Don’t panic. Think long term. Corrections are normal.
Financial advisers find themselves dispensing calming words and holding hands with uneasy investors as the stock market extends its biggest decline in more than a year.
“It seems a lot of people are just expecting things to continue to unravel and get worse,” says Jordan Kimmel, market strategist for National Securities Corp. in Morristown, N.J.
And coming so soon after the worst stock meltdown since the 1930s, though, it’s not easy to convince average investors that this too shall pass following another double-digit decline.
Evidence abounds that investor jitters flared up in May. They had been quieted by the market’s climb since early last year.
The VIX, a measure of the stock market commonly known as the fear gauge, has nearly tripled in the past month. Many financial planners and advisers report getting more calls and e-mail from clients about what’s happening. And those clients who are in or close to retirement are particularly nervous — some even moving money out of stocks in search of something safer.
“This downturn may have a dramatic effect on their lifestyle,” says Lori Embrey, a financial adviser with Fairfield Investments & Wealth Management in Pickerington, Ohio.
A poll released last month by investment management firm Franklin Templeton found that a majority of those surveyed — 57 percent of 1,010 people — believed stocks were too risky. And that was before the current volatility, when the market was still on a 13-month run that lifted the Stanard & Poor’s 500 by 80 percent.
Even some financial professionals feel that way now.
Concerned that Europe’s debt woes could infect the U.S. market, Chris Ravsten, an investment adviser for Fox stone Financial Group in Denver, recently decided to move clients’ money out of stocks and into bond funds for the next four months or so.
Another adviser, Robert Bernstein in San Diego, says that after watching the European turmoil worsen he pulled the $7.5 million he manages for clients out of stocks May 5 — the day before the “flash crash” that kicked off the worst of the swoon.
