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By Jason Stipp | 10-13-2011 01:51 PM

Levin: Worst Decisions Made at Market Extremes

Investors who are worried about the current market downdraft should consider the 2009-2010 recovery and their own time horizon before abandoning their equity holdings, says Accredited Investors' Ross Levin.

Jason Stipp: I'm Jason Stipp for Morningstar. Volatility has returned to the markets this fall as concerns weigh over the sluggish economy and the ongoing European sovereign debt crisis.

And as we know, volatile markets can make nervous investors of us all. Here with me to offer his tips for tumultuous markets is Ross Levin. Ross is a certified financial planner, a founding principal and the president of Accredited Investors.

Thanks for calling in, Ross.

Ross Levin: Thank you, Jason. I look forward to talking with you about this.

Stipp: First question for you. You've probably received a call like this before, but let's say that I am a nervous investor. I've just gone through several weeks where we've had up and down markets, and I call you up and I just say, 'Ross, I can't take the volatility anymore. I need to get out of equities. I can't sleep at night. Can you get me out of my stock positions?'

Levin: Well, Jason, the first thing to think about ... I really appreciate how anxious people are regarding what's going on. The most important thing for people to step back and think about is, what is the ultimate use for this money? What is their time horizon? And how should they be invested given that time horizon?

So, the question should you completely get out of equities or should you completely get into bonds, it's not really as simple as that, and I think the first thing we need to do is acknowledge how difficult things are, but I think also we have some experience for people to think about. And that experience may be uncomfortable for them, but 2008 and 2009 was not that far away, and for those clients who could not take the volatility or the losses that they were experiencing, and sold out in March of 2009, they missed a rally of epic proportions. And again, I think what people end up doing at the extremes both when the markets are too strong and when the markets are too weak, at the extremes is when people end up making decisions that go against their best interests.

Stipp: Ross, you mentioned there that time horizon is an important thing to consider as you're thinking about where your clients would have their assets. So, if I am near retirement or in retirement, and I'm calling you with these concerns, what sort of checklist would you go over with me in that case, given that I obviously have a more immediate need potentially for my portfolio?

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