Financial Planner's Advice: Stick To Plan; Don't Panic
MELISSA BLOCK, Host:
This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.
MICHELE NORRIS, Host:
And I'm Michele Norris. Whiplash, whipsaw, seesaw, rollercoaster: we're running out of cliches to describe the financial markets this week. When the final bell rang today, the Dow Jones Industrial Average closed on a high note, up more than 100 points.
BLOCK: The week's massive ups and downs sent many investors scrambling to their computers to check their portfolios, and some straight to their brokers. Coming up, we'll talk investment strategy with the president and CEO of TIAA-CREF. First, though, NPR's Ted Robbins takes us to the office of a financial planner in Tucson, Arizona, where the phone has been ringing all week.
(SOUNDBITE OF PHONE RINGING)
DEBBIE MUSOVSKI: TCI, this is Debbie. May I help you?
TED ROBBINS: It's been a bit like being a receptionist in a therapist's office for Debbie Musovski(ph) at TCI Wealth Advisors.
MUSOVSKI: Sure. People get nervous.
HANK PECK: We do a lot of behavior management.
ROBBINS: Hank Peck would be the therapist. He's actually a certified financial planner. He says some of the anxiety is from the crash of 2008. It's still fresh in people's minds despite what's happened since.
PECK: Since 2008, we've had this unbelievable bull run, one of the greatest bull runs in the history of the market until recently. Does it feel like that? Does it feel like that. And every one of my clients say: No, it doesn't feel like that. And that's exactly right. And it doesn't because of the volatility.
ROBBINS: What Hank Peck does to cultivate peace of mind is to find ways for clients to meet their financial goals while reducing volatility. Take Gina Babunovic(ph), she lost nearly half her portfolio in the 2008 market crash. She came to Hank Peck because she knew she had to do something different with her money.
GINA BABUNOVIC: I was moderately - to aggressive in my portfolio.
ROBBINS: She had more than two-thirds of her money in high-risk growth stock mutual funds, less than a third in low-risk bond funds.
BABUNOVIC: That is really not a good position for me to be at 57 years of age.
ROBBINS: She's divorced and looking for full-time work in public relations. Right now, she is pretty much living off her investments. Her new plan, which may return less in an up market but lose less in a down market, is to have only half her money in stocks and half in bonds.
PECK: In this allocation, she'll be uncomfortable, but I'm here to tell her that she's in a good position.
BABUNOVIC: I may be uncomfortable, but I won't be frightened, and that's the difference.
BABUNOVIC: And that's a way I can sleep.
ROBBINS: Another way Gina Babunovic can sleep?
BABUNOVIC: I'll put my head in the sand for two days.
ROBBINS: She goes on a news fast.
BABUNOVIC: And I just tune it out, like with the debt ceiling, what was going on, I just said OK. When the dust settles, then I'll delve in to see what was happening, why it was happening, so that I'm not listening to all that white noise. It evokes fear.
ROBBINS: Hank Peck says that's the worst time to act.
PECK: You can't make good decisions that are fear-based.
ROBBINS: Problem is while the good times are nice, psychologists say it's the fearful times which tend to make a stronger imprint. So the final, maybe the most important thing, which keeps Gina Babunovic calm is relying on the investment plan she and Hank Peck came up with. Her plan, very broadly, is to remain self-sufficient without taking on more risk than she needs to.
BABUNOVIC: It's also very important - and this is a goal - because of that that I am not dependent and reliant on my children as I age.
ROBBINS: But she knows her plan is based on continued health and income, and it could all change with circumstances.
BABUNOVIC: I am one voice of millions, but I am degreed. I worked for that. I've planned hard. But even when someone is and has done all the right things, bad times come. I am very fortunate, and I know that.
ROBBINS: Meanwhile, stick to the plan. Oh, and two parting words for everyone from Hank Peck.
PECK: Don't panic.
ROBBINS: Ted Robbins, NPR News, Tucson.
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