Stock market continues shift

Investors to re-evaluate financial goals

By BRETT DUNLAP, bdunlap@newsandsentinel.com


PARKERSBURG — As the stock market continues to shift, investors are being told to not get emotional and to be patient as they re-evaluate where they stand.

Many investment firms and financial planners are calling the current stock market “volatile.”

World markets tumbled in January as the New Year began with one of its worst starts and continued to get worse, according to financial information firm Standard and Poor’s Monthly World By Numbers Report and Global Stock Market Review.

‘‘High volatility, quick turnarounds in both the markets and sentiment, and much lower prices prevailed throughout the month,’’ the report said. ‘‘On aggregate, world markets were down $7.9 trillion at one point, recovering slightly in the last week of trading to post a staggering $5.2 trillion market decline for the month.’’

The sharp reversal to the strong 2007 global gains resulted in a highly unusual inter-meeting reduction in rates by the U.S. Federal Reserve of an equally unusual amount of 75 bps, the report said, adding nine days later, the Fed reduced the rate by another 50 bps.

‘‘There were few safe havens during January, as investors pushed U.S. Treasury rates down in their flight to safety,’’ the Standard and Poor’s report said. ‘‘Globally 50 of the 52 markets were down, with 25 of them posting double digit losses.

‘‘If investors thought the market could only go up, January’s wake-up call pulled them back into reality.’’

Louverture C. Jones of the Edward Jones Investments office on Pike Street in Parkersburg said people can be perplexed by the current volatility of the stock market and the fact that recently, the Dow Jones Industrial Average experienced triple-digit movements.

He said investors need to focus on what they can control, diversify their holdings, know their risk tolerance and look for opportunities.

‘‘You can’t control subprime mortgages, oil prices, the U.S. economy, Federal Reserve pronouncements or any of the various factors that may affect the stock market,’’ Jones said. ‘‘But you can control your investment decisions. Specifically, you can select quality investments — those that you wouldn’t mind owning if we enter a bear market.

‘‘Historically, so-called ‘blue chip’ stocks and investment-grade bonds have tended to bounce back more quickly at the end of market declines than those investments that are considered more speculative. Remember, though, that past performance is no guarantee of future results.’’

If an investor owns own one type of investment, their portfolio may be vulnerable to market downturns, Jones said adding if someone spreads their dollars among a wide range of securities — stocks, bonds, Certificates of Deposit, Treasury notes, etc. — they may be able to lessen the effects of market volatility on their holdings.

‘‘That’s because different investments don’t always move in the same direction at the same time,’’ he said.

People need to understand their risk tolerance, what they can risk and for how long they can risk it, local investors said.

‘‘Different people have different risk tolerance levels — so make sure you know yours,’’ Jones said. ‘‘At the same time, be aware that there are different types of investment risk.

‘‘When you invest in stocks, you risk losing some, or all, of your principal. But if you opt for a less risky portfolio consisting largely of fixed-income vehicles, you risk losing purchasing power, as these investments may not keep up with inflation. You’ll want to strike a balance between these different varieties of risk.’’

Investors need to continually look for new opportunities.

‘‘Market declines can present long-term investors with an opportunity to buy quality investments at a lower price,’’ Jones said. ‘‘Remember that all market declines have had one thing in common: They’ve all ended. Although we do not know where the markets will go in the future, the U.S. economy and financial markets have historically spent much more time rising than falling. So, look for those quality investments - they’re still out there.’’

When the economy has slowed, people have traditionally gotten emotional over the downturn with many trying to get out, said Jason Boley, senior financial adviser for United Bank.

‘‘People are nervous,’’ he said. ‘‘Their first reaction is to sell.’’

However those people would be selling at a bottom price when prices could improve.

Boley said people should not get emotional when dealing with their investments. Traditionally older investors become more conservative while younger investors get more aggressive.

‘‘My advise is for people to make sure they have the correct asset allocation,’’ he said.

People need have the proper allocations among their stocks, bonds and cash based on their investment objections and risk tolerance, Boley said.

‘‘They need to be patient,’’ he said. ‘‘There are going to be peaks and valleys.”