Don't Sell! Advice From the Wall Street Pros
Financial planners advise investors to wait out panics in the markets.
Jan. 22, 2008 — -- With U.S. and world markets spiraling downward, upward and everywhere in between, nervous investors might be tempted to unload their plummeting holdings ASAP.
A word to the wise: don't.
Several financial planners who spoke with ABC News today said that investors should wait before doing anything drastic.
"Right now, people just want out and it's the worst time to be selling," said Katie B. Weigel, the founder and managing director of LongPoint Financial Planning in Concord, Mass.
"It's hard not to panic, but I would urge people not to panic and be selling into this panic," Weigel said. "I would wait it out if you can."
David McPherson, the founder of Four Ponds Financial Planning in Falmouth, Mass., and an ABC News columnist, had similar advice.
"Sell out of panic, and there's a good chance you will regret it later on. I know people who moved nearly all of their holdings into cash after the 9/11 attacks and then missed the later rebound and terrific gains of the past few years," he said.
Bruce Tucker said he was urging his clients to stick to their long-term plans.
"You can't be that concerned about what happens in one week or one month if your goal is five years out," said Tucker, a principal at Sterling Financial Planning in Sparta, N.J.
Weigel said she expects a brief rebound in the markets. Once that happens, she said, that would be the time to consider selling. Weigel singled out investments in emerging markets — markets in industrializing countries with large potential for growth such as Brazil, Russia, India and China, along with several other Asian countries.
"Most people right now are probably overweighted in emerging markets," she said. "The typical investor will not trim their profit. They'll say it's going up and we're just going to keep participating in the ride."
Weigel said that, during a rebound, investors should consider selling a portion — though not all — of their emerging markets holdings to remain true to their investing goals and maintain a more balanced portfolio.
And Tucker feels one investment that may be worth cashing in on right now are Treasury-Inflation Protected Securities (TIPS), bonds that provide investors protection against inflation.
TIPS have been performing well as of late, but once there's a market rally, they will likely go back down in value, he said.
He advises long-term investors, in particular, to use their newly freed cash to buy into low-cost equity. Tucker also said that "defensive sectors" — sectors that don't drop as dramatically as market indexes do — such as utilities and health care are worth a look.
"If you believe the stock market will be higher six months or a year from now, as long as you're patient. … There's a great opportunity to buy securities at a low price," he said.
"Right now the market is like a bargain bin," said Mellody Hobson, president of Ariel Capital Management and a "Good Morning America" financial contributor. "It's a great buying opportunity, stocks are getting cheap,"
But Weigel was more conservative.
"We don't think this is the time to be feeling like there's buying opportunities," she said. "I don't think we've seen the bottom."