Keeping Cool In a Down Stock Market; Experts Still Advise Long-Term Strategy
The 61-year-old government attorney wants to have $1 million by the time he retires in a few years and the only way he figures he can get there on his $60,000 annual salary is to buy stocks. Lots of them. Sometimes even using borrowed money.</br></br>That strategy worked well for Frandsen until these past few weeks. The Dow Jones industrial average of blue-chip stocks has fallen 9.8 percent in one month and, like millions of Americans who rode the equity boom up, Frandsen is facing what may become the first substantial decline in stock prices since 1990.</br></br>"If the whole market heads south, I'll be wiped out," Frandsen said flatly Friday after the Dow dropped nearly 150 points, erasing its gain for the year. But the Gaithersburg man is sitting tight, even though all of his $260,000-plus retirement portfolio is invested in stocks.</br></br>In the midst of such turbulence, it's not easy to heed the standard advice of financial planners: Stay calm and think long-term like Frandsen, but also ignore the daily stock tables and build a diversified portfolio that includes stocks as well as bonds and cash. Several planners said, however, that they have been reminding clients to do just that during this downturn.</br></br>"Investors need to implement a well-designed, prudent, well-diversified portfolio," said H. Lynn Hopewell, a financial planner at Monitor Group Inc. in Fairfax. "That way, when the market boogies up and down, it doesn't matter."