Experts say don't panic at stocks' wild ride, but be cautious

Mount Prospect certified financial planner James Platania says he's seen a typical reaction from investors in his 26 years in the business.

They hate losing money. But what they really, really don't like is having exited the stock market not long before it starts rising again.

"I'm telling you," Platania said Tuesday, "for most people they can live with (some losses)."

Platania and other experts said there isn't a one-size-fits-all strategy, but they urged caution one day after the Dow Jones industrial average tumbled 504 points, the worst drop since the Sept. 11, 2001, terrorist attacks.

Research supports the experts' advice to remain in the stock market because no one knows where it's headed or how long the trip will take.

Following the 1929 crash, investors needed 16 years to get even if they invested at the market high. After the 1987 bear market, it took 23 months to get back, according to research from the American Funds mutual fund firm.

But investors recouped their losses in just eight months after a major decline in 1990.

Terrance Gaertner, principal of Chicago Financial Advisors in Park Ridge, said investors need to remind themselves there always will be market declines for varying reasons and that stocks rebound.

"You really have to be there when the market is rising," Gaertner said.

Dr. Nancy Molitor of Wilmette, a clinical psychologist who specializes in coping with economic issues, said investors can't have a fight-or-flight reflex when the market plunges because it leads to poor decision-making.

Molitor said anxious investors usually are comforted by information and should seek it through a call to a financial planner or from news stories.

"People tend to do one of two things," Molitor said. "They either overreact or underreact."

As for what to do now, the financial experts offered some general tips.

Investors under 30

Monday's Wall Street woes created a golden opportunity for younger investors to buy low, said certified financial planner Alan S. DeMar.

DeMar, whose Itasca firm specializes in investment advice and tax and retirement planning, said the younger generation has at least a 30-year horizon for stock investments. They just need to keep allocating the same amount of their paychecks into 401(k) accounts, he said.

"It's time to take the money out of the couch and start buying," Gaertner said.

Platania said younger investors aren't as affected by steep drops in the market because their accounts probably aren't that fat.

"If you're in the 401(k) for two or three years, you should be happy the market is going down," Platania said.

Approaching retirement

If you're close to calling it a career and your 401(k) account suddenly looks dismal, now isn't the time to make changes, said Gaertner.

You might have a life expectancy of another 20 years at age 60. Gaertner said that means your financial thinking still should be long term, not just focused on retirement a few years away.

"People tend to shorten up their horizons near their retirement," Gaertner said.

DeMar said investors could look at altering their investment mix after the market settles a bit.

Marilyn Pasiecznyk of Grayslake said Monday's events on Wall Street were "scary," but she remains a believer in the stock market and her diversified retirement portfolio.

Pasiecznyk, one of 15 members in an investment club, said none of the members were calling for the sale of any of the individual stocks the group owns.

"Over a 10-year period, you're usually making money," she said.

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