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TagsBY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
"Screw your courage to a sticking point."
That piece of advice – which comes from Shakespeare – is what a number of shrewd financial advisers are telling nervous investors these days. (By the way, do you know which Shakespearean character said that – and to whom?)
Actually, financial advisers seem to fall into roughly three camps: (1) those who say sit still; (2) those who suggest that you look for bargains; and (3) those (well, one person) who recommends that you consider selling risky assets, like junk bonds.
Here are some sit-still advocates:
Don Phillips, the mutual fund guru at Morningstar in Chicago, the publishing house, advised: "Buckle up, and stay on board."
Said Scott P. Noyes, CFA, CFP, of Noyes Capital Management in New Vernon, "It is too late to sell and too early to buy. Wait it out."Jerry A. Miccolis, CFP, of Brinton Eaton in Madison has this reassuring advice: "Don't panic, and don't try to outsmart the market.
"Stay with your long-term investment strategy/asset allocation, don't watch the markets, and go enjoy your life.
"The only people that really got burned in 2008/2009 were those who changed their strategy. (There's a reason why the long-term average return for the typical stock index fund is 10 percent, but the average return for investors in those funds is only 4 percent!)"
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The second group is more aggressive: These advisers suggest that it's a good time to consider scooping up bargains.
"History has proven," said David E. Marcus, CEO of Evermore Global Advisors in Summit, "that buying in the midst of the crisis will create significant value in the future...it just may be a bit painful in the short run.
"We are in a ‘nibblers' market. We are nibbling at lower prices on those names that we love each day.
"The key is to not panic but instead to focus on the fundamental values we see globally."
Someone else eyeing possible bargains is Brian Kananchy, CFA, CFP, chairman of the investment committee at RegentAltlantic Capital in Morristown:
"Stay calm and assess the current environment.
"We are seeing the first significant correction since the stock market rally that began in March 2009.
"The catalyst for the correction is the sovereign debt concerns in Europe. These concerns are legitimate and won't be solved quickly. They have the potential to slow economic growth in the Euro Zone for many years as countries look to increase taxes and cut spending.
"However, there is still positive news out there. The U.S. is experiencing an economic recovery, and corporations continue to show strong profit growth. Also, emerging markets continue to have strong economic growth fueled by younger populations and strong fiscal positions.
"Overall, I would look for buying opportunities in this market downturn, particularly among reasonably valued U.S. and emerging market stocks."
In agreement is David G. Dietze, JD, CFA, CFP, president and chief investment strategist of Point View Financial Services in Summit. "We believe value-oriented investors should get out their shopping lists and add to positions," he says. "Presumably, they are now light on the portion of their portfolios devoted to equities, so it would be prudent to rebalance to planned asset-allocation targets.
"In particular, we'd be looking at large European blue chips. While that area sounds quite scary, remember that these stocks have corrected anywhere from 17 percent to 40 percent, so you are certainly paying less than what you would have as recently as November. Yields are about double what our U.S. market is offering, and other valuation metrics are relatively attractive as well. Finally, while conditions in many of the southern European countries have deteriorated, the European multinationals do much if not most of their business outside of Europe, which reduces their exposure to Europe.
"Further, their exports get paid for in foreign currency, which is worth more as the Euro depreciates, offering a silver lining to the Euro's decline."
Another money manager who is thinking of buying is young Brian Frank, manager of the Frank Value Fund in Parsippany. "We are giving the same advice we always give to investors: As long as you have a three-year or more time horizon, it's always a great idea to be in stocks. As stock pickers, we are finding some of the best deals we have ever seen -- the bear market of 2008 included! As always, the short-term can be volatile and unpredictable, but over a longer time period, the risk/reward ratio is extremely favorable."
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Finally there is the third camp, urging investors to sell their more risky holdings.
Says Andrew Wang, portfolio manager of Runnymede Capital Management in Mendham, "Today's markets are high in risk as seen over the last few weeks: sovereign debt problems in Europe, BP's oil environmental disaster, and the spark of Korean conflict.
"Investors need to be wary of high risk assets like junk bonds and high-beta [volatile] stocks that had a big run in 2009. Instead investors should focus on high-quality assets."
Oh, it was Lady Macbeth who told her husband to screw his courage to a sticking point. But despite the source, the advice may be good.
