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How Consumers Should Approach A Volatile Stock Market


Our next guest has been taking a lot of calls in the last few days - people asking, are we still OK? As in, will I still be able to retire when I want? Do I need to worry about my savings - reasonable questions when you take a look at the big swings in U.S. stocks the last several days. Today, after another wild ride, stocks rebounded with the Dow closing up 567 points. Yesterday the Dow lost 1,175 points. So let's bring in Richard Salmen. He's a certified financial planner in Kansas City, Mo., but he's joining us from Fort Lauderdale, where he is at a CFP conference. Hi there.

RICHARD SALMEN: Hey, Ari. How are you doing today? Thanks for having me on.

SHAPIRO: All right. So are we still OK?

SALMEN: Well, the short answer is yes, but it's a qualified yes because those that have been planning and understand what they own for investments and why they own it are OK. It's those that haven't been paying attention to what's going on in their financial life that may or may not be OK.

SHAPIRO: And a lot of this depends on how close you are to retirement, right? So the advice you're going to give will differ depending how old someone is. What would you tell somebody who's early in their career, say 20s or 30s?

SALMEN: Well, the one thing you have on your side when you're that age is time, Ari. And so you can recover from mistakes that you might make, and you can recover from market corrections. So you have time, but that still doesn't mean you shouldn't have the right set of investments and the right investment allocation in order to be able to, you know, ride out these kind of volatile waves.

SHAPIRO: And on the other end of the age spectrum, if somebody's really close to retirement, what's your advice going to be to them?

SALMEN: Well, you need to pay even more attention. For those - you know, for those who have already accumulated assets and especially if they're living on those assets for an income stream, you need to know that a downturn in the market - I mean, in 2008, we saw a downturn of 45, 50 percent on the stock side of things. You need to have investments that are going to be able to continue to pay you income in spite of the fact that your stock part of your portfolio goes down. So it's much more critical because you don't have that time I talked about for the 30-something-year-old.

SHAPIRO: Do you often find yourself trying to talk people out of selling when they see dramatic swings in the stock market or buying - you know, tell them, no, you actually should ride this out; life is long; wait, and see what happens?

SALMEN: That's exactly right, Ari. And the reality is most of our clients don't worry about that too much. The phone calls I'm getting right now from clients who have already been educated are, hey, is our plan still on track - because that's really what the money's for - is for whatever goals you have in life. And with good planning, you've already got the right investment allocation and the right diversification so that when these normal corrections happen, you don't have to jump off the ledge. You don't have to sell everything because that's almost never the answer.

SHAPIRO: So it sounds like you're saying if someone does have a plan, then that plan generally is still on track even if there are wild swings like this.

SALMEN: Oh, absolutely. That's absolutely correct. The one thing people forget, Ari, is that volatility cuts both ways. Nobody gets upset about the volatility when the stock market does nothing but go up for the last year and a half. It's only when it then drops. All we gave back was the gains that - yesterday - that we had made during 2018. So if somebody was sitting there on December 31 where the stock market was, were they feeling bad at that point? My guess is no.

SHAPIRO: So it sounds like you're as much a therapist as you are a certified financial planner.

SALMEN: There's a lot of financial counseling involved, Ari.

SHAPIRO: (Laughter) Richard Salmen, thank you very much for your time today.

SALMEN: All right, so if you would just let the people know that if they can find a certified financial planner professional...

SHAPIRO: (Laughter).

SALMEN: ...To help them with the planning, we would appreciate it.

SHAPIRO: Thanks very much. Richard Salmen is chair of the Certified Financial Planner Board.

SALMEN: Thank you very much, Ari. Transcript provided by NPR, Copyright NPR.