Investors ride out volatile market

Financial experts are praising the public for not contributing to the slump by panicking.

By Mark Trumbull | Staff writer of The Christian Science Monitor

from the August 21, 2007 edition

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Stocks and bonds have been on a wild ride lately, but so far mainstream investors are staying the course.

The mutual fund company T. Rowe Price in Baltimore, for example, saw account holders migrating away from US stock funds on some days last week, but no all-out retreat.

In Toledo, Ohio, money manager Alan Lancz isn't getting any panicked calls from his well-heeled clients. He helps soothe their concerns with a weekly newsletter to put the ups and downs in perspective.

And in Atlanta, an investment club led by retiree Larry Reno is one of many around the nation that looks upon the recent downdrafts as an opportunity to buy stocks at a better price.

"It's just another bump in the highway on the road to financial success," says Mr. Reno.

In short, most individual investors seem to be doing just what financial advisers say they should do: Focus their long-term goals and don't be ruffled by near-term dips.

It's too soon to say whether the rough ride is over, but Monday was a calmer day for world markets. Stocks rebounded in Asia and Europe following moves Friday by the Federal Reserve to get stalled US credit markets moving again.

To the degree that individual investors ignore the current noise in financial markets – or view it as a time to buy – they are lending some stability to battered share prices. They aren't driving the market's overall direction, analysts say, but so far they have helped to prevent a so-called "correction" from turning into a rout.

In many cases, experts say this stems from a kind of benign neglect, since many small investors have their 401(k) plans on autopilot and don't bother adjusting their holdings based on current news.

"Our investors seem to be staying the course," says Rebecca Cohen, a spokeswoman at the Vanguard Group, which provides mutual fund investments used in both retirement and brokerage accounts.

"There certainly are concerns, [but] mutual fund investors are again proving to be focused on the long term," says Ed Giltenan of the Investment Company Institute, which represents the mutual fund industry. The group saw small levels of fund sales by investors last week, but "nothing drastic," he says.

This doesn't mean that ordinary investors don't perspire and sometimes feel panic as they watch the markets.

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