Repeated days of decline
Even before Thursday's dramatic decline, markets had been heading steadily down for days — at the close of trading Thursday, the Dow Jones industrial average was about 1,000 points below its July 21 level.
As successive days brought bad news, other financial planners offered views that investors shouldn't radically alter their savings portfolios unless those investments are already riskier than they're comfortable with.
Typically, stocks make up 20 to 60 percent of a portfolio for people nearing retirement, financial planners say.
"The key to investing is to be proactive and not reactive," says Frank Jaffe, a certified financial planner at Access Wealth Planning in Roseland, N.J. "To try to make major adjustments now to a portfolio doesn't make sense unless a portfolio is overly risky to begin with."
"Doing nothing may not sound like you're on top of things," says Jaffe. "But your portfolio should already be set up to reflect the amount of risk you're willing to take."
Kevin Cook, a senior stock strategist at Zacks Investment Research in Chicago, echoed the "sit tight" advice and said investors might consider selling small amounts of equities timed to rallies in the market.
He expects the stock market to "go sideways" for the next two months. "This is not a time to worry about the market going 30 percent lower like it did in 2008. It won't do that," Cook says.
If you're a conservative investor, Michael Davis, president of Davis Financial Services in Jacksonville, Fla., recommends fixed annuities and dividend-paying stocks so that you will still be earning money even if stock values fall.
"Fixed annuities have made it through the test of time; they made it through the Great Depression," he says. "The ups and downs of the market are tough on us the closer we get to retirement." So the 6 or 7 percent rate that's guaranteed for 20 or 30 years through income riders attached to fixed indexed annuities "can create a pension for a person to draw on."
Also of interest: Interactive map shows financial pain, state by state. >>
Carole Fleck is a senior editor at AARP Bulletin.