Calm down, and get a grip: That’s the advice from Lois Carrier, a Certified Financial Planner and president of Carrier & Maurice Investment Advisors.
On Monday morning, most of the world was fixated on what financial markets would do in the wake of the U.S. credit downgrade by Standard & Poor’s. The market did not disappoint, with the Dow Jones Industrial Average taking investors on a tumble down 634 points, or 5.55 percent, to close at 10,809.80 on Monday. The Standard & Poor’s 500 Index dropped 79.92 points, or 6.66 percent, to finish at 1,119.4 — the worst day since December 2008.
But Carrier says she always has the same words of wisdom for her clients, no matter the market’s whims.
“There of course is a lot of panic, but my advice is always the same,” she said. “The market will always go up and go down. But it will continue to go up even as it goes down.”
Carrier thinks much of the market’s activity was actually caused by the crisis in European markets, but it’s hard for people to look past what’s happening in their own country.
“The market is very reflective of human emotions, and most of us humans are upset so the market reacts to that,” she said. “The market is a composite of all investors, so when they freak out, the market freaks out.”
Long-term investors should keep their fingers off the mouse, Carrier said, and some should even look for the opportunity a down market can bring.
“People jump out of the market when it’s down and forget we’re supposed to buy low, sell high,” she said. “To a common sense investor, everything is on sale.”
In addition, she emphasized that diversified investors should be seeing an equal amount of ups and downs if they own a mix of asset classes.
“There are about 22 to 24 asset classes, and they move differently under different market circumstances,” she said. “If you are invested in all asset classes, you will always have something up in a down market. That makes you feel a whole lot better.”
For example, the large-growth company asset class might perform oppositely from the small-value companies, and the percentage of each asset class in an investor’s portfolio varies from person to person.
She urges investors to be careful with knee-jerk reactions and to try to see long-term.
“There’s a lot of good things that are not being reported,” Carrier said. “We’ll be back up.”