A Big-Picture Plan to Beat Volatility

08/22/2011 7:00 am EST


Keep your focus on a long-term investing horizon, says Greg Heaton, who tells Kate Stalter that investors should tune out the market “noise” at times like these, and stick to their financial game plans. He has rebalanced client portfolios as market conditions change, but he cautions retail investors to avoid hot commodities such as gold.

Kate Stalter: Today’s advisor is Greg Heaton. He is with Wisdom Financial Services in Geneseo, Illinois. Thank you very much Greg for joining us today.

Greg Heaton: Thanks for having me Kate.

Kate Stalter: Why don’t we start out with the obvious topic that is on everybody’s mind these days, which is the market volatility? What is it that you are telling your clients about that you feel is important, and what do individual investors need to know right now?

Greg Heaton: We are keeping them focused in on their time horizon, because that is so important in the marketplace. Because when we talk with folks and they have a time horizon of less than one year, we will tell those folks they don’t belong in the stock market. That is too short a time horizon, and they don’t belong in the marketplace.

If they have a longer time horizon, of, say, three to five years, six to nine years, or ten years plus, then we do have a game plan for those folks that will keep them disciplined. We will tell them at this point in time to ride it out and don’t make any changes.

Kate Stalter: So given all of that, what is your strategy with your clients at this juncture? What kind of vehicles are you putting them into?

Greg Heaton: Well it’s very simple; we build portfolios through Matson Money and the portfolios are designed in a way that captures the entire market return. We are not trying to guess a sector, or guess either large or small, international or US.

We are diversified across 44 countries around the world in 19 asset categories, or 19 asset classes, and it is our job to keep them focused and keep them disciplined. We are not simply just buy-and-hold, but we do believe in buying and rebalancing a portfolio.

Kate Stalter: Is there anything that you believe individual investors should steer clear of these days? Any investments that they should avoid or any strategies to avoid?

Greg Heaton: Well absolutely, I think what you see on TV or the Internet, most of the things everybody is talking about buying is in gold. Gold is a commodity and we don’t believe in an actual buy in gold or oil or those type of commodities.

We believe that equities, for the long haul, the long run, are going to pay great dividends to our clients.

Kate Stalter: Okay, so stick with equities and don’t go with the flavor-of-the-month, so to speak?

Greg Heaton: Absolutely, absolutely.

Kate Stalter: Just to kind sum up here Greg: What should people do to calm some of the fear that many investors are feeling right now? I know you are an investing coach. What do you say to clients who are getting fearful these days?

Greg Heaton: Well, what we do with our clients is, we go back and say, “OK, what is our game plan here? What is our time horizon? Is it something that we need money short-term?”

And for a lot of our clients that have a short-term need, some of those folks are holding cash and are able to dip into that savings for the cash for the short-term needs. But again, if their goal, if their time horizon is longer term, we tell them to stay focused. We will keep them focused as a matter of fact.

Even back in July, after we had a nice run in the marketplace, we actually had rebalanced our portfolios for our clients automatically, so they were able to take a little bit out of the equity and out of the international side and put it into the fixed-income side.

We continue to do that for our clients, and we have a game plan for them. We are going to keep them in that game plan and we are not going to let them waver.

We actually just tell them to shut off what we deem is “financial pornography.” We tell them to shut all that noise off, because it really doesn’t help them. It actually hurts them because they get very emotional with their monies and when they are emotional, they can tend to make bad mistakes.

So we tell them to turn off the hype and stay focused and stay disciplined.

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