Newspaper article THE JOURNAL RECORD

Will Losses Unnerve Modern Investors?

Newspaper article THE JOURNAL RECORD

Will Losses Unnerve Modern Investors?

Article excerpt

NEW YORK -- When their monthly account statements begin arriving in the mail next week, investors will be staring at a collective $2 trillion loss.

It shouldn't come as a surprise that there will be some damage on the bottom line.

It will be the first time, however, that many people see their share of the loss tallied, down to the penny, in print. How they react to that swift kick in the portfolio may have a lot to do with whether stocks add significantly to Tuesday's rebound or sink farther into the first bear market since 1990. At one time Wednesday, Wall Street had entirely regained its Monday losses, but by closing, the Dow Jones industrials had ended down 45.06 to 7,782.37.

For a bull market that's always depended on the pluckiness of investors, it could mean trouble if they start thinking twice before uttering mantras such as "buy the dip" and "I'm in it for the long haul."

"We'll see if they're really long-term investors as they say they are," said Robert Streed, senior investment adviser at Northern Trust in Chicago, noting that major mutual fund companies are reporting a shift away from stocks.

While there has been no immediate sign of panic among individual investors, August did mark the first month in eight years that they've withdrawn more money from stock mutual funds than they've deposited, according to the market research firm Trimtabs.

"The most important thing is that the money stays in the financial system. If it goes from stock funds to bond funds, that's a short- term problem. Eventually that money flows back into stocks," said Streed. "We'd be worried if that money started going into apartment buildings or oil wells."

At least two prominent investment strategists stepped forward after Monday's 512-point tumble by the Dow Jones industrial average to assert that a "buy the dip" credo is not yet a thing of the past.

Abby Joseph Cohen, the chief market strategist at Goldman Sachs and the most noted "bull" on Wall Street, recommended that investors shift available cash into stocks, maintaining that a mounting global economic crisis won't push the United States into recession. …

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