By JACK SIRARD
Scripps-McClatchy Western Service
SACRAMENTO, Calif. — Cydne Graham is in her late 40s and semiretired.
In her own words, she can’t afford to take a hit in the stock market. But when it reopens, she’ll be holding firm.
The Huntington Beach investor says quite simply: "I refuse to sell. I’m going to personally rally around this country and the president. If the country and the market go down, I’m willing to go down with it."
With several hundred thousand dollars invested in mutual funds and common stocks such as Procter &Gamble, Cisco Systems and Microsoft, Graham says her first thought was to sell everything.
"But then I got to thinking about why they attacked the World Trade Center. They want us to panic, and if we do, they win," she says.
While Graham’s investment strategy is strongly an emotional one, most investment experts believe that in the long run it will be the wisest one as well.
That’s what I think, too. Hold on for the long term.
But in the very short term, it’s anyone’s guess.
Prevailing wisdom on Wall Street is to expect a knee-jerk reaction, which could send stock prices reeling. If the Dow Jones industrial average drops 5 percent, it would be a loss of 500 points.
But with the closure of the exchanges, anything could happen.
In the short run, some investors no doubt will let their emotions overtake their decision-making in the form of panic selling.
Money manager Jeff Merriman says that when "the markets do open, this will be a time of high danger to unwary investors. There’s a high likelihood that prices will immediately be lower, but we think investors would be unwise to engage in panic selling."
That’s precisely what we’ve seen happen so far in Europe and Asia, where equity prices declined sharply earlier this week.
For instance, the FTSE 100 index of leading British shares, which plunged 5.7 percent Tuesday, rebounded with a gain of 2.8 percent, or 136 points, to close at 4,882.
There’s no question that events such as we’ve seen this week create many questions. The more questions that are answered before the market reopens, the less likely it is that we’ll see such panic.
But the reaction to the initial reaction is what will matter most to long-term individual investors.
"At some point, the markets will stabilize, and that will be a more appropriate time for any necessary selling," Merriman says.
"It’s impossible to know how events will unfold in the coming weeks and months, but it could be that a dramatic dip in prices now could present a good buying opportunity for investors with cash and confidence."
Merriman labels Tuesday’s attack an "event risk" or "a risk that some natural or man-made disaster can occur at any time and will cause investors to suddenly question their assumptions about the future."
He says that, "short of keeping all your money in government guaranteed bank accounts, there is no absolute protection against sudden events."
His advice is to keep enough money in cash and bonds to reduce this risk and volatility.
"If you have not taken these steps, this is a very good time to consider doing so," Merriman advises.
Like a lot of Americans, Graham believes the stock market represents this nation’s self-esteem, and she says that past national tragedies have proven time and again that this nation’s resilience is remarkable.
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