As Big Banks Bomb, Will You and Your Family Be Put at Risk?

March 17, 2008— -- Willie Long's stock watching habit isn't helping his nerves.

"After hearing the breaking news this morning, I'm a little more jittery," the retired teacher said. "Any time you see stock go from $100 a share to $2 a share, you've got to worry about your money."

Long called a meeting with his financial planner.

"The biggest mistake people make is operating out of fear," said Long's investment advisor, Jesse B. Brown, who is also the author of a book "Pay Yourself First, a Guide to Financial Planning." "Your mother used to say, don't put all your eggs in one basket. That is extremely important at this time."

The fear is that investments in banks, once considered profitable and stable, are now leading the market's decline.

"These stocks, the large investment banks were largely considered the bluest of the blue chips. What it points to is that they themselves have balance sheets that are very vulnerable," said Peter Ziv, president of Ziv Investments.

Investors with savings or checking accounts at these troubled banks have little to worry about. No matter what, federal insurance guarantees their savings up to $100,000. Those with stock accounts with one of these banks also need not worry about their money. Their funds are in stocks — not tied to the bank.

The risk comes for those who own stock in investment banks such as Bear Stearns.

"Any security which is tied to these organizations which are in financial turmoil is at risk of nonpayment," Ziv said.

Many of us do have ownership in such stocks and may not even know it. Ten of the most widely held mutual funds have plunged nearly 12 percent over the last year — in part, dragged down by their investments in the faltering financial sector.

At Cherry Hills Investment Advisors in Colorado, the phone has been ringing all day.

Susie Johnston of Cherry Hills Investment Advisors said, "We do have to talk our clients down a lot of times. I just had a call about two hours ago — a client called and asked should he sell everything."

Johnston is urging her clients not to panic.