Cobb Financial Advisor Economist React to Stock Market's Fluctuation
KENNESAW, Ga. (Aug 25, 2015) —
Kenneth Baer, managing partner at east Cobb’s Baer Wealth Management, said Monday morning his firm had gotten a few calls from clients concerned about the market, but he and his staff attempted to reassure them.
“This is just part of the risk of owning stocks,” Baer said. “This is expected to happen. It’s not a matter of if, it’s just a matter of when. You have to understand and accept this risk with a part of your portfolio if you want to achieve return over time.”
Baer said he’s told clients to “stay the course” and be disciplined in their approach to investment.
“That’s part of what we do here is to act, really, as a coach,” he said. “We’ve got a game plan, and we’re going to stick to that game plan. Now we might make adjustments down the road, but as of right now, we’re going to make sure that we stay disciplined.”
Days like Monday are an example of why investors need a diversified portfolio, Baer said.
“To me, it’s just a blip on the radar,” he said. “Whether it lasts longer or goes deeper is unknown, but that’s why you don’t have a portfolio that’s 100 percent stocks. You have a portfolio that’s a mixture of stocks and bonds, and bonds have done well over the past few days and are doing well (Monday).”
Roger Tutterow, an economist and professor at Kennesaw State University’s Coles College of Business, said Monday morning’s drop in prices is simply a “market correction” after years of growth, but that doesn’t make it more palatable to see such a decline.
“It’s painful to watch for anyone,” Tutterow said. “We see that this dropped, really you’ve lost well over 10 percent of your value or 10 percent of the prices between the corrections we had late last week and (Monday morning), but you also have to put things in context. We had a really strong run in the broad market from the summer of 2009 to date. Over long periods of times, these days of volatility tend to wash out a little.”
Because it’s difficult to outguess the market in terms of timing, Tutterow echoed Baer’s comments, saying investors should keep a diversified portfolio and “ride the market” to benefit from the recoveries that follow the downturns.
“The big worry I have is that many times when you see these kinds of events, after a lot of the damage is done, people sell their stock, and so they absorb the downturn, but then they’re not in place when there is a recovery,” he said. “In particular, during the market correction of 2008-09, there were a lot of investors who panicked toward the bottom and got out and so they absorbed the losses, but then they were not in place when the market started recovering in the summer of 2009.”
Tutterow said investors who don’t need cash in the near term should try not to get distracted by these kinds of downturns and instead, focus on the silver linings.
“Remember that when prices go down, it means that there is an opportunity to buy,” he said.