America’s war with Iraq has resulted in an even worse economy, initially rocked
by Sept. 11 and threats of a recession. The outcome has left some investors
worried about what to do next.
Dan Corrigan, founder and president of 13-year-old Corrigan Financial, a financial
services firm in Providence and Middletown, said the last three years have been
tough on investors who have money tied up in stocks, mutual funds and other
assets.
“These are definitely difficult times for investors,” said Corrigan, a certified
financial planner and specialist. “But the volatility of the market in effect
allows people to rebalance.”
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Donald Sowa, president of the Sowa Financial Group in East Providence and
past president of the Rhode Island chapter of the Financial Planning Association,
said a lot of investments have to do with the way people feel, rather than what’s
going on in the market.
In 2000, people were thinking about early retirement and a profitable portfolio,
today, they are more conservative and taking fewer risks.
Investors are encouraged to take moderate risks by spreading investment dollars
among multiple assets and asset classes including money markets, stocks and
bonds.
“Take the time to do it right,” Corrigan said. “You need to work within a
strategic process and not within incremental or tactical investment decisions.”
Three years ago people were looking at performance levels that were too high
to maintain long-term, according to Corrigan. Now, he says, it’s the exact opposite.
Corrigan has some advice for worried investors and it’s all about choosing
and sticking to the best “financial plan” or “framework” based on individual
investor needs and not responding to the roller-coaster market by making quick,
snap decisions or reacting to short-term market drops or gains.
“But more than ever, diversification of broad asset classes and adherence
to policy (is important),” he said. “No one would ever build a home without
a blue print and you should never invest without a blueprint.”
Sowa agrees, adding that clients are now reevaluating their portfolios.
“What had happened is because of the volatility in the market. We have naturally
begun moving certain clients into a more defensive position, such as fixed income
investment including corporate and government bonds,” Sowa said.
Angela Thomson, a CFP with Coastal Financial Planning in Lincoln and president-elect
of the Rhode Island chapter of the Financial Planning Association, said she
was proactive with her clients once she saw a war in the near future.
“When I saw the impending war coming I sent a letter to all of my clients
telling them that their portfolios are conservative investments…and that if
they are uncomfortable they should feel free to call me to voice concerns,”
she said. “A lot of it is I have a good line of communication with clients.
They also know what is going on, and there are no surprises.”
Thomson also has exit strategies in place when she sees a downturn in the
economy.
Other planners, including Teresa Mandella, a CFP with American Express Financial
Advisors Inc. in Stockton, Calif., reports that investors should be looking
for buying opportunities by looking for stocks that are “on sale.”
But, Sowa says, while existing investors are waiting it out, new investors
are not willing to put their feet in the water just yet.
“Investors are saying to themselves, ‘Is there any compelling argument to
put money into the market right now’ and the answer is there aren’t any. Noise
doesn’t make them feel good. I think they are sitting on it or going into a
more conservative holding right now,” said Sowa.
While no one is holding the crystal ball to predict whether it will be a successful
war and when it will be over, Sowa said his group will have a better grasp on
what’s going on in June and July when they have two quarters already behind
them to look at.
“If this war ultimately goes well, and if our allies step in to assist to
rebuild a positive circumstance for Iraqi people, the president ends up with
a lot of political capital…and that will help stimulate investment in the market,”
Sowa said.
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