Ed Butowsky, managing partner at Chapwood Capital Investment Management LLC, joins Fox business to evaluate why financial advisors are running scared in light of disasterous world current events.
Why is it that when the market goes down most financial advisors run scared? In light of recent disasterous current world events, these events are just one reason why you as investors need to keep a close eye on your advisors.
How does Japan impact us?
Many of us in some way are tied to the international sector either through funds or direct investments, the real question is whether investors should dump these positions. The bottom line is no, you should not sell off your positions. Ed explains that while this event is a terrible horrific event its impact on the US market and around the world is minimal. Japan represents approximately 9% of US exports which equates to less then half a percent of our Gross Domestic Product (GDP). This should not be a reason to dump your investments, to the contrary this would be a great time to invest in international markets.
Why are financial advisors running scared, is it because their clients are calling all the time or is their a problem the way financial advisors do their business?
Ed explains that its a combination of both reasons. The clients often time are calling scared and emotional citing this is their life savings and everything is down and this leads to unexperienced advisors not knowing want to do or say to comfort the client. Moreover, its obvious with many of these advisors lack a firm relationship with their clients that lead to a lack of clarity to the investors. A seasoned advisor would have explained to their clients during the recent market liquidation that at the time when we were at the low of the market, that stocks based on expected earnings were 45%-50% undervalued. For this reason alone no one should have been selling their investments.
How do you manage your financial advisor through a crisis like the market liquidation we experienced?
Ed explains that the first thing you do is to be sure that your financial advisor gets paid a management fee not a commission. Many firms are pushing municipal bonds on their clients because they buy it and advisors make their commission. Furthermore, investors should not have to buy products to enhance their portfolios. What has happened over the last couple of years is indicative of investors doing the wrong thing at the wrong time. There is no full proof way to time the market and certainly not one that is consistant with the changes in the market and world events, so stay fully invested. To date stocks are 12%-14% undervalued based on expected earnings and will only go higher. Financial advisors should understand that concept when approached with questions regarding stock values.
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
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Tags: Advisers, advisor, economy, financial advisors, fox business, gdp, gross domestic product, investments, money, recession, stocks, world events