With volatility in the stock market shaking up investors, Jonathan Murray, a financial adviser at UBS Financial Services in Hunt Valley, says people should keep a long-term outlook and accept such corrections as normal.
Murray appears regularly on WBAL Radio to discuss finance and serves as a director for the University of Maryland Center for Environmental Studies and the University of Maryland System Foundation. Before entering the world of finance, he was an assistant dean of admissions at his alma mater, Dickinson College in Carlisle, Pa.
Murray's twin brother, David, is also a financial adviser, and in 2006 the brothers published a book on personal finance: "Two For the Money: The Sensible Plan for Making It All Work."
In the book, the twins describe growing up modestly in suburban Pittsburgh in a childhood that would "look familiar to lots of baby boomers" while learning lessons in working hard and being smart with money.
The stock market has been volatile lately. What's going on here, and should investors be worried?
In my experience, you can't tell people not to be worried; they're either worried or they're not, and no amount of empirical evidence or data can change that. What I will say is that there's always a reason to worry when investing. There's always been an "apocalypse du jour." Today's candidates include Ebola, Russia, ISIS, the European slowdown, China and a Federal Reserve Bank that has overstepped its bounds. But I remember similar reasons for concern in the past, such as SARS, Long-Term Capital, the collapse of the Thai bot, the Russian ruble, Y2K, Saddam Hussein, 9/11, credit default swaps, the collapse of Lehman, and fears about a run on our banks. Yet, during that time, I watched the Dow go from 2,000 to 17,000. One thing's for sure ... now is always the hardest time to invest. I believe it is important for investors to remember market corrections and recoveries are frequent and a normal part of investing.
Which sectors are most attractive for investors at the moment? What should investors avoid?
The silver lining with volatile markets is that it may present buying opportunities. When stock prices decline, many investors feel it is a chance to buy stocks that may have been overvalued. As opposed to a period of rising stock prices, where one has to be more careful about differentiating and identifying value, a down market may give investors the rare opportunity to invest at a discount. So sector analysis becomes a little less important; you should consider looking for great companies at good prices, and good companies at great prices. Volatile markets may provide you with that opportunity. Thematically, I am excited about investing in companies that will benefit from energy independence, capital spending by businesses, innovations in technology and health care, and in water. There generally exist some really compelling ideas in those areas.
As far as what to avoid, I believe that most investors should be very, very careful about buying certain fixed-income investments today. With yields at historic lows, many investors who are looking for yields might extend maturities and lock in longer duration bonds. The concern is, when interest rates rise, as they usually do, the market value of those fixed-income securities could plummet — significantly — in an investment that is considered to be less subject to market volatility, or "safer." So, ironically, given the current yield curve, I would avoid many fixed-income investments that are perceived to be "safer" than stocks, since if you have to sell those bonds prior to maturity, you could lose a significant portion of your capital.
What kind of impact will the different habits of millennials have on the market long term?
With regard to millennials, I don't believe that their current habits will have a dramatic impact on the markets. Many millennials may be skeptical about their Social Security benefits being there for them, so they know they need to prepare for their own retirement. My bigger concern for millennials is how they intend to pay off their staggering college loans. That's a huge concern for this country.
What kind of impact is the Ebola scare having on the market, and will these trends continue?
Ebola could become a legitimate market issue, in my opinion. Markets move, at least in part, due to consumer confidence, and if consumers are nervous about traveling, getting on a plane, shopping in public, that has economic implications. I remember the SARS scare back in the early 2000s, and it had a slowing effect. We need to get a handle on this disease, [or] else U.S. consumers will crawl into their bunkers to hide.
What's your strategy for your personal investments?
My personal investment strategy is the same one that I utilize for my clients. I learned it from my dad, who is still in the investment business. It is based on prudent, time-tested principals: Be diversified, utilize proper asset allocation, and don't chase momentum or the "hot dot," stick to your customized financial plan, and keep your emotions out of it. It's pretty simple, but not always easy.
This is boring, old-fashioned, conservative, Ben Graham/Warren Buffett-style value investing, but it can work. Be an investor, not a speculator. The desired outcome is to make money over time, not overnight. Seek to avoid the big loss and protect on the downside. Attempt to generate a stable, growing income stream that can keep up with the rising cost of living. That's what I believe most serious investors want.
Title: Financial adviser, UBS Financial Services
Education: Bachelor's degree from Dickinson College in Pennsylvania
Family: Married for 26 years, two sons ages 21 and 18
Interests: Investing, the outdoors, classical and hard-rock music, Bethany Beach, Del.