After another volatile day on Wall Street, WNYC checked in with Erika Safran founder of Safran Wealth Advisors, to see how her clients — many retired and living off of their 401Ks and investments — are reacting.
Q: What are you your clients worried about?
A. They're not worried. They're aware, but not worried.
Q: What are you telling them?
A. I identify their portfolio. I identify their positions, and give them comfort in what their exposures are to particular asset classes, and then I bring back to mind what their long term goals are — what were our positions? What were our objectives? I don't create a Pollyanna attitude when the markets are precarious. You can't tell a client, 'Don't worry.' I can tell them to be aware, and let them know that we are watching. There's no reason for people to think everything is wonderful, but at the same sense, this is not a huge, gigantic sell-off that is going to destroy them next week.
Q: What do you tell people nearing retirement?
A. The strategies that they have in place would have been put in place before yesterday, so if my client is three years from retirement, then they don't have 80 percent of their assets invested in the stock markets, be it domestic or foreign, because anyone who has a goal that is a few years away should have a certain amount of cash allocated for that goal. And without question have more security. I know over the long term the stock market is going to be the growth, but if you know that you’re going to need $50,000 from your portfolio next year, wouldn't it be wise to do that now? So, part of that strategy is if you need money and you're going to need consistent income from that portfolio. We always set aside at least two years of those assets and it sits in a money market fund. And that way when the market turns against you, you don't have to worry about dipping into that principle to access those funds.
Q: How do you diversify in this type of economy?
A. Money markets, cash is king. In bad times, money markets can be set aside. Another strategy is being diversified and holding not only domestic bonds, emerging market bonds or bonds that are not tied to the U.S. dollars that trade in foreign currencies. And there are mutual funds that achieve that.
Yesterday morning, what we did was in the morning we bought a position that would provide us hedge against the falling market, so we bought the hedge in the morning, and we sold it out in the afternoon. Are we traders? No. Do we take action to secure parts of client's portfolios on volatile days? Yes. And today we're moving along with no change in client's portfolios. No buying, no selling.
Q: Any other advice for people concerned right now?
A. Generally the public has this misconception that when the markets turn you should stop contributing to your 401K. When the market turns, you should probably increase your contribution to your 401K because you’re adding monthly, or with every paycheck, so you have the fortune of buying it cheaper. You’re actually buying it on sale consistently.