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Lindley Estes is a business writer for The Free Lance-Star and This blog is on Fredericksburg-area business. Send an e-mail to Lindley Estes.

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Experienced advisors best navigators for down markets

AT AN INVESTING speech I was covering a couple of weeks ago, I chatted with a fellow attendee about the qualities of a good stockbroker.

The person, a local attorney, recommended avoiding hotshot youngsters fresh out of business school who are armed with more theory than experience.

He said to go with an adviser who has seen firsthand the wild swings of the market without losing his or her head. For example, one who was around for the crash of October 1987, the ensuing bull market and the bursting bubble of 2000-02.

The recommendation makes sense, whether you hire an adviser or invest for yourself. Having an experienced pilot at the helm keeps emotions under check.

Renowned value investor David Dreman makes a similar point in the Oct. 15 edition of Forbes magazine. His column, titled “Panic No. 12,” says the recent stock-market dive (and climb) is nothing new.

Before this summer’s subprime-mortgage-influenced panic, Dreman had been through seven stock-market crises since entering Wall Street in the late 1960s. Between World War II and when he started, there were four additional panics.

So these nervous times represent the 12th such scare for investors in the post-World War II period. As Dreman points out, the stock market has always recovered before and is likely to do so again.

“Dire times bring opportunities,” Dreman writes. “The long-term trend of the stock market is up.”

Indeed, the major indices have already recouped the significant losses of recent months. One wonders whether it can even be called a stock-market correction.

Dreman points out that real concerns do exist. Mortgage troubles could hurt economic growth. Yet investors shouldn’t run for the exits, he counsels.

“Today’s stock market remains solid with good fundamentals and many cheap stocks at hand,” he writes.

Of course there’s no guarantee that history will repeat itself. Just because stocks have bounced back before doesn’t mean they will again.

In his book “The Black Swan,” Nassim Nicholas Taleb writes that we spend too much time studying the past for clues about the future. At any time, an unexpected event such as Sept. 11, 2001, can drastically reshape history’s course.

Taleb uses the example of the Thanksgiving turkey to illustrate the point. That turkey gets well-fed at the same time every day for months. He leads a luxurious life. That is, until the day he becomes dinner.

So it’s impossible to know exactly what the future holds. Uncertainty is as much a part of investing as it is of life. All we can do is carefully choose fundamentally sound investments and believe in them during trying times.

To keep that faith, it’s good to have a seasoned captain around, whether that’s you or someone you hired.