The worldwide economic collapse of the past year may have left some local investors shell-shocked and wondering what their next move, if any, should be, but experts from across the region are suggesting now might be the ideal time to invest, as long as one considers all their available options.
While the media over the past year has been full of gloomy stories about the state of the world economy, some local investment experts have already seen signs of a potential recovery. Whether that recovery results in an economic turnaround may depend at least somewhat on whether individual investors begin putting their money back into play.
“People who have been sitting on cash since the bottom in March are still on the sidelines,” says registered investment advisor Beth Jones. “I’m poking and prodding them to get that money back in the market because things are still fairly reasonably priced, and they’re missing the boat. Some people have been moving that money back into the market, and that’s one of the reasons the market is starting to rebound.”
Jones is co-owner of Red Hook-based Third Eye Associates, a “life and wealth management” firm with offices in New York and Washington, DC.
“The markets always move first, so they go down first and come up first,” says Jones. “We’re not pessimistic, but it’s not clear if this bounce we’ve seen in the stock market over the last few months is a permanent situation. I think it’s going to be moving up and down for a while longer. Those boom years, where your house is going up 10 to 15 percent a year are over, as least in my lifetime.”
The Long Term
Robert Baker, assistant vice president and financial services officer with Ulster Savings Bank, agrees. “If you’re investing for the long haul, the best idea is not to panic,” Baker says. “The market is having a good upturn right now, so it’s a good time to invest.”
According to Jones, the best time to invest is often when the market is on the rebound. The real difficulty comes in convincing those who are timid to believe it.
“It does make sense to take advantage, even if you do it gradually over time, to do it now,” she says. “People do counterintuitive things. They feel like they shouldn’t put money into the market when it’s down, but that’s when it’s cheap. That’s how people who are wealthy made their money.”
Sal Bocchimuzzo, chief financial planner with Mid-Hudson Valley Federal Credit Union, agrees to a point, though he stresses that it’s not always as simple as “buy low, sell high.”
“I don’t advocate market timing,” Bocchimuzzo says. “Looking at the numbers out there, we’ve had a great run since mid March, but this is definitely still in the early stages of the recovery. There’s still a lot of cash on the sideline. These bullish singles were out there in the fourth quarter of 2008, and things were very volatile. But if you’re in for the longer term, it’s a fantastic time to put a plan together and get in.”
Diversity
In order to ride out the current roller coaster-like climate and keep your cool, the first thing Jones recommends is keeping one’s fingers in a number of pies.
“My advice is to always have a well-diversified portfolio,” she says. “The thing that protects you on the downside is having a very solid mix of different-sized companies; US companies, and international companies.”
It’s a notion Jones says she always advises, whether in times of strife or prosperity. The idea is that one’s portfolio can manage a hit in some areas if it has others keeping the ship afloat.
“I have my clients segment their money into different buckets,” says Jones. “Their short-term money should be fixed in the bank with a guarantee on it. Their mid-term should be a mix of stocks and bonds, and their long-term can be more aggressive.”
Bocchimuzzo agrees. “Even though the market has recovered a bit, people are still concerned, and people want to know how to recover their losses,” he says. “It’s still very prudent to be diversified. Sit down and develop a personal financial plan, come up with timelines and a rational approach, rather than trying to guess the right sector and try to get it back in a year. Now is the time to be smart and have a plan.”
