By Dave Schwab
firstname.lastname@example.orgIn the wake of the stock market’s wild roller coaster ride of late, local financial advisers have some advice to give on what to do — and what to avoid.
Don’t react knee-jerk like investors did, counseled
Aubrey Morrow, certified financial planner and President of Financial Designs, Ltd.
“The reaction was sheer, unadulterated panic selling that was not taking into account any stock market fundamentals,” he said, adding the recent selling was a massive vote of “no confidence” in politics and governments in the U.S. and Europe.
Which is why Morrow is bullish on this bear market.
“When the stock market declines purely because of a reaction to political issues or events, the stock market historically bounces back very quickly,” he said. “The great majority of U.S. companies are fundamentally strong with high cash holdings and high profits. The problem is not the stock market, the problem is political.”
Investors should bear in mind, noted Morrow, that “when someone is selling — someone else is buying — and most likely buying ‘on sale.’ ”
Morrow made a bold prediction.
“My crystal ball sees an ‘up’ market by the end of this year,” he said. “For many, down markets are buying opportunities.”
The most important thing now is to not get shaken up and stay the course, advises
Scott Kyleof Coastwise Capital Group.
Pointing out the stock market is cyclical, experiencing “crashes” of varying degrees over time and always will, Kyle said, “The right thing to do is the same thing anyone does in life with diets or relationships or managing money — that is, have a plan and stick to it: Be disciplined.”
Kyle said people are react emotionally rather than rationally during a financial crisis, the exact opposite of how they should react.
“The big mistake people make is to mismatch their investments with their time horizons,” he explained noting, if you don’t need money from investments for 5 years, you shouldn’t be investing as if you needed it in five months.
“Don’t make decisions based on today,” Kyle said. “When you match your investments with your time horizons, that takes care of (down) periods like this.”
Trevor Callanof Callan Capital, a La Jolla-based wealth management firm, notes history shows a mixed effect to the stock market when a nation’s debt rating is downgraded from AAA as the United States’ just was.
“Australia (1987), Spain (2009) and Ireland (2009) all delivered positive six-month returns following their downgrades,” he said.
A downgrade does not give new information about the underlying creditworthiness of the U.S., he added, noting other countries that have lost their AAA rating they have not held the significant role that the U.S. currently plays in the global financial markets “so the impact is difficult to model.”
Callan said it’s important for investors to “evaluate the volatility of their portfolios” to make sure they’re fine-tuned.
A market like this is a “unique opportunity to review and rebalance your portfolio,” he said adding “If everything in your portfolio is headed down, you don’t have it right.”
Callan said, as always, the most important thing in stock investing to stay disciplined and balanced, finding just the proper investment mix.
“You need to blend asset classes together to get the most return with the least amount of risk,” he said.
Avelino Cortina III, owner of his own financial firm, AC3 Capital, is taking a conservative approach to the current stock market.
“I think we’ll see a down market here for awhile,” he predicted, advising “sitting in liquid assets, in cash and FDIC-insured very short-term bonds is probably a prudent thing.”
Noting the market does have the ability to “rebound rather quickly,” Cortina doesn’t believe the fundamentals are there right now for that to happen.
“The problem with the U.S. is very much demographic — not enough people working to support a lot of people who are retired and living longer, ” he said. “We need to reorganize, restructure and rebuild America. That needs to come from Washington. And I think people in Washington are very confused as to what to do.”
San Diego stocks slip with rest of market
By City News ServiceAnyone holding stock in San Diego’s larger and well-known firms weathered the economic storm of the past week fairly well, buoyed by Tuesday’s 430-point gain on Wall Street.
The Dow Industrials have yo-yoed in recent days, with Thursday’s massive loss followed by a mild increase on Friday, another meltdown on Monday and Tuesday’s big run-up.
Nearly all of the shares in big companies based in San Diego County have lost some value since trading opened five days ago, but investors generally did not lose their shirts.
Since trading began on Aug. 3:
• Bridgepoint Education, which runs online university courses, was down 50 cents, closing Tuesday at $21.37;
• Callaway Golf Co., the golf gear maker, has fallen 33 cents to $5.89;
• Cubic Corp., the manufacturer of defense systems and automatic fare collection equipment, has lost nearly $4 to $42.07;
• Cymer Inc., which puts together chip making equipment, has dropped $4 to $40.01;
• Illumina Inc., which makes equipment for DNA sequencing, was down
about $4 to $55;
• Jack in the Box closed today at $20.39, for a five-day loss of $1.01;
• Qualcomm, the cell phone chip manufacturer, dropped $3.27 over the past five days to $49.89; and
• Sempra Energy, parent of San Diego Gas & Electric and Southern California Gas Co., lost less than $2 to close at $47.71.
The five-day time period included both major drops for the Dow Industrials and both recoveries.