"Of Mutual Interest"-Jason Zweig, Investing Columnist , "Money" Magazine
Tuesday, March 20, 2007PAUL KANGAS: Our weekly "of mutual interest" segment tonight looks for some answers to the question: I invest in mutual funds and the markets are going nuts. What do I do? Joining us with some answers our mutual fund expert Jason Zweig, investing columnist at "Money" magazine. Thanks for joining us, Jason.
JASON ZWEIG, "MONEY" MAGAZINE: Thanks, Paul.
KANGAS: So what is your answer to that question? What do mutual fund investors do when the markets are so volatile?
ZWEIG: Well, I think the first thing to do Paul, is to put in the perspective. You know, a 416 point drop, a 240 point drop like we've had lately sounds terrible until you divide it by 12,000, which is the level of the Dow. We're really talking about 2 or 3 percentage points which is not as volatile as it might sound and people should bear that in mind.
KANGAS: OK. You said it's important to keep a diversified portfolio of funds especially in a bumpy environment. How do investors know they're diversified? How do you know you don't own funds with large sub-prime mortgage exposure, for example?
ZWEIG: Well, that's a good question and there's a pretty simple answer which is if your funds aren't really performing much worse than the market, they probably aren't overloaded with those problem mortgage securities and I wouldn't be overly concerned about them in that case.
KANGAS: Of course we're all human, Jason and all subject to human emotions, but what part do emotions play in deciding whether to buy or sell funds?
ZWEIG: Well, they play a really important part, Paul, and one thing that always disappoints me is when people invest in the heat of the moment and they make important decisions at a time when the news is very upsetting. And my general rule is that if the stock market is open, your portfolio should be closed. If the market is trading, you should not be. You need to sleep on it. You need to think about it. You need to see how you feel the next day not the day that the market is crashing.
KANGAS: OK. Any other guidelines for mutual fund investors that you might suggest in this type of volatile environment?
KANGAS: Well, yeah. I think one thing that's very important is if you are feeling upset by how volatile the market is, a really good simple tip, Paul, is go to the nearest mirror.
KANGAS: Really.
ZWEIG: Yes. Now, for male viewers, obviously, this may take a little more time than for our female viewers, but go to the nearest mirror and actually look at yourself in the mirror. I mean it literally. Look in your own eyes and see whether you look as upset as you think you are. And the chances are you're going to see the same person looking back at you that you always do. And that's a pretty good sign that the next day, the next week, your feelings will have passed and you really don't want to make a rash decision based on how upset you think you are.
KANGAS: Now that is a truly unique recommendation. Just look at yourself in the mirror. I like it. That sound like good advice to me. Thanks, Jason. As always, you have sage advice and we look forward to talk with you again next month.
ZWEIG: My pleasure. Thanks, Paul.
KANGAS: Our guest, Jason Zweig, investing columnist for "Money" magazine.
