ARI SHAPIRO, HOST:
Within minutes of opening this morning, the Dow plummeted more than a thousand points. It was the largest point loss ever during a trading day. When the markets closed, things were at a slightly less scary point. The Dow ended the day down 588 points.
AUDIE CORNISH, HOST:
No matter what, if you're lucky enough to have a retirement account, this was not a fun day to check the balance. The volatility comes after the Chinese government started taking some extreme steps to stabilize its markets - steps that haven't helped much. We're going to start this hour by asking what this means for you and your retirement. We'll put those questions to David Kotok. He's chairman and chief investment officer for Cumberland Advisors. Welcome to the program.
DAVID KOTOK: Well, thank you very much. It's nice to be with you, although we certainly picked a volatile day to do it.
CORNISH: What kind of phone calls are you getting? How worried are your clients?
KOTOK: They're concerned. Why is this happening? Is this going to start a bear market? How serious is it? What's the Federal Reserve going to do? Could China be the reason behind this? Lots of questions.
CORNISH: Did you have people calling you, saying sell?
KOTOK: I had two clients today, early this morning, direct us to liquidate their accounts, and they were panicked. And they ended up selling early this morning when the stock market was off a thousand points on the Dow Jones. I think it was a mistake. I don't think it's wise to panic. But they were panicked, and they took over, decided to liquidate and exit the stock market.
CORNISH: Even if you didn't panic today, should people feel reassured that things bounced back later in the afternoon, or is this market just a lot more risky than thought?
KOTOK: The market is going through a corrective process. It's about time. No markets go straight up. So in this case, correction is warranted. Things have changed. There's a risk premium in the market, and it's returning to the market. It doesn't mean the bull market is over. I don't believe it is. I think we're in a long-term bull market that'll go on for several more years.
CORNISH: So given what you've told us, what does this mean for retirement funds, for people who are looking at their retirement funds today?
KOTOK: People looking at retirement funds have to realize, I think, the best result for them is full, worldwide diversification of their risk, not concentrate in emerging markets, but to be everywhere, own pieces of many things. It's a sound principle. It's been around a long time. Diversification of risk works best.
CORNISH: And is that something that, you know, the typical person can kind of look at what their mutual fund is dipping into and make requests, make corrections?
KOTOK: People can look at the asset holdings of a mutual fund. If they don't like what they see, they should sell it and switch. The fact is the mutual fund reflects only what's inside of it, and there's transparency if someone's willing to do the research. We strongly recommend that investing requires knowledge and understanding. And if you don't know it, don't see it, don't go there.
CORNISH: That's David Kotok. He's chairman and chief investment officer at Cumberland Advisors. Thank you so much for speaking with us.
KOTOK: Thank you. Good to talk with you.
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