Financial Planners, Brokers Tell Clients To Wait (And Buy)

by Erik Ahlberg

Dow Jones News Service, 12/21/2000

(Copyright © 2000, Dow Jones & Company, Inc.)

CHICAGO -(Dow Jones)- If you liked the stock at $50, then you’ll love it at $25. That’s the theme coming from many financial planners and stock brokers this week as equities markets continue their dramatic slide and office switchboards light up with calls from dizzie investors.

From corporate earnings warnings to moves by the Federal Open Market Committee, glaring headlines coupled with sinking portfolios have investors asking how to best manage their stocks.

The advice: watch, wait and buy if you can. “I think that people will look back on these troubles and wish they were smart enough to put more money into the market,” said Bruce Biedar, an Edward Jones & Co. investment representative in Mount Prospect, Ill. But Biedar admits that “there’s still a lot of hand holding to do,” as investors relearn how to evaluate a company’s worth and its long-term potential.

Most callers are new investors who haven’t weathered markets during tough times, Biedar said. People didn’t want to miss out on the big gains of the 1990s and made some risky bets, and are now paying the price, he said. Biedar preaches a message of diversification and constant risk reevaluation. “You can’t control what happens in the short term, but you can control quality in your portfolio and overall balance,” he said.

Joyce Franklin, a CPA and certified financial planner at Franklin Financial Advisors in San Francisco, said she has been advising clients to stay invested and maintain broad exposure to the major asset classes, including small and large caps, international stocks and real estate investment trusts. Franklin also has been advising clients on tax-loss selling, where a client can use a loss from an investment to offset capital gains and can use $3,000 of those losses to offset income, she said.

Watch and wait is also the theme from Robert W. Lancaster Jr., a senior branch manager for Charles Schwab Corp. in downtown Philadelphia. Lancaster said the firm is sticking with its advice to keep a diversified portfolio that’s consistent with the investor’s goals and taste for risk.

With many clients asking them to review their portfolios at year-end, “we’re making sure that we understand their goals correctly” and how much risk they wish to take on, Lancaster said.

Though he said most investors are diversified, “if they are over-concentrated in tech we’re definitely telling them this is another opportunity to rebalance your portfolio and make sure you are diversified.”

“Advice hasn’t changed much now from when tech stocks were zooming wildly,” Lancaster added.

In the high-tech-dominated Puget Sound area, Kurt Owen, vice president of investment for the US Bancorp Piper Jaffray office in Seattle, said many investors seem paralyzed by the about-face in the market in recent days, neither buying nor selling. “They don’t know what to do, so they don’t do anything,” he said.

In March, when high-tech markets first sounded a warning to investors, Owen said he readjusted his own portfolio – and those of clients who would listen – to increase the percentage of value stocks. But it was a frustrating experience. “I was asking people to sell some of their Cisco, Intel and Microsoft and people wouldn’t do it,” Owen said. “Some people did, but they either didn’t sell enough or not soon enough.” Owen said that with the sharp declines, some investors are now thinking they won’t sell because their stocks are down 20% or 30% and the markets can’t go lower, contributing to the investor paralysis. “I couldn’t get them out at the top, and now I can’t get them out on the way down,” Owen said. “They probably will get out at the bottom.”

He added that the “buy on the dip” philosophy of the past five years has given investors no more money to invest on the latest dips. “Now they don’t know what to do,” he said. “Everything they thought was right has gone upside down on them.”

James O. Davis, a certified financial planner at Financial Advisory Group in San Francisco, also said he is advising clients to stay the course.

“The reality is if you could have seen (the Nasdaq’s downturn) coming, you would have been wise to get out of the way,” he said. “No one saw it coming, and it’s foolish to get out of positions at these prices.”

Davis said he always stresses to clients that markets are volatile and he believes he prepares them well. In many cases, clients have been able to take advantage of lower prices to add to positions, typically in growth funds, he said. The Nasdaq may have hit a near-term bottom for the year on Wednesday, but “we don’t know when this thing is going to settle down,” said Paul Dickey, an investment executive at the

Denver office of U.S. Bancorp Piper Jaffray. The rise above 5000 in March was a big bubble, Dickey said, and “we don’t know when it’s going to stop deflating.” For long-term investors the slide represents a great opportunity, and Dickey recommends they broaden their approach beyond individual stocks by investing in unit investment trusts, which can be chosen to target specific sectors. Dickey also recommends investors have cash holdings of at least 20%, and up to 40% for aggressive investors, in order to pick up undervalued shares.

By Erik Ahlberg, Dow Jones Newswires; 312-750-4141;

(Dow Jones Newswires reporters Paula Stepankowsky in Portland, Ore., Jolyn Okimoto in Palo Alto, Calif., Frank Byrt in Boston, Dinah Brin in Philadelphia and Tom Locke in Denver contributed to this story.)

Copyright © 2000 Dow Jones & Company, Inc. All Rights Reserved.

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