Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Manny Schiffres, the Executive Editor of Kiplinger's Personal Finance Magazine to talk about what to do when the market drops. Manny, 2007 is been a scary time for investors. There had been 200, 300, 400 point drops, the down on a single day. How are we supposed to react to this?
Manny Schiffres: Well, the most important thing the investors do is not to panic.
Kevin McCormally: What do you mean?
Manny Schiffres: Well no one knows what the market is going to do on a short-term basis. So these drops are a great opportunity for the typical investor to revisit his portfolio or her portfolio, look at your risk tolerance and determine whether you are invested the way you want to be invested.
Kevin McCormally: And so if you did lose sleep, if you got sick to your heart when the market drop what should you do?
Manny Schiffres: Well, if you have lost sleep because the market went down 300 points a day and it cost you 3% of your overall investments then you have to totaling down the risk of your portfolio, that means cutting back on your stock allocation and putting some of that money to bonds or money market funds.
Kevin McCormally: I know some smart people say when the market drops like that that's the perfect opportunity to go and then buy because you can buy today for less than you could have buy yesterday.
Manny Schiffres: If you are a short-term investor it's really impossible to make a decision one way or the other. Let's take a couple of examples, the market crashed in October 1987 lost 22% in a single day, what happened it may ended for couple months and then the bull market resumed in December 1987. But look what happen in 9/11, after that terrible tragedy markets went down and they continue to go down for another year,it didn't help that the 9/11 occur in the middle of recession this just exaggerated a bit.
Kevin McCormally: Manny, you look back in history, what do you suggest for people going forward, what should investor do for the rest of the share?
Manny Schiffres: Investors need to look at their portfolio, asses their personal tolerance risk and volatility, asses their long-term -- asses their time rising. If they are invested for the long haul they should be primarily in stocks, if they have the strong stomach for it.
Kevin McCormally: Okay, thank you Manny.
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