THE EQUITIES MARKETS- WELCOME TO THE ULTIMATE CONEY ISLAND RIDE

Neal A. Deutsch, CFP^®

Published in Rivertown Journal, June 2010

In a move similarly experienced with riding a rollercoaster with a blindfold on, we recently saw the Dow Jones Industrials drop 999 points, of which 700 of those points plunged inside a 15 minute window. Recovery was just as dramatic: it bungeed up 600 points in the next 15 minutes, putting May 6, 2010 into the record books as the wildest day on Wall Street. The catalyst was issues connected with Greek debt fears and the unrest caused by the Greek government striving to avoid bankruptcy. Mid way through the trading day, a "glitch" in the trading system caused a mass sell order instituted by technology that moved as fast as a blink of an eye. While this may seem as old and ancient news, there are two things I remind you of: I write my column approximately 25 days ahead of print-time, and what lessons can be learned from this experience?

Investing in the markets can be both a rewarding and maddening experience, all wrapped up into a package that dictates the level of our retirement, acquisitions, standard of lifestyle and just about everything in between. While the market is going up, we tend to be complacent assuming that the markets and our future only go in one direction- up. Let's go back further than this past month...

A year after what was the most dangerous and unprecedented time in America's financial history where the Dow dropped to 6547, credit was frozen, and we all came about this close to the abyss. The worst case scenario could have been a depression that would have made the Great Depression seem like a tea party, where unemployment could have exceeded 25%, and could have taken perhaps a decade or more to have recovered. Whether you agree with the political side or not, the Treasury department made sure that the major banks had the necessary liquidity to withstand any type of financial demand.

Twelve months later, with the banks mostly repaying the TARP funds (and mostly with a profit to the American taxpayer), the Dow at 10,380 (even with the above debacle) as of this writing, and, for the most part, the absolute panic is over. While values have not necessarily reached the previous peak, they certainly are a lot better than they were a year ago. Undoubtedly some of you might receive a phone call from your financial advisor that might go like "See how much better we're doing than a year ago?" as he or she pats himself/herself on the back. It's easy to call a client or customer with good news. It's much more difficult to call a client when things are not so good.

My question to you then becomes "how did your financial professional behave when things were uncertain?" Did he/she make an effort to call you and discuss the current economic environment? Did he/she suggest reviewing your portfolio in view of the fact that market conditions had changed? Did they communicate with you in any medium: phone calls, market letters, newsletters, etc. Were they there and available to take your call and hear your concerns? That doesn't mean that there necessarily should have been changes, but certainly a review under the circumstances would have been warranted. This may be a good time to evaluate what you want in your professional relationship: do you want an order taker, or a financial professional who can help to guide you through the ups and downs of the marketplace we have seen in the past year?

Are they trained in all facets of financial and estate planning, or are they strictly a salesperson? While there certainly is nothing wrong in being in sales, is this what you want in your relationship, or is there more? If so, this may be the time to consider your relationship, and consider a change. If your financial professional did not return your calls, if he/she did not make an effort to educate you as to the grave circumstances that prevailed at the time, you have to ask yourself "Why am I continuing this relationship? Why deal with someone who, when the chips are down, hides?"

All Financial Professionals are not alike. Time in the industry, experience, accreditation, and licenses are but a small part of screening your candidates. How do you find someone to work with? Ask people you trust: your friends, relatives, and other trusted professionals. There are search sites, such as WiseAdvisor.com and PaladinRegistry.com which can direct you to screened financial professionals in your area. The most important thing to keep in mind? The journey to financial success depends on the road you take: find the best advisor you can and invite him or her to join you on your trip.

If hearing from me once a month isn’t enough, come visit me in our new blog site at www.chestnutblog.com.  If you think I’ve got pearls of wisdom here…you ain’t read nothin’ yet! See you there!

Neal A. Deutsch is a Certified Financial Planner^™  & Registered Securities Principal, offering securities through First Allied Securities, Inc., member FINRA/SIPC.  Neal is President of Chestnut Investment Group in Suffern, NY, helping people with financial planning since 1984. Please feel free to call Neal at (845)369-0016 or email him with your questions at neald@chestnutinvestment.com.

Was this article helpful? - Print it! by clicking on the printer icon bellow and pass it around, send it by mail just by clicking on the email icon or just post it on your facebook wall or twitter page...
Share the wealth!!!