Ups and downs come with territory, Valley analysts say

By Don Shilling

Anthony Lariccia preaches emotional stability during tough times in the markets.

1“It’s my opinion that the worst is behind us,” said Lariccia, a Canfield financial adviser who has given away more than $11 million to area organizations over the years.

For this story, Lariccia was happy to give some free advice in how to deal with stock markets that have swung wildly in the past week because of the problems with Wall Street investment banks.

“The trick is to look at the long-term view and keep your emotions controlled at all times,” Lariccia said.

With the Dow Jones industrial average down about 18 percent this year, Lariccia knows investors are nervous. Much of his time recently has been spent assuring clients that stock markets will be fine — if given time.

“The biggest problem is psychology. One week is long-term for some people, not five or 10 years. You have to be emotionally stable to see that,” he said.

Reid Schmutz, president of the Youngstown State University Foundation, acknowledged that a down market can rattle the nerves. The foundation, which provides scholarships and other grants, had assets of $161 million June 30, about $9 million less than it had a year earlier.

“We just stay the course in times like these. Sometimes you just have to breathe a little deeper than others,” he said.

Though stock market values fluctuate from year to year, they go up an average of 7 percent a year over time, he said.

The foundation hasn’t made any changes because of the recent down market, he said.

About two-thirds of the foundation’s portfolio is invested in stocks. Relying on the market is the best way to earn enough to outpace inflation, he said.

Though the foundation’s assets have declined, the income produced by its investments has actually increased, he said. The income is produced by dividends paid on stock investments and interest earned on bonds.

Patricia Brozik, president of the Community Foundation of Mahoning Valley, said taking a long-term view is essential when building an endowment.

“We know there are going to be ups and there are going to be downs,” she said.

No change in investment strategy has been ordered because of the recent stock declines, she said. The organization, which was founded to make grants in the community in 1999, has more than $11 million in assets.

Diversification of investments is the key, she said. The foundation has five local trust companies that invest part of the portfolio using a targeted investment strategy. That includes both stocks and bonds.

Jan Strasfeld, executive director of the Youngstown Foundation, said that organization also remains committed to building its endowment in large part through stocks. The foundation has about $85 million in assets.

In recent years, it has diversified its investments by relying more on international stocks and small-company stocks and less on large-company stocks.

As for individual investors, Lariccia suggested this would be a good time to increase investments because stock prices are down.

Lariccia is a stockbroker for Merrill Lynch, which has been struggling with bad debt from subprime loans and the housing downturn. Bank of America has proposed taking over the company. Lariccia said the takeover would be positive for Merrill Lynch because of the financial strength of Bank of America.

He said he likes the stocks of Johnson & Johnson, a consumer products company, and PepsiCo, which makes drinks and snacks, because the companies are dominant in their industries and are well-capitalized. Among financial stocks, he likes PNC Financial Services Group because it has retained its stock value despite the recent financial crisis.

As for investors with 401(k) retirement accounts, he advised them to keep their money in mutual funds with strong performance records.

“Never panic and sell out,” he said. “Emotional composure in all kinds of weather is the best way.”

shilling@vindy.com