Ride out the rollercoaster of volatile world markets

FRIDAY, AUGUST 12: The wild rollercoaster ride of stock markets is enough to give anyone financial whiplash, but now is not the time to panic and sell.

This advice is from Lauren Bell and Cindy Campbell at Argus.

Monday saw the US markets crash in one of the worst days ever, only to bounce back on Tuesday.

Wednesday saw another huge drop, but was followed by a soaring market in early trading on Thursday.

So what’s an investor to do?

Ms Bell, executive vice president of life and pensions at Argus, said: “The markets have been extremely volatile. Our advice is not to panic.

“If someone is concerned, they first need to have a look at their risk tolerance and reassess it.

Recovery

“We caution our members about making any drastic changes at this time.”

Ms Campbell, chief operating officer at AFL Investments (part of the Argus Group), said: “Because of the volatility in the market, it is not a good time to be making any major changes.

“These are long-term investments and long-term investment strategies. People shouldn’t be changing them because of short-term market conditions.

“They are structured for long-term, full cycle growth.”

She said AFL is entrusted to manage people’s money and has already positioned  client portfolios “extremely defensively in 2011”.

Ms Campbell said: “We were concerned about the continuing challenges in the US economy and the sovereign debt problems in Europe” (see country credit ratings here).

“Unfortunately, some of those fears were actually realized this last week with the downgrade in the S & P, from AAA to AA+ in the US.

“We also saw that huge drop in equities. The volatility is at 2008 and early 2009 levels.

“If people are concerned about the quality of the US Government debt, we would have seen bond and equity markets drop at the same time, and we didn’t see that.

“We saw equity markets drop and large rallies in bonds.

“That’s because people were still looking to the US and believe it is secure and they were buying those treasuries.”

She added: “We’re going to have a slow recovery. The early equity gains really weren’t sustainable given the underlying fundamentals.”

Ms Bell said they have had a few people come into the office or phone concerned about their pension plans.

“We’ve reassured them and provided them with some sound advice so that they too can avoid making a hasty decision.

“One of the good things is the Argus portfolios are so well diversified.”

Ms Campbell added: “Our portfolios have built-in protections in the market.”

She said the balanced funds were only down two to 3.5 per cent, with those protections built into them.

“They significantly protect capital in down markets. The US had been the standard in which everyone else was measured against.”

Ms Campbell said the US needed to join the rest of the world economies and put in austere fiscal policies.

“That means there is going to be less money going into the economy from the government.

“Wall Street is looking and saying growth isn’t going to be as robust as maybe as the early part of 2011 would have led you to believe.

“It’s all about the fundamentals in the global economy.

“We are in a global economy. There’s not much that can happen in one single economy that’s not going to have a ripple effects on the rest of the world.”

People who have questions about their pension funds or portfolios can contact Argus at 298-0888.