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Don't Panic, Diversify, Financial Planners Say

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By MICHAEL SASSO

msasso@tampatrib.com

Published: October 12, 2008

TAMPA - For Scott Brown, chief economist at Raymond James Financial, the question is no longer whether we're in a recession.

We definitely are, he says. Now, the questions are how long will the recession last and how deep will it be, including how many jobs will be lost, he said. Another question on people's minds: how to protect their money when the stock market is gong haywire.

"If you're worried about a recession, don't be. It looks like we're already there," Brown told a group of journalists assembled for an economic roundtable Wednesday.

Last week, the Tribune talked to Brown about the economy, as well as two financial planners, on what investors can do to insulate their money from the recession's fury. They are Kimberly Overman, president of The Financial Well and president-elect of the Financial Planning Association's Tampa Bay chapter, and Carl von dem Bussche of Financial Guidance Group of Palm Harbor.

How many people are going to lose their jobs in the recession may depend on when banks begin lending money again, Brown said, because at the moment businesses aren't able to get the financing they need to expand. In past recessions, such as in 1982, the national unemployment rate was higher than 10 percent.

Brown doesn't think unemployment will rise that high, but thinks it could reach 7 percent or 7.5 percent by the middle of next year. The nationwide unemployment rate is 6.1 percent. Florida's unemployment rate could be slightly higher than the nation's by mid-2009, because of our deeper problems in the housing market.

Until the economy starts growing again, people may need to re-evaluate their investments and build up their rainy-day fund. Among financial planners' advice:

•Don't sell in a panic. It's OK to look at your retirement plan or investment portfolio frequently, but resist the urge to pull out all of your money because you'll make rash decisions, Overman said. Instead of obsessing over how much you've lost, consider whether you have the right amount invested in stock funds, bond funds and money market funds.

"If you're going there just to see whether they're gaining money or losing money, you shouldn't be going there," Overman said.

•Consider when you'll need your retirement income. If you're young, you can probably withstand the topsy-turvy market until it rebounds, Overman said. In fact, stocks are so cheap right now that it might be a good buying opportunity, she said.

People approaching retirement should have more conservative investments, such as bonds and other safe investments. But they should still own some stock funds so that they can have some growth in their investments, she said.

•Consider municipal bonds. High-quality municipal bonds, which are rated AAA, are fairly cheap at the moment and still can provide investment returns of 5 percent, which beats inflation, said von dem Bussche.

"So that's one way you can make a little bit more than the inflation rate," he said.

•Seek out dividends. Not every company that offers publicly traded stock pays dividends. If you're particularly nervous about what's happening in the stock market, you may consider buying stock in companies that pay dividends, rather than just hoping the stock appreciates in value, Overman said.

Tribune researcher Stephanie Pincus contributed to this report. Reporter Michael Sasso can be reached at (813) 259-7865.

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