Now Is Not A Good Time To Sell, Analysts Advise

Oct. 10--Many investors have grown edgy watching their retirement savings get pummeled, wondering how much longer they can take the wild market swings.

But financial experts say keep hanging on if you hope to recoup losses.

Even though your gut may want to be more conservative -- say, putting your money under the mattress -- don't do it, said Duke Lyskin, certified financial planner in Oxnard.

It's necessary to hold on to some volatile investments that could yield returns that exceed inflation. He said it is important to think logically, taking the emotion out of the decision.

These days, Lyskin is falling into the role of psychologist more than financial adviser as he helps clients think about the long term and not panic.

It's often beneficial to take a contrarian view, he said. If a lot of money is pouring into stocks, it's probably a good time to sell. If everybody's running from the market, it's probably a good time to buy.

"When euphoria takes over or pessimism takes over, it's generally time to do the opposite of what everybody else is doing," he said.

Lyskin expects the next two years could offer some of the best buys in real estate and stocks in this lifetime.

Enough cash reserves

"This is unprecedented territory; we've never seen this before," said Larry Winter, senior financial consultant with Thrivent Financial for Lutherans in Thousand Oaks.

Winter and his team are working long hours, typically from 7 a.m. to 9 p.m., trying to talk with all clients to educate them about the credit crisis and how it has affected their portfolios. His office has made 200 to 250 calls in the past week, asking clients whether they want to change their portfolio investment temperament to be more or less aggressive.

The big question among his clients is whether they are allocated properly to handle this volatility. The majority are long-term oriented and riding this out. The first step is ensuring they have enough cash reserves to provide for their needs for the next three to five years. If they do not, then changes are made to meet specific needs.

Many financial planners say they have kept clients from panicking by providing them updates on what's happening in the volatile market and how they're positioned in it.

Brian Padrick, a financial adviser with Edward Jones in Newbury Park, sounded a little raspy Thursday. While Padrick said he's not seeing a lot of panic among long-term clients, new investors who didn't have a plan before the market crisis are definitely stressed.

Many people want to know if they should pull their money out of the stock market, and he admits that a small percentage of clients have. Some have confessed to him that they "can't take the pain."

"I think it's a matter of having a hard time understanding why we're going through this," he said. People want to know why the bailout package isn't working quickly and why stocks are plunging. Investors should consider the quality of their portfolios, goals and risk tolerance, he said.

Watching it go down'

Investors with the most riding on current market conditions are those recently retired or about to retire.

Even though Jean Nussman feels like she's properly diversified, the market's turbulence is still nerve-racking for the retired nurse who lives in Saticoy. The 78-year-old says she's lost $200 in Pfizer stock this year.

"I just sit here and keep watching it go down pennies every hour," she said.

But she has faith the market eventually will turn around, so she's leaving her money right where it is, even if that means more potential losses.

With stocks, annuities, an IRA, a pension and Social Security, "I manage pretty well," Nussman said.

Some people still have pensions, which puts them in a good position to have a "reasonably decent lifestyle" even if their entire 401(k) tanks, said Barry Bolker, a certified financial planner in Camarillo.

Hit with a double whammy

But those who don't have pensions can ride out this rough time as long as they take a long-term view. Things may be bad for the next few years, but they will improve, he said.

That's why it's important for retirees to have cash to spend during the next three to five years but hold on to their stocks so they don't lose out to inflation in the long run.

"I'm advising people not to make drastic moves, not to get completely out of stocks," Bolker said.

Historically, stocks have been considered a good investment. Standard & Poor's reports its 500 index of stocks had an annualized return of 3.5 percent for the past seven years.

Other studies have suggested higher returns from investing in large companies.

Those living on their retirement savings now are hit with a double whammy because the value of their accounts is dwindling while they're also taking money out, said James Lorenzen, a certified financial planner at the Independent Financial Group in Thousand Oaks.

Lorenzen said investments in stocks and mutual funds generally comprise 40 percent to 60 percent of his older, wealthier clients' portfolios, while the rest is in bonds and cash. They usually live conservatively and don't need the money to live on, in which case the time horizon is not next week, but 10 to 15 years out.

<p>The biggest mistake people make is retiring and then asking a financial planner how to make their money last, said Pete Kozak, a certified financial planner in Camarillo.

"That's a really hard job for somebody," he said. Instead, people should be seeking a financial planner five or 10 years before they retire, if not before, to start planning how they will live in retirement.

Not bad for everyone

Kozak said people need to be flexible about reassessing. He mentioned one client who retired but hadn't saved enough unless the market remained buoyant for the next 15 years.

Kozak told her she was better off returning to work rather than drawing out of her retirement account while the market was down.

"This is absolutely the worst time to be selling any equities," he said.

Kozak started receiving a lot of calls from new clients when the markets began plunging. People are seeing the need for a good plan that can be tweaked as market conditions change.

"This is where planning really shows its value," he said.

Lorenzen emphasized that the market's mayhem is not bad for everyone. Young people, he said, are in an enviable position if they have retirement plans in which they contribute monthly. The best thing that could happen to a young worker is if the market stays low for 15 years and then shoots up, he said.

"I think they're lucky," he said. "I wish this had happened to me when I was in my 20s or 30s."

At lower prices, investors can get much more for their money. Lorenzen advises young people to save their money, don't buy on credit and max out their contributions for their retirement accounts. If they do this, "one day when they're old and gray, they'll wake up rich probably."

Live within their means'

He added that young people have a tendency to watch TV trading shows, buy trading software and go on trading Web sites.

"Those things don't work," Lorenzen said. "I know that if I try to trade, I'm going to inevitably lose, because you almost always lose. Even professional traders on Wall Street have a tough time doing it."

Bolker said the coming years will demand that young investors adopt an attitude similar to their grandparents' generation in which people save to buy things and build good credit records with a low level of debt.

"People are going to need to look closely at their lifestyle and start to live within their means," he said.