Long-term investors watch the frenzy

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When Mark Eagleton opens a new account for an individual investor, one of the first things he says is that it’s easy to go online and make changes every day.

One of the second things he says is not to do that.

“Most of our customers are pretty comfortable saying this is a long-term investment,” said Eagleton, executive vice president of wealth management at Citizens Bank & Trust. “We try not to let their emotions get ahead of them.”

That’s easier said than done when social media, not to mention the financial news media, is blowing up about quadruple-digit percentage gains for some investors.

About 55% of Americans own some stocks, but few engage in the kind of day trading that sent shares of GameStop and other companies to brief, dizzying highs. Most are saving for retirement or a child’s education with pensions, 401(k) accounts and mutual funds. These are investments that don’t see the kind wild swings that captivated financial professionals and individual investors when GameStop rose 1,700% or cryptocurrencies and commodities like silver showed similar, dramatic spikes.

Some of those long-term investors may have been asking if they missed something.

“We had several inquiries,” said Mark Matthews, a financial advisor with Edward Jones investments. “Anything that creates volatility is going to catch people’s attention. My advice was it’s not going to have any impact on a long-term investor. They don’t need to take any action one way or another.”

That doesn’t mean it’s easy to watch, even with no skin in the GameStop action, because anything that generates market volatility raises fears of more widespread losses on Wall Street. Some speculate that the Federal Reserve’s low-interest rate policies are fueling a speculative bubble in asset prices, something that could burst if GameStop’s fall creates a wider sell-off or loss in confidence.

At Edward Jones, Matthews believes that the GameStop roller coaster will be limited to that particular company. He notes that market fundamentals, like credit spreads, corporate earnings and growth in different market sectors within the Standard & Poor’s 500 — is more favorable today than on the cusp of the dot-com bust of the early 2000s.

“People do worry about bubbles, and you can have a bubble in a certain stock, like GameStop. That doesn’t mean the market is in a bubble,” he said.

Both Eagleton and Matthews agree one of the current challenges with investing is the 24-hour news cycle and the rise of social media, which can turn the daily ins and outs of financial information into a frenzy.

“You can’t react to everything you hear,” Matthews said. “There’s going to be something else 10 minutes from now. We try to invest on principles that have stood the test of time.”

Eagleton, whose company manages the St. Joseph police pension, recalls a couple of investors who pulled their money out of the market after stocks tumbled during the coronavirus shutdowns. Guess what happened next?

“The market had this incredible recovery and now they’re kicking themselves,” Eagleton said.

GameStop is down to $51 a share, which is off its high of $350 but still about 375% of where analysts believe it should be.

The Dow Jones Industrial Average is up 2.7% for the year and the S&P 500 has gained 4%.

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