Is It Panic If My Broker Tells Me to Get Out?

[FinanceDude]

I would fire this guy. Tell him to delete your phone number from his computer. Nothing wrong with Fidelity as a company, but if this guy knew anything, he'd be the one FIREd instead of out there messing up other people's finances.Harley

It's always easy to be an armchair quarterback........

 

[unclemick]

The Norwegian widow is getting fat - cause she doesn't have self employment or walk to the mailbox anymore with auto deduct.

Not as much as pssst Wellesley but VG Target 2015 SEC yield north of 3% gets the job done - ya gotta love plan B.

It still hurts when I look although those Vanguard computers are just merrily humming away rebalancing via happy electrons and stuff. .

And the Boglehead's linked an interview with Mr B(who was on vacation) who told everyone to buck up and stay the course - provided you were happy with your asset allocation.

If your nerves have you upchucking in the bathroom - asset allocation 'might' be adjusted a tad.

heh heh heh - he didn't say that - I did, although I prefer not looking and staying the course.

 

[OAG]

No crystal ball involved... just living right before God...
and using the good sense God gave me... and sometimes
a little nudging from Him was necessary!

Helena: No need to defend your "all cash", "no debt" status. I suspect there are more "all cash", "no debt" members on this board. By "all cash" I mean CD's for the most part.

 

[Bestwifeever]

When we ERd a couple of years ago, we swore we wouldn't panic with a down/bear market. We intended to just leave our money in for the long-term (50% in muni bonds, 50% in mutual funds)....

My husband made me call our Fidelity broker because he was tired of listening to my doom and gloom.... The broker thinks we need to decrease our mutual fundings at least 15% and get rid of the index funds, which are so heavily in the financial sector.... The broker said that everything we have been doing (and just discussed with him less than six months ago) is invalid (like allocating for growth, balance, diversity, looking at midcaps vs. small and large): "the paradigm has completely changed."

Fidelity is sponsoring a free seminar to advise investors and we will be discussing this further with the broker next week. I'm almost positive that we will reduce our positions and will focus on preserving our assets rather than growing them. So is this panic---or just following my broker's advice?

Can I ask how your investments have fared year to date? To me it sounds like your 50/50 is pretty conservative so I hope you haven't lost too much ground overall.

I have been reading a Nolo book, Get a Life by Ralph Warner, and he makes this side comment under the heading "When the Market Drops, So Do Index Funds": "At least in theory, actively management mutual funds that concentrate on the stocks of conservatively run companies may do better during market downturns [my addition: than index funds], since their managers are supposed to make investment decisions based on both their downside and upside potention (management funds may also hold cash reerves-something index funds don't do)."

So I wonder if this is why your broker is hearing the worry in your voice and thinking it might be good for your peace of mind to move out of index funds?

(I personally don't have a dog in this hunt but I am a good worrier so thanks for giving me something more to deposit in the worry bank . I am so grateful that you posted this as DH and I will likely be needing to make some AA decisions in the next 3 months if he takes a buyout and your post is very thoughtprovoking.)

 

[newporttony]

Hummm, interesting... Our FA called yesterday and left a message on our answering machine. After three months of silence he would like us to call him back "ASAP" all of the sudden. I wonder what he wants (could it have anything to do with the fact that the porfolio he manages on our behalf lost 15% since last year?). I'll know more in one hour...

Wow--sounds like panic has set in (incidentally, the VIX is approaching 30 which has signaled the beginning of previous relief rallies). Please let us know his thoughts.

I talked with a Merrill broker a few weeks ago who told me--after the obligatory "my clients have been in oil and commodities since the beginning of the crisis"--that long-term buy and hold investors are "dinosaurs". He said that this is a stock picker's market, a market you rent and not own, etc and that, more than ever you need the advise of an investment professional.

 

[CitricAcid]

I talked with a Merrill broker a few weeks ago who told me--after the obligatory "my clients have been in oil and commodities since the beginning of the crisis"--that long-term buy and hold investors are "dinosaurs". He said that this is a stock picker's market, a market you rent and not own, etc and that, more than ever you need the advise of an investment professional.

He must be right! He has nothing to gain from you spending all your money chasing stocks at Merrill, right?

 

[Milton]

The broker said that everything we have been doing (and just discussed with him less than six months ago) is invalid (like allocating for growth, balance, diversity, looking at midcaps vs. small and large): "the paradigm has completely changed."

See generally The Motley Fool UK: Market Comment 8/01/2003.

 

[unclemick]

"This time it's different."

Sure is - the dang clock won't stop - after 15 yrs of ER - I'm gonna be a regular 65 year old phart by summer's end.

Gotta buck up - party harder and longer - not getting any younger - and the rumor is - you can't take it with you!



heh heh heh -

 

[2B]

Panic, Panic, Panic

I love it. Six weeks ago I started all this by posting that I was up slightly for the year. This whole "collapse" started in late May. I'm down about 8% for the year with my 40 bond/60 equity mix. My cash represents about 7 years of living expenses at my "midpoint life style" case. I'm not happy about it but I can't see any reason to panic but many are.

Is there any NEW information out there about anything? Pundits continue to wring their hands. Israel and the US still don't like Iran and visa versa. That means oil could go higher (if not lower). Analysts continue to downgrade financials due to the credit crisis but there has just been noise for at least 3 months.

In the midst of all this, company earnings continue to look pretty good against earlier projections. If you're not in a few isolated locations, housing prices are holding up pretty well. Unemployment is relatively low at 5%. The US govt ran a budget surplus last month. The trade deficit is down and exports are rising. People are standing in line to spend money on video games and fancy cell phones so the consumer can't be tapped out.

Please panic. Do it for the good of the country.

 

[audreyh1]

I agree with all of you that this one broker is not all-knowing. If he was just It seems like y'all feel it is appropriate to hold....but isn't it also appropriate to re-evaluate your holdings once or twice a year? And to make changes? I understand that the US economy is always experiencing outside forces and challenges.....and always has been. But is it possible that the changes and conditions that are currently impacting the market are more significant, pervasive, and longer-lasting than any we have previously seen...and that US stocks are unlikely to recover, let alone increase?

It is appropriate to evaluate your holdings once or twice a year to see if your portfolio needs rebalancing, NOT to change your asset allocation based on market conditions.

It certainly might take another year or two for market conditions to improve. But your portfolio is invested for DECADES. As long as you have a cushion for the next 2 or 3 years (and you certainly have enough bonds), this is an investing opportunity, not a time to run for the hills.

Full disclosure - my portfolio rebalance flag just barely triggered a couple of days ago. I am tempted to wait a month or so simply because I don't think this bear market is done yet (it's so hard not to time) - I would expect close to another 10% down in equities, IMO. I see this as a buying opportunity even if it takes a couple of years to see the upside.

Audrey

 

[newporttony]

I love it. Six weeks ago I started all this by posting that I was up slightly for the year. This whole "collapse" started in late May. I'm down about 8% for the year with my 40 bond/60 equity mix. My cash represents about 7 years of living expenses at my "midpoint life style" case. I'm not happy about it but I can't see any reason to panic but many are.

Is there any NEW information out there about anything? Pundits continue to wring their hands. Israel and the US still don't like Iran and visa versa. That means oil could go higher (if not lower). Analysts continue to downgrade financials due to the credit crisis but there has just been noise for at least 3 months.

In the midst of all this, company earnings continue to look pretty good against earlier projections. If you're not in a few isolated locations, housing prices are holding up pretty well. Unemployment is relatively low at 5%. The US govt ran a budget surplus last month. The trade deficit is down and exports are rising. People are standing in line to spend money on video games and fancy cell phones so the consumer can't be tapped out.

Please panic. Do it for the good of the country.

I'm with you--I frankly don't see the armageddon scenario playing out. Unemployment claims are running below that of the 2001 recession, forward PE ratios are reasonable, and companies are hitting their (slightly reduced) quarterly earnings forecasts. This environment seems to be the result fear of the unknown.

I think I am very much in the minority in thinking that the market can snap back relatively quickly and that we could be seeing all-time nominal highs in 2009/2010. That would make this a great time to be buying equities. But, what do I know.

 

[rs0460a]

That would make this a great time to be buying equities. But, what do I know.

I'd say (based upon my personal investment history) that you're pertty smart ....

But hey, what do I know?

- Ron

 

[newporttony]

I'd say (based upon my personal investment history) that you're pertty smart ....

But hey, what do I know?

- Ron

I don't know--all my colleagues tell me I am nuts for continuing to invest in this environment. Of course they were wildly bullish when the market was hitting new highs, so I see there extreme bearishness as a bullish sign.

 

[rs0460a]

I don't know--all my colleagues tell me I am nuts for continuing to invest in this environment.

Before I retired, I constantly heard from the "financial experts" I wor*ed with of what/how I should invest my money.

Well, guess what. They are still wor*ing. I retired early last year (age 59 - not that early, but certainly earlier than my "estimate" of age 62 to 66).

It's your money (and your life). If you make a mistake, your "colleagues" will not help you out. If you don't err (and things work out well), they won't admit your "success".

So it all comes down to what you think - what you want to do. In fact, I don't expect you to follow my "advice" (but hey, give it some consideration - I took the time to respond! )...

- Ron

 

[newporttony]

Before I retired, I constantly heard from the "financial experts" I wor*ed with of what/how I should invest my money.

Well, guess what. They are still wor*ing. I retired early last year (age 59 - not that early, but certainly earlier than my "estimate" of age 62 to 66).

It's your money (and your life). If you make a mistake, your "colleagues" will not help you out. If you don't err (and things work out well), they won't admit your "success".

So it all comes down to what you think - what you want to do. In fact, I don't expect you to follow my "advice" (but hey, give it some consideration - I took the time to respond! )...

- Ron

Ron,
Congratulations on your success and thanks for the advice. I have learned over the years to tune the naysayers and doomsdayers out, but there sure are a lot of them.

Deep down, I know you need to take risk to be rewarded and also that there are no guarantees. I know also that you need to earn your equity premium by having the crap scared out of you occassionally. Without the fear, equityholders would earn t-bill returns.

 

[Dawg52]

What you guys bitching about? GE, KO, NM, all finished up today. STON finished flat. Let the dividends come to papa! Life is good.

 

[tangomonster]

Can I ask how your investments have fared year to date? To me it sounds like your 50/50 is pretty conservative so I hope you haven't lost too much ground overall.

Bestwife, we have lost ten percent out of our combined portfolio.

And now that I've written that, I'm able to put it a bit more in perspective. ten per cent is not the end of the world. I can handle ten percent.

It's more the worry of ten percent more next week (or next trading day! ) and then ten percent the next and then ten percent the next.....and not recouping for several years....

All of you have given me some food for thought and I will definitely be less vulnerable to my broker's fast talk when I meet with him on Wednesday.....

 

[Westernskies]

I was raised with the notion that that buy high and sell low was not the way to go.. Remember, the broker(age) gets paid every time you trade...

FWIW, I would change reps, not necessarily your portfolio. Telling you to hide under the bed for two years isn't the answer.

 

[NotSoonEnough]

This "down market" is a tremendous opportunity. Sure, things could go terribly wrong next week, but I will again buy more. Each big down-tick causes me to buy, I can't help it, I know that one day soon greed will return. When greed returns (with a vengeance) I will sell equities and buy bonds, buy low and sell high, and re-balance as necessary. You must be contrary, especially in a down market, or you will miss that huge up-draft.

Yep, it *is* different this time, there is a greater opportunity than the last time...don't miss it.

 

[W2R]

This "down market" is a tremendous opportunity. Sure, things could go terribly wrong next week, but I will again buy more.

What a great "blue light special"!!!

I just bought more Wellesley (VWIAX), Total Stock Market Index (VTSAX), and FTSE All-World Ex-US (VFWIX).

I bought with funds from my VMMXX (Prime Money Market) account at 8:05 Eastern Time. I don't know if I got today's closing rate, though, since I bought at 8:05 PM Eastern Time. That might be too late. (?)

But then, the market might plunge more on Monday so it could be a good day for buying, too.

 

[copyright1997reloaded]

I have zero debt... nada... even my real estate is paid off.
I have 100% company paid health and dental and a glorified
hobby [self employment from home] that brings in enough
income to cover everyday expenses. I am blessed

Even if you are ALL cash, you are not 100% protected:
Scenario - financial system gets much worse, fed balance sheet used up, forced to make good on assets to keep system alive. Results -> possible extreme ramp up in inflation, devaluation of US currency.
Scenario - financial system gets much worse, fed lets institutions fail. Result -> breaking of the buck on various "safe" money market funds, deflation as counter party causes an un-leveraging of assets.
Scenario - ...

My point isn't to scare, just to say whatever you do has risks, including staying out of the market. Me? I try to sleep ok at night by being conservative with my allocations, including over 20% in cash and easily converted fixed instruments (CD's, iBonds, relatively short term Treasury Notes), and another healthy chunk in longer term fixed instruments (with a big part of that inflation adjusted). The rest - in equities.

 

[Rambler]

I was going to buy more equities this past monday...but I got greedy and decided to hold off...good thing, the market is lower and so are my target stocks....gotta love those blue light specials, gonna target monday's opening.

...and yep Dawg, let those dividends come to papa!

R

 

[newporttony]

What a great "blue light special"!!!

I just bought more Wellesley (VWIAX), Total Stock Market Index (VTSAX), and FTSE All-World Ex-US (VFWIX).

I bought with funds from my VMMXX (Prime Money Market) account at 8:05 Eastern Time. I don't know if I got today's closing rate, though, since I bought at 8:05 PM Eastern Time. That might be too late. (?)

But then, the market might plunge more on Monday so it could be a good day for buying, too.

Good for you; I've been buying also. In fact, the more outrageous the predictions, the more I know I should buy. I made the mistake of tuning into CNBC this afternoon and was treated to predictions of stagflation, deflation, and US government bonds losing their triple-A ratings.

I'll probably be a buyer again Monday.

 

[Helena]

My point isn't to scare, just to say whatever you do has risks...

As you say, nothing human is secure.

Fear only God - God is in control.

 

[Lsbcal]

Well we are on page 4 of this thread so probably nobody cares what I say, so I'll just talk to myself. I keep going back to the FIRECalc spreadsheet I produced for our situation. It shows some years that were MANY TIMES worse then the current situation (we're down about 8% with spending and portfolio losses this year). We are not yet in a great depression, a World War, or a great inflation.

The great thing about the FIRECalc spreadsheet is it gives you a sense of perspective. Each cell is ONE FULL YEAR OF ANXIETY. If this is a crisis it will probably take many years to play out -- several cells of data. There will be plenty of time to make portfolio adjustments along the way. There is absolutely no way to time this thing in the short term although if you try you may be lucky. The portfolio changes I've made this year have probably hurt more then helped. For instance, I had planned to sell my only stock (Johnson & Johnson bought in 1994) and diversify more. I was going to sell 1/4 every half year starting July 1. So JNJ has decided to start doing better then the market and luckily (so far) I held off selling it. I sold my 10yr TIPS in late January and they kept going up and I regretted it. Today they are below my sell price, but what I bought to replace them probably didn't do better, oh well.