Get Ready for "Statement Shock"

October 1, 2008
By seadmin

Amidst all of the frenzy on Wall Street and Capitol Hill, it’s easy to forget that the third quarter now is over, and in about a week or so investors will be receiving their 401(k) and other financial statements.

To this I say — get ready for a huge dose of "statement shock."

You are likely going to be in for a rude awakening, especially if you’ve been following the buy-and-hold recommendations of most financial advisors. You see, it’s not just the major market averages that have seen a huge decline in Q3.

If you own municipal bonds, high-yield closed-end funds, individual stocks, mutual funds, or just about any financial instrument, you’ll likely be staring at some really big losses.

These big losses are likely to lead to a wave of shareholder redemptions, as investors run for the exits. Unfortunately, this means a much longer road to recovery for the equity markets.

Statement shock leads to redemptions, and redemptions mean selling pressure — and that means lower equity prices.

My friends, it’s a vicious circle, and until that circle is interrupted, a safety-first mindset is your greatest ally.

Log In

Forgot Password