real estate and gas and oil.
For those nearing retirement with a 401(k) that allows in-service withdrawals, a good choice might be to shift the money to a fixed or cash account inside the 401(k). There are no penalties, Kubik said, unlike other 401(k) withdrawals that mean a 10 percent tax. A fixed account is similar to a CD or annuity that will pay a certain percentage yearly with restrictions on moving the money. A cash account is like a money market with a rate based on current commercial rates.
“It is a lesson I learned from 9-11, The market does come back but it takes two to three times longer to come back than it did to go down,” he said.
Karin Grablin, financial adviser with Dictor & Martin, said she has made “very few adjustments” in the distribution planning she does for retirees. “We use predictable sources like dividends and interest and annuity payments. We are insulated somewhat from the market.” But Grablin conceded if the current conditions don’t improve in a reasonable timeframe she “may have to reconsider” her stance.
Grablin has been busy sending e-mails and talking on the phone with clients over the past several weeks, “We are in constant contact and send them something in writing that they can hold on to.”
During Monday’s 777 point drop in the Dow, and the first triple digit drop in the S&P 500 ever, Grablin just shook her head and wondered why people had to panic.
“I don’t think the panic in the market is justified. Some kind of reconciliation is going to happen,” she said.
Fred Forbes, with Financial Factors Inc., wishes investors would take a broader perspective when caught up in the turbulence. He pointed out that Monday’s market dropped 7 percent, much less than the October 1987 drop of 27 percent.
He did have one client who panicked. “He is unemployed and pulled out funds earlier. I reminded him of that,” he said.
Forbes has tweaked his advice in light of the recent market activity. “I’m reducing the international component of funds clients are holding to keep it to 10 percent of their investment.” But he argues against pulling out of the market entirely.
“People want to head for the sidelines but putting your money in ultrasafe things means you can’t outpace inflation, your yield will be low and you’ll end up paying taxes,” he said.
Forbes will be visiting his clients and reviewing their quarterly statements in the upcoming weeks and he plans to take a temperature reading on their tolerance.
“If it is really chewing them up, they’re not sleeping at night, then they shouldn’t take as much risk as they are,” he said.
John Tucker, with Edward Jones, has remained steadfast in his long-term view of the market despite recent events. “If clients have high quality investments, they should be OK,” he said.
He contends the people having the most problems right now are traders selling short and he doesn’t hesitate to point out “excellent buying opportunities” to his clients like tax-free longer term bonds and Treasuries.
Nancy Marciniak, an adviser with Smith-Barney, said she has “tweaked some portfolios to further reduce volatility” with some of her clients who are uncomfortable now.
“Overall many clients are more protected and diversified than they realize, so once we discuss this, they are more at ease,” she said.
“For clients who want to keep very short-term money safe I have used Treasury bills and CDs. For those who are looking for longer-term growth with protection of principal for their heirs and protection of income for themselves, I have used variable annuities.” she said. “There is no right portfolio for everyone.”