- The Washington Times - Wednesday, January 23, 2008

Investors should stay calm and be patient with their portfolios despite market volatility and fears of a recession, financial advisers say.

“Don’t panic. Try to keep a long-term perspective on the market,” said Moultrie Dotterer, head of equity strategy at Richmond brokerage Scott & Stringfellow Inc. “In 38 of the last 50 years, the S&P; has been up on an annual basis. That’s about 76 percent of the time.”

Despite yesterday’s surprise three-quarter-point interest rate cut — the Federal Reserve’s biggest in more than two decades — the Dow Jones Industrial Average lost 128 points to close at 11,971.19. Concerns about a slowing U.S. economy have knocked stock markets worldwide 20 percent or more off last year’s highs.

“This kind of market absolutely makes people feel uncomfortable,” said Stuart Ritter, a certified financial planner with T. Rowe Price in Baltimore. “But it’s the actions they take or don’t take that’s going to decide whether they stay on track with their financial goal. They should stick with their properly allocated, properly diversified portfolio.”

As long as a portfolio remains solid, short-term volatility shouldn’t influence investment decisions, he said.

“Their strategy should be based on their financial goal and their time horizon, not on what the market’s done in the last week or month or is projected to do in the next quarter,” Mr. Ritter said. “If your portfolio is set up properly, regardless of your time frame, you shouldn’t be worried.”

Colleen Kelley, a Charles Schwab customer from Silver Spring, appeared to embrace that thinking.

“I think it’s all cyclical and the stock market will come back,” she said yesterday at Charles Schwab’s retail branch on K Street Northwest. “I’ve got another 20 years before I retire. I can wait it out.”

Aaron Carr, a Fidelity Investments customer from Rockville, wasn’t convinced.

“I just pulled all of my mine out to put into a CD,” Mr. Carr said outside Fidelity’s K Street branch. “The market just seems too rough right now.”

Small investors can take steps to reduce volatility in their portfolios, Mr. Dotterer said.

“That would be in terms of your stock allocation, to take some traditionally defensive names and those would be health care names, consumer staples names,” he said. “And also buy larger cap blue-chip stocks — that’s a more conservative strategy — and also bonds.”

Investors who make those choices should be mindful of the consequences, Mr. Ritter said.

“That consequence is a lower average return. So if you do something that lowers your average return, to achieve the same financial goal you have to save more,” he said. “So if you decide, ‘You know what, I’m going to get out,’ my point is you probably shouldn’t do that.”

Mr. Dotterer, noting that investors’ biggest fear is a U.S. economic recession, cautioned against overreacting.

“I’m not an economist. I can’t say that we are, but typically the U.S. economy, even if we are in a recession, it does recover pretty fast,” he said. “And that’s based on the fact that we are now one player in a global economy. Because of globalization over the past decade or so, that’s made our recessions very shallow.”

Some investors remain hopeful that the stock market will rebound and are using the downturn as a chance to pick up shares at steep discounts.

“I just opened a new account,” said Bill Ince, a Cleveland Park resident, outside Schwab’s K Street branch. “Everybody knows the market will come back. This is a great time to load up on cheap stock.”

Timothy Warren contributed to this report.

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