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Plan for long haul but tweak holdings

Source:ap.org Author:TIM PARADIS Date:03/25/14 Click:

NEW YORK - Bob Freedland tries to follow the advice of the pros and keep his money invested for the long term but Wall Street's latest jitters have left him a little worried.

Like many investors alarmed by an unyielding parade of triple-digit moves in the Dow Jones industrial average in recent weeks, Freedland, a physician in La Crosse, Wis., tries to set aside emotion but there is always that temptation to dump his holdings and exit the markets.

But while looking past day-to-day gyrations can be hard for even disciplined investors, planning for a distant future doesn't mean investing and forgetting. So Freedland has scanned his diverse portfolio to plug any holes and shifted some of his holdings.

"One of the things that I do is I certainly pull in my horns," Freedland said.

Despite his misgivings over whether the market is headed for a pullback steeper than an ordinary correction, he is leaving the bulk of his investments in mutual funds untouched. But he is putting some of the money he uses for short-term trading toward generally less risky bets — he did transfer some money out of media and telecommunications investments that have done well and into natural resources, a strong performer in recent years.

"I'm going to defer to my managers who manage my funds. I'm going to leave it in there assuming I'm not going to need it for another 10 years," he said.

But it's hard to not look at the some of Wall Street's largest moves and cringe.

"I've actually found that my psychology moves with the market so when the market declines I get very pessimistic and when the market goes higher I get very optimistic," Freedland said.

Tim Swanson, chief investment officer at National City's Private Client Group in Cleveland, said some investors rattled by the market's pullback haven't properly considered the chances they're willing to take. Rather than panic, they should simply re-evaluate their holdings and make sure they still match their long-term goals.

"When things go up, people tend to overestimate their risk tolerance," he said. "Then you get a little bit of volatility and get a statement or two where they've lost money and they're not as risk tolerant as they thought they were."

In 2008, the Dow and the Standard & Poor's 500 index, which many mutual funds track and are measured against, are each down more than 5 percent, though off their lows. The technology-heavy Nasdaq composite index has lost more than twice that.

Swanson said he hasn't made major investment changes since the market began retreating although he is reining in some expectations. He thinks emerging markets investments won't continue to see the biggest double-digit gains of recent years.

"Our clients have benefited handsomely from that sector. There's still long-term opportunity there. But should they be as enamored as they were one or two years ago? Probably not," he said.

He also contends that areas that have been beaten down such as financials or the consumer discretionary sector, which includes homebuilders, could fall to levels where they look more attractive.

Sean Hannon, a chartered financial analyst at Epic Advisors LLC in Westfield, N.J., predicts commodities will remain strong in coming years amid rising demand from developing countries.

"They've done extremely well," he said. "I'm confident at some point we're going to get a very nasty correction in that market but at the same time I think the global growth story is still there."

It's wise on occasion to consider selling strong performers, he said.

"An investor who has made their money and is questioning if there is more upside — I think that's the time to pull the trigger.

"I've got a handful of investors who are nervous about the markets in general," he said. "What you really want to do is have a strong view and understand what you want to own and why you want to own it," Hannon said.

Freedland, 53, is taking some money set aside for trading and making day-to-day bets on the market's ups and downs as he awaits strong signals about the economy.

"There is no follow-through on these moves," he said of the abrupt shifts in the market's moods. "I'm not even sure this strategy will be profitable. My own internal barometer is telling that things are bad."

(This version CORRECTS Sean Hannon's title in 15th graf.)

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