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Staying the Course

By Joel Dresang

Investors riled by the recent stock market selloffs need to be calm and reasoned, Bob Landaas advises.

Bob Landaas talked about the latest financial and economic developments in a call-in program on Wisconsin Public Radio, Tuesday, Aug. 9. To listen, please click here and then press the middle button under Kathleen Dunn’s name.

“It’s important that people not panic and that they resist the temptation to sell into a down market,” the founder and president of Landaas & Company says. “The whole reason why we build balanced portfolios in the first place is that clients who need income from their accounts have years and years and years of income just sitting in their bonds without worrying about their stocks.”

But even investors with only partial exposure to the stock market can get antsy and let emotions overcome logic, Bob acknowledges.

“It’s understandable that people would be concerned,” Bob says. “It’s obvious that the markets have become volatile because of the concerns about the debt ceiling, the synchronized global slowdown, problems with debt in Europe and increased anxiety among investors.”

Academic research suggests that investors allowed to follow the impulse to sell stocks out of fear tend to have lower-performing portfolios in the long run.

At the weekly Monday morning meeting with Landaas & Company advisors and associates, Bob noted that in his 36 years in practice, Wall Street has survived eight major selloffs. He expressed confidence it would survive a ninth.

“Fundamentally, I don’t think things changed all that dramatically,” Bob said. “I think unfortunately the debt ceiling debate comes at a time when it appears obvious that we’ve got this synchronized global slowdown and investors are rightfully concerned.”

Two years into recovering from the biggest recession since the Great Depression, more economists are speculating on the chance that the economy may be heading back into another slump. At the same time, corporate earnings – benefiting from global growth – are nearing record highs.

Brian Kilb, executive vice president and chief operating officer of Landaas & Company, is advising investors to consider the earnings over the economy.

“The economy certainly has shown signs of slowing, but until we feel it in earnings, until interest rates start going up, I’m going to continue to feel optimistic about things,” Brian says.

The strength of corporate earnings should help stabilize stock markets eventually and send them back up, Bob says, suggesting possible opportunities for investors willing to take on more risk now. But for those already properly invested in well-balanced portfolios, this is a time to be calm and stay put, Bob says.

“It’s important to have investors focus on investment fundamentals – the importance of building balanced portfolios, the importance of riding out the storm, the benefit to long-term investors of staying invested,” Bob says. “As quickly as markets go down, they go up.”

At the same time, Bob says, investors who feel uneasy should contact their investment advisors for whatever reassurance they need to weather the turbulence.

Joel Dresang is vice president of communications at Landaas & Company.

initially posted Aug. 8, 2011

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