Unless you are one of the lucky few who did not lose a significant amount of value in your investments during 2008, you should scrutinize your accounts for undue risk and potential abuses. At year-end, stocks are down on average over 30%, bonds about 18%. Economic conditions continue to deteriorate. There is considerable risk to both stocks and bonds going forward for a number of reasons, including the fact that the federal reserve’s attempt to slay the dragon of deflation by printing money like mad may well conjure up the evil genie of inflation. See Is the Medicine Worse Than the Illness?, by James Grant, Wall Street Journal, December 20, 2008.
Now is the time to reevaluate your tolerance for risk, says Karen Blumenthal of the Wall Street Journal in her December 31, 2008 article entitled Assessing Risk: Questions to Ask Yourself. As a general rule, short-term money ? i.e., money that you may need to access in three to five years ? should not be invested in stocks. The volatility is just too great ? meaning that when you need the money, stocks could be way down like they are today, and you could be forced to sell at a loss.
Now is also the time to scrutinize your accounts for possible mismanagement, and determine whether some or all of your losses can be recouped in arbitration. Brokers and financial advisors are required by law not to recommend an investment or investment strategy that is unsuitable or inappropriate based on the investor’s investment objectives and risk tolerance. They are also required by law to fully disclose all the risks associated with each particular investment. Questions to ask yourself include: Did my advisor recommend an appropriate allocation of stocks, bonds and cash? Within each such asset class, did my advisor recommend an appropriate diversification so that my stocks, for example, were not overly concentrated in one or a few sectors of the economy? Did my advisor carefully inquire into my risk tolerance fully discuss the risks of his or her recommendations prior to my investing? Did my advisor provide me with reasonable disclosure of the specific risks of my investments? Brokers and financial advisors can be compelled to compensate investors for losses caused by their failure to meet such legal duties.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions, and have aided clients who have been the victims of financial adviser abuse and scams. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.