When markets fall, opportunity comes to buy at low cost

Buy low and sell high is the philosophy people should follow when it comes to their retirement money in the stock market, but sometimes human instinct goes against that, according to James O. Moff III, owner of Moff & Associates.

"I hear this a lot, 'I put my contributions in but my dollar amount is lower than six months ago and I put six months of contributions in,' but people should realize they are accumulating a lot of inexpensive shares and that bump will be felt later," Moff, who's company is located at 460 Market St., said. "You just have to be patient."

Moff said that sometimes it is difficult for people to understand the concept of buying low and selling high.

"But Warren Buffet, he thoroughly understands it," Moff said, referring to the billionaire who invested $3 billion in General Electric on Wednesday.

"I think it's human nature to think, why should I put money into something that is going down?" Moff said. "But it's a great time to buy right now."

Moff said those most concerned with the downturn in the stock market are the people who are taking income from their investments.

"With all the news in the media, it drives people to call their advisers and ask how the credit crisis is affecting their portfolios," Moff said.

But Moff said if people who are taking income from their investments structure their portfolios properly, it probably consists of high dividends from the equities and interest from bonds, and such portfolios are still producing income, anywhere from 4.5 to 5.5 percent.

"So there really is nothing for them to overreact about," he said. "The only thing that really happened this week was that share prices dropped and, besides those taking monthly income, people are accumulating more shares. And that is the silver lining on this downturn."

"When the price per share drops and you are contributing to your 401(k), you are getting more shares so, when it goes up again, you can reap that pay off," Moff added.

Very few of Moff's clients are actually pulling out of the stock market. "Most investors are in it for the long haul," he said.

The market cycles every few years and each of those cycles are a little different, Moff said.

"The last market cycle was the collapse of a lot of the dot-com companies," Moff said. "Back in 1994, we had the savings and loan crisis. There is always something that's going to upset the economy."

Bob Thompson, registered representative for Diversified Asset Planners, 8 N. Grove St., Lock Haven, said his best advice for his clients is to ride the storm out.

"Historically, after every downtown in the market, 10 years later, we are always much further ahead than when they were in the downturn," he said. "Those with investments in the long term, they're not looking for immediate overnight growth ... there's not a whole lot to worry about right now.

To help hedge its clients against wild fluctuations in the country's economy and stock market, Thompson said his firm generally turns people onto "less aggressive" stocks and bonds. Those investments, he said, yield lower returns, but are much more stable through the long term.

He said investors who are best insulated against wild fluctuations are those with guaranteed rates, including annuities and money markets.