Investment advisors say: Keep calm

Feb. 07--Local investors saving for retirement or other long-term goals should remain calm despite the dip that the stock market took on Monday and last week, two financial advisors said on Tuesday.

The Dow Jones Industrial Average rebounded on Tuesday yet remained below the all-time high it reached in late January. And while the market is below its recent peak, it remained more than 4,600 points higher than it was a year ago. The market Tuesday night was about where it was in late December.

"If you're retiring in 15, 20, 30 years, this market volatility is a very small blip in that picture," said financial advisor Kraig D. Osborne of Edward Jones Investments in Edenton.

The 1,175-point drop in the Dow on Monday was technically an all-time record in terms of points. But investors need to think in terms of percentage, not points, said advisor Darek W. Hunt of Aurora Strategic Advisors in Lumberton.

Expressed as a percentage, the market fell 4.6 percent on Monday. As a percentage, that is only the 100th-worst drop.

Osborne and Hunt said their clients have not panicked. Hunt said the worried calls he received came from other advisors and non-clients.

Osborne described the decline as a knee-jerk reaction to reports of rising interest rates and rising wages, which affect stock prices, he said.

Also, some investors have decided it's time to cash in their stocks to make some money, Osborne said, describing it as "pent-up selling demand."

"People are just taking profits now," he said.

Ordinary investors should see this situation as an opportunity to review their investments and make sure they are well balanced among among their stocks, bonds, 401(k) plans, mutual funds and other investments, said Hunt.

Hunt said some of his clients "nibbled" during the decline -- bought a small amount of stocks they had an interest in before the prices fell. They will buy more if the price falls further, he said.

Investors need to concentrate on the performance of the in vestments they own and not the overall market indexes such as the Dow and the Standard & Poor's 500, Hunt said.

Hunt and Osborne disagreed on the nature of drop on Monday.

Hunt thinks the market is heading for a correction -- a significant price drop after the market becomes overvalued.

Osborne said stock prices have been unusually stable with increases and few declines in recent years. Prices normally move up and down routinely, and Monday's drop appears to be a signal that the markets are returning to a normal amount of volatility.

In the long term, Osborne thinks the markets will continue grow.

"We think the broader bull market still has gas left in the tank," he said.

Automated electronic trading appears to be a factor in Monday's drop, said economics professor Petur Jonsson of Fayetteville State University. The computers at the various investment firms raced to beat each other to the best price, he said, and created a cascade of sales that drove down prices.

Despite the drop in the markets, the nation's underlying economy is strong, Jonsson said. "I think the future looks pretty good for the next few years," he said.

Staff writer Paul Woolverton can be reached at [email protected] and 910-486-3512.

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