Market Correction Shows Middle-market Need for Advisors

The stock market has taken investors on a crazy ride recently, most notably with the markets falling off sharply yesterday before rebounding somewhat today. What tomorrow will bring is nearly impossible to predict.
Market volatility is nothing new. Corrections have happened before and they will happen again. When it comes to those investing for their retirement, experts agree that the biggest danger is that people will make hasty or even panicked decisions.
This is where the services of a professional advisor can be particularly valuable.
“It seems like every time there’s a significant drop in the market, we get calls from concerned clients,” says NAIFA President Juli McNeely. “We remind them that we have a plan in place designed to protect them and ensure their financial security over the long haul. We can talk them out of making rash decisions that could derail their long-term plans.”
History shows that those who panic in the face of a market slide tend to fare poorly. Most recently, investors who abandoned the market during the correction of late 2008-2009 are likely much worse off than those who stayed in. Since the low point in 2009, the market has gained 220 percent, which has more than made up for the initial drop.
According to research by Morningstar, self-directed investors are notoriously bad at knowing when to buy and sell their investments. They often feel a strong inclination to sell when the market is declining and buy when stocks are going up. That’s the precise opposite of the “buy low, sell high” dictum.
“Less experienced investors and those in the middle market are particularly vulnerable,” McNeely said. “That’s one reason why I’m so concerned about the Department of Labor’s fiduciary proposal that could limit investment advice to these clients. Without an advisor’s help, they may not have a plan in place to help them ride out a market correction. And on a day like yesterday, if they need reassurance, they would have nowhere to turn.”
  • Posted August 25, 2015 IN

Blog post currently doesn't have any comments.