Market downturns shake confidence but also create opportunities.
As chief investment officer at Credit Suisse’s private banking in the Americas group, Robert Weissenstein oversees billions of dollars in assets for some of the nation’s wealthiest families.
He offered his advice to average investors while on a visit to Denver on Friday.
Young adults
Profile 1: A young couple in their 20s who rent and have no kids.
Young adults need to budget their money in a way that allows them to build the cash they need to start investing.
“Start by being very disciplined about putting more money aside,” Weissenstein said. “Buy what you can buy, not what you want to buy.”
First-time homebuyers can expect tighter standards on loans, higher interest rates and larger down payments.
That said, declines in home values and rising foreclosures in some markets like Denver could offer bargains.
Stock investments for those in this age group should be in such transformational themes as growth in China and the emergence of renewable energy technologies, he advises.
Kids in college
Profile 2: A married couple in their mid-40s saving to send children to college.
The volatility in stock markets in late July and August shows why it pays to be conservative with money earmarked for short-term needs.
Parents who waited to liquidate the money they needed to make this September’s tuition payment will have to do so in a market that is down 10 percent since July.
“Don’t play the market up to the last minute,” he advises. “Make sure you hold stuff that is not subject to volatility.”
For long-term investments, people in this age group should give more consideration to global markets, especially emerging markets that will continue to grow even if the U.S. slows.
Credit Suisse, based in Zurich, Switzerland, encourages its clients to put at least a third of their stock portfolio in non- U.S. markets, a higher percentage than most advisers suggest.
Retirees
Profile 3: A couple in their 60s approaching retirement.
Market losses can be especially tough for those approaching retirement because they lack the time to recover from sharp declines.
Weissenstein advises clients over 60 to dial down their “volatility budget.”
Fixed-income investments should be of high quality and short duration, although opportunities may open up in other categories once the market settles down.
Credit Suisse cautions against investing too heavily in companies that depend on consumer discretionary spending, which could tighten if the housing market continues to slump. Weissenstein also supports the notion that technology stocks will do better in this environment on a relative basis.
