By Tim Leeds
Local investors don't seem extremely worried about daily ups and downs in the securities markets, local investment advisors said this week.
Kevin Keim, investment representative for Edward Jones in Havre, said recent fluctuations in the market are not unusual in a historical perspective. He said it only seems volatile when compared to the comparatively calm market in the early 1990's.
"If we look back into the past prior to four, five, six years ago the amount of market volatility today is not uncommon at all," Keim said. "From 1992 until recently the market enjoyed an uncharacteristic lack of volatility."
Keim said as a percentage of the market, the fluctuations are not larger than normal. He said that when the market was at 3,000 points, a 30 point fluctuation was 1 percent. Now, a 107 point fluctuation is 1 percent, he said.
Keim said the day to day fluctuations are not a major concern.
"I'm more concerned with what the market does over a three-month, or six month, or one year or two year time span than what it does from day to day," he said.
He said local investors he sees have very practical long term objectives and tend to see short term moves in the market as very insignificant, or even opportunities.
"Most of the folks that invest with me view dips in the market or down trends as opportunities to buy good investments at reduced prices," Keim said.
Chris Faber, financial advisor at Waddell & Reed said they warn their clients that the market will have bad times. They haven't seen any clients coming in worried, he said.
"The way we work with clients is with a financial plan and a long term focus," Faber said. "They understand that good investments, good programs, will ride through volatile times."
Faber said that the market and market indicators have always come back up after a drop. He said at Waddell & Reed, they recommend that clients avoid concerns about investing at the right or wrong time, but that they invest for the long term.
The investor must also strike a balance between risk and reward, Faber said. Spreading the investment over diverse investment instruments might reduce the chance for spectacular profits, but it can also reduce the chance of a loss from market fluctuations, he said.
Faber said regular investing is another way to reduce risk. He said his firm advises regular monthly investments of the same amount, which creates dollar cost averaging.
He said if the security's price is up, the investment buys fewer shares, and if the price is down, it buys more. This reduces the risk of price fluctuations, he said.
Steve Bebee, vice president/office manager of the Havre D.A. Davidson & Company office, said that with the amount of trading on the market daily, market ups and downs have to be expected.
"When you're trading over a billion dollars a day, it's going to be volatile," he said.
Bebee said the volatility isn't usually from people liquidating investments. He said individuals and mutual funds regularly re-position their investments into new instruments and market sectors, which causes the market to fluctuate greatly.
Bebee said there are more day traders actively trading on the market, and Internet trading has increased activity as well. He said technology has opened the door to what investors can do and to information available to them. This has increased market activity greatly, he said, and that increases volatility.
Bebee said his clients are usually long term investors, and he doesn't recommend people trade in securities if they are worried about market volatility.
"If you can't sleep (worrying about market volatility), go into a CD or money market," Bebee said. "If volatility is going to keep you awake at night, don't do it."