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Doug Wagner: Investment requires staying the course

By Staff | Oct 31, 2008

Today’s stock market could be a little bit like going to the casino. You don’t want to put any more money into the slot machine than you want to lose. Similarly, don’t put in any more money into the market than you can afford to let sit for an indefinite time until stock prices improve.

Doug Wagner of Edward Jones Investments in Estherville addressed Rotarians’ questions at their Thursday meeting.

Regarding the investment potential of Ford and other auto stocks, Wagner said, “You don’t know what’s going to happen to GM and Ford.” He underscored the fact that government bailouts are not a certainty and neither are the conditions of those bailouts. Wagner noted that in 2006 automakers paid out more for health care and benefits than they did for steel.

Whatever stock it is that you own – or decide to buy – Wagner advised against panic selling, something that seems to have recently been driving some of the biggest market downturns in U.S. history.

“The biggest thing behind this market right now is irrationality,” Wagner said. “Not much has made sense over the past two months.”

Wagner noted this is the 32nd bear market since 1900.

“It’s not an irregularity. It’s something that happens every three and a half years,” Wagner said.

A big problem recently compounding the economic downturn is people liquidating their 401Ks.

“A lot of people without somebody to talk to have cashed in,” Wagner said. “The biggest thing is when too many people cash in on these things.”

So what is Wagner’s advice?

“It’s a good time for people to look at what they do own,” he said.

Wagner commented on runaway inflation in the housing market that peaked this year. Traditionally, housing values increase with the rate of inflation, he said. A similar scenario could apply to stocks.

“Long-term markets trade totally on what’s going on,” Wagner said. “Short-term markets trade on perception.”

Just to consider how uncertain traditional wisdom really is, Wagner quoted contrarian investor Warren Buffet: “Be fearful when others are greedy and be greedy when others are fearful.”

Paraphrasing the Serenity Prayer as it applies to market dips of up to 700 points in one day, Wagner said, “No one can really control that. The thing to do is make sure your money is where it should be.”

Instead, a balanced portfolio is the best way to weather uncertain markets, said Wagner. And if you don’t have to, don’t sell when your stocks are in a nosedive.

Wagner said investors should ask themselves where their money is and what they have it there for. “The hardest thing about financial planning is everybody is different,” he said. “Risk level is always a personal thing. Buy quality, be focused and don’t listen to the media real closely.”