Financial Advisor, Alfred E. Neumann
Financial advisors of every nature --- stock brokers, life insurance specialists, real estate investment mentors, trust officers, economists, the list goes on and on -- not only neglected to work to get their clients out of the equities market before it began its decent, but were encouraging them to continue taking more risks by increasing their portfolios.
That's indisputable, and it's indisputable that the majority's advice and the products they were pushing are, in the main, what has caused the world financial markets to tumble to their present low points. So in the opinion of many, it was that advice that caused their clients to be in the awkward positions they are in today.
So my question is simply this: Why would anyone follow those same people's advice as to how to handle their investment accounts now?
In reality, there are only three logical positions those who are in the market should take at this point, regardless of the size of their corpus -- a few thousand bucks or multi-millions:
1. Do nothing. Keep the status quo, no matter how scared you are or how hard it is to convince yourself that this is the right tact. Selling and converting to cash at this point does nothing more than assure that you've got and will have losses.
2. Methodically sell portions of those equities that have losses and take the write-off against your current income, and then reinvest that entire capital amount back into like investments. This should only be done with the meticulous advice of your tax advisor. It is a very positive tact. It's the ray of sunshine.
3. And finally, this one: Take a deep breath, and then begin investing more cash into conservative companies, real estate and the like, that are not over-valued at their current market price, so that you can not only increase the possibilities of recovery profits, but also will experience the recovery faster than by holding to the status quo.
Probably the worse consideration for most at this point is redeeming accounts and putting the proceeds in other forms of investments. Remember, most financial advisors only make money for themselves when clients are buying or selling.
In our case, we are following a blend of No. 2 and No. 3. However, that's certainly not meant to be advice for you or anyone else to follow.
You need and should make your own decisions. In a huge number of cases, that people followed others' advice is why they've seen their estates take huge haircuts. Your best friend today is an astute and knowledgeable Certified Public Accountant.
Copyright 2008 - William S. Cherry
BILL CHERRY, REALTORS
DALLAS
Our 44th Year Selling America
214 503-8663
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