October 2008 :: I’m Staying Fully Invested

Monday night, the day the market took a 777 point nosedive, the local 10 o’clock news conducted a poll of their viewing audience. The poll was simple and conducted via cell text messaging.

The question was: “How are you feeling about the current economic crisis.”

The instructions were clear.

Text 1 to 43525 to vote “Not concerned”

Text 2 to 43526 to vote “Terrified”

That was it, two choices. As a bonus, the results were tabulated live as the calls were received.

This positioning by the media and the use of the adjective ‘terrified’ speaks to the current emotions being experienced by our clients. As the events of the last month have unfolded the following three emotions have taken center stage:

Fear – investors today are as nervous, perhaps more so, than at any time in our careers. If you have been in the business for 20+ years you remember the 1987 crash. If you have been in the business 10 years you lived through the dot com meltdown. Yet you would need to go back to some unknown point before 1990 to get a higher reading on the CBOE VIX than we had on Monday 9/29. The VIX, known as the ‘fear gauge’, jumped to its highest reading Monday since being calculated in its current format in 1990. This is leading professional investors, and the general public, often fueled by the media, to have a heightened level of nervousness and anxiety previously unexperienced.

Loathing – the distrust amongst the general public of the greater entity known as Wall Street has rarely (never?) been higher. 20+ years ago during the Milken, Drexel, Masters of the Universe era the disdain for the Street felt similar. Today to simply be associated with a firm alleged to be part of the Wall Street bail out is perceived to be part of the problem. We can become guilty by association. As great brand names have been damaged, we have firsthand knowledge of advisors that are looking to change broker dealer affiliations because they believe the name they once knew to stand for strength and fiscal integrity is now tarnished.

Anger – read the editorial pages, the chat rooms, the social networking sites and you will quickly learn that the overarching sentiment coursing through the investing public is anger. They are ticked off that (as they see and say it) greed, stupidity, ignorance, lack of insight, government pre-election posturing, and political grandstanding have impacted their portfolios in a way that they now need to recalibrate their personal definitions of retirement, financial security, and safety.

As for me, I’m staying fully invested.

Invested in the ability of our industry to navigate the fears of our clients. To be able to keep them out of harm’s way – this includes making ill advised portfolio mistakes when emotions are running high.

Invested in the ability of advisors and distributors to compassionately listen to their clients concerns and then formulate the right plans to address those concerns.

Invested in the sound reputation of the vast and overwhelming majority of outstanding and prudent providers who have created, managed and recommended the very products that have led to the largest creation of wealth our country has ever experienced.

Lastly, and as hard as it may be when the rotten news comes in seemingly endless waves, I am fully invested in the bedrock concepts of investing:

Time was, and is, on the side of the prudent investor.

Diversification still works long term, even when correlation narrows during bear markets.

Inflation and taxes still eat up returns in cash instruments.

Investors will not reach their goals and dreams without the products our industry provides and the guidance we offer.

By the way, in case you were wondering about the results of the inane poll on the local news, I couldn’t tell you. I voted with my clicker and changed channels.