Investors advised to roll with market gyrations

Posted August 8, 2011 5:30 p.m. EDT
Updated August 8, 2011 6:35 p.m. EDT

— With the Dow Jones Industrial Average declining by almost 1,100 points since last Thursday, investment advisers were urging their clients Monday not to panic.

On the first trading day after credit-rating agency Standard & Poor's dropped the rating on U.S. debt from AAA to AA+, the Dow gave up 634 points. That followed a 513-point drop on Thursday, which at the time was the largest single-day decline since late 2008.

The Dow has lost 11 percent in the last week – it is now below 11,000 for the first time since last November – and worries over the sluggish U.S. and European economies and their heavy debt loads stoke investor fears of further market declines.

Yet, Gerald Townsend, president of Townsend Asset Management Corp., a Raleigh firm that handles about $100 million in investments, preaches patience to his clients.

"Control your own emotions. React, but don't overreact," Townsend said. "Never panic in the middle of a downdraft like this."

Investor Kevin Pennington said he's trying to stay on the market roller-coaster.

"The news has been so depressing lately. The more I look at it, it's just going to make me feel more frustrated, more angry," Pennington said. "As long as we look at it like a long-term investment, I think we'll be OK."

Townsend said people need to react based on their individual short- and long-term needs, noting that he considers someone who is 10 to 15 years from retirement a "young investor."

"If you're a long-term investor without a great need for cash out of your accounts for quite some time, you might look at this and say, 'You know, I didn't think that stocks were overpriced two weeks ago. ... I'm going shopping. I've got to find some bargains out there," he said.

Some jittery investors might want to shift their portfolios around in an unstable market, Townsend said, and allocate fewer resources to stocks.

"If you were 100 percent in stocks and you're feeling a bit more conservative, maybe you pare it back to 80 (percent)," he said. "If you were 60 percent in stocks, maybe you pare it back to 40 or 50 (percent)."