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By Jason Stipp | 05-07-2010 08:01 AM

Shaking Off the Market Shocks

Morningstar's Jeremy Glaser and Christine Benz offer tips for assessing risk and opportunity in a tumultuous market.

Jason Stipp: I'm Jason Stipp for Morningstar. Now that we've had a chance to sleep on quite a wild ride in the market on Thursday, what do investors do today? How should they think about their portfolios? How should they think about the risks and the opportunities that may be out there, given all the market activity that we've seen?

I'm here with Morningstar markets editor, Jeremy Glaser and Christine Benz. She's Morningstar's Director of Personal Finance. Thanks for joining me, guys.

Christine Benz: Nice to be here.

Jeremy Glaser: You're welcome, Jason.

Stipp: Yesterday, I think, looking back on it, it potentially could be a learning experience for investors and what their risk tolerance is. We saw quite a spike of downward volatility yesterday. How should investors think about this, as far as how much risk they can tolerate, and does this day change things for people?

Benz: Well, I think it's a mistake to let risk tolerance drive what you do because, in my experience, investors are a terrible judge of what their risk tolerance is. So I come back to having a plan, the importance of having a plan. The people who seem to have the worst experience at times like these, are those who don't have a plan.

So if you don't have one, get one. If you have one, check to see how you're doing versus that plan. Maybe you're allocations are up or down versus what your targets are. And that would be a starting point.

Stipp: Jeremy, do you think anything that happened in the market yesterday changed the risk situation? I mean, is the market dramatically different Thursday than it was on Wednesday? Or what exactly do you think happened with risk yesterday?

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