Stock Holders Wonder...Should I Stay or Should I Go?
Friday, October 24, 2008PAUL KANGAS: Amid the bailout plan and a dismal October on Wall Street, many people are now rethinking their investment plans and trying not to hit the panic button. Some small investors are second guessing whether they should stay in stocks or move to something safer. Darren Gersh posed some of those questions to experts.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Meet Renee Cobbs, single mom, executive assistant, investor.
RENEE COBBS, INVESTOR: My 401(k), it's very depressing. It's scary for me. How am I going to make that up? How am I going to recover from that?
GERSH: What do you say to that, Ric Edelman, financial planner and best selling author?
RIC EDELMAN, CEO, EDELMAN FINANCIAL SERVICES: Instead of being upset and worried about the value of her investments, she should be very excited, because in her 401(k) she is contributing with every paycheck additional money into the plan, which means she's buying every week with her pay check. She's not selling, she's buying. Now do you want to buy when prices are at their all time high or do you want to buy when they're at a historic low?
GERSH: By now, you are probably saying, yeah, right. Look at the headlines, look at the market. Buy and hold is sounding a lot like hold and lose. So Ric Edelman, what about that?
EDELMAN: You're right that buy and hold is not a good opportunity because all you can do is watch it go down and down and down as you hold and hold and hold. What you should be doing is buy and rebalance. When you buy and rebalance you hold that diversified portfolio and you take advantage of opportunities, when one asset has fallen below another to buy more of the one that's low, sell some of the one that's high to bring them back into line.
GERSH: But isn't there a safe investment out there somewhere? Anywhere? What about it finance Professor James Angel?
JAMES ANGEL, FINANCE PROFESSOR, GEORGETOWN UNIVERSITY: For very short term investments an FDIC insured bank account or a Treasury bill is safe, because you know exactly how many dollars you're going to get. But in the long run, those are not very safe because of inflation.
GERSH: And now, a final piece of advice. Deep breath in. Hold it. Exhale. Feel better? All right, neither do I, but probably the most important piece of financial advice is this: calm down. Do not make decisions when you're feeling panicked. So relax this weekend. The stock market will still be there on Monday. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
