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Trying times in investments
By: Chuck Kurtz, Staff writer
During this period of economic and stock market volatility, there are three things local economists and financial advisers agree on: don’t panic; the banking system is strong; and make sure your investments are diversified.
With the stock market tumbling, it is difficult for Jac Comfort, regional leader for Edward Jones, Overland Park, to provide the comfort his clients seek as they watch their portfolios crumble.
“We’ve been getting a lot of calls and I’m giving them the most boring and consistent advice possible: Make sure your investments are diversified,” he said. “That’s the cardinal rule of investing even when the market is raging and going great, and this market correction is showing us why investments need to be diversified.
“If you’re going to need your money in the next two to three years, your equity needs to be in something other than stocks. If not, then stay in for the long hall and you absolutely need to be contributing to your 401(k) now more so than at any other time as long as that money is diversified; this is a great opportunity.”
Doug Houston is a professor in the University of Kansas School of Business who teaches economics at the KU Edwards Campus in Overland Park. He said people should stay the course and not panic.
“You don’t want to suddenly move your assets from stocks to gold,” he said. “The best news behind all this is one thing: the real economy, which is producing products in this country and around the world, looks good. The productivity is a factor that suggests the underlying economy is pretty sound and although it might be hurt by the current situation to some extent, I don’t see a complete meltdown.”
Houston said establishing tough regulations on Wall Street investments is even more important than the federal government’s proposed bailout plan.
“I would be very cautious about the bailout and the underwriting of all these investment banking failures,” he said. “What we need is to get tougher regulations and privatize Freddie Mac and Fannie Mae so that the government is not trying to regulate and subsidize at the same time.
“It appears the government is taking on a lot of potential liability and with all the other unfunded mandates, this is going to be a draining thing to the country and I’m not sure it’s a good thing.”
Comfort recalls 1987 when the stock market fell 22 percent in one day.
“I had just started in the business and didn’t know what was going on,” he said. “(Financial) veterans kept telling me to keep people diversified, and it worked out. The market turned around and came back. We had a bad year in 1990, and again in 1994 and there were some problems with Y2K in the year 2000, and then the World Trade Center attack.
“There are uncertainties and no one knows what is going to happen, but the bottom line is to be diversified with investments.”
There are companies producing products that always do well during these times, Comfort said.
“People still put diapers on their kids regardless of the economy; they brush their teeth and wash their clothes and it doesn’t matter whether the president is a Republican or a Democrat,” Comfort said. “Companies like Proctor and Gamble will have people buying their laundry soap, their toothpaste and deodorant, their diapers, their shampoo, the things that people use every day.
“That’s why these kinds of companies will withstand the market volatility. I drove by the Wal-Mart the other day and the parking lot was full of people because they still need those things.”
Comfort said people need to talk with their financial advisers about their investments.
“They need to sit down with them and ask questions about whether they are diversified and asking them to be shown how they are diversified,” he said. “What exposure is their financial investments to retail stocks? What percent is in bonds? Are they good quality government bonds or risky corporate bonds?
“Their financial adviser should have called them by now because this is the time when the consumer needs that person the most, especially if they are compensating them, that’s when they need to be there for them to help answer questions and talk to them about their concerns and talk to them about the rules of investing.”
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With the stock market tumbling, it is difficult for Jac Comfort, regional leader for Edward Jones, Overland Park, to provide the comfort his clients seek as they watch their portfolios crumble.
“We’ve been getting a lot of calls and I’m giving them the most boring and consistent advice possible: Make sure your investments are diversified,” he said. “That’s the cardinal rule of investing even when the market is raging and going great, and this market correction is showing us why investments need to be diversified.
“If you’re going to need your money in the next two to three years, your equity needs to be in something other than stocks. If not, then stay in for the long hall and you absolutely need to be contributing to your 401(k) now more so than at any other time as long as that money is diversified; this is a great opportunity.”
Doug Houston is a professor in the University of Kansas School of Business who teaches economics at the KU Edwards Campus in Overland Park. He said people should stay the course and not panic.
“You don’t want to suddenly move your assets from stocks to gold,” he said. “The best news behind all this is one thing: the real economy, which is producing products in this country and around the world, looks good. The productivity is a factor that suggests the underlying economy is pretty sound and although it might be hurt by the current situation to some extent, I don’t see a complete meltdown.”
Houston said establishing tough regulations on Wall Street investments is even more important than the federal government’s proposed bailout plan.
“I would be very cautious about the bailout and the underwriting of all these investment banking failures,” he said. “What we need is to get tougher regulations and privatize Freddie Mac and Fannie Mae so that the government is not trying to regulate and subsidize at the same time.
“It appears the government is taking on a lot of potential liability and with all the other unfunded mandates, this is going to be a draining thing to the country and I’m not sure it’s a good thing.”
Comfort recalls 1987 when the stock market fell 22 percent in one day.
“I had just started in the business and didn’t know what was going on,” he said. “(Financial) veterans kept telling me to keep people diversified, and it worked out. The market turned around and came back. We had a bad year in 1990, and again in 1994 and there were some problems with Y2K in the year 2000, and then the World Trade Center attack.
“There are uncertainties and no one knows what is going to happen, but the bottom line is to be diversified with investments.”
There are companies producing products that always do well during these times, Comfort said.
“People still put diapers on their kids regardless of the economy; they brush their teeth and wash their clothes and it doesn’t matter whether the president is a Republican or a Democrat,” Comfort said. “Companies like Proctor and Gamble will have people buying their laundry soap, their toothpaste and deodorant, their diapers, their shampoo, the things that people use every day.
“That’s why these kinds of companies will withstand the market volatility. I drove by the Wal-Mart the other day and the parking lot was full of people because they still need those things.”
Comfort said people need to talk with their financial advisers about their investments.
“They need to sit down with them and ask questions about whether they are diversified and asking them to be shown how they are diversified,” he said. “What exposure is their financial investments to retail stocks? What percent is in bonds? Are they good quality government bonds or risky corporate bonds?
“Their financial adviser should have called them by now because this is the time when the consumer needs that person the most, especially if they are compensating them, that’s when they need to be there for them to help answer questions and talk to them about their concerns and talk to them about the rules of investing.”