These days, the volatile stock market has many people worrying about their finances. But the market isn't as bad as it may seem, Don Crowley, president and CEO of Family Financial Centers in Payson, said.
"In the great bull market we've been in for the past 20 years, people have gotten the false sense that the market will always go up," Crowley said. "We're in a normal market now, in which risks and rewards are balanced."
What do today's stock market trends mean for the average investor? Think conservatively, Crowley said. "It's a difficult period. That's why you're better off being conservative rather than aggressive."
Crowley, who specializes in investment management, took a circuitous route to his current profession. Having majored in economics and English at the University of California-Berkeley, Crowley started off his career as a journalist before ultimately finding his way into finance. In 1967, he was hired as a research director for an investment firm covering the banking industry. And in the 1970s, he went to work for the Bank of America in San Francisco as a financial stock analyst.
Crowley left the Bay Area and moved to Payson in 1999, and is licensed as an investment adviser in Arizona, currently handling about 40 accounts.
"For an account where I have total sway, I invest as I would my own," he said about his investment strategy for clients.
Crowley said that investing in stocks can be a very humbling business "because no one is ever 100 percent right. So much of it is based on psychology, and so much is hard to anticipate. Stock prices are based on expectations. You're dealing with the psychology of the masses. It's always a balance between fear and greed in the investment market.
"For the most part, prices reflect the state of knowledge. Someone might have a slight advantage, but by and large, we're all working in a market where there are a lot of smart people. My message is to be very patient. If you go after what Wall Street is touting, you'll lose your shirt. Wall Street above all else is a selling machine."
Crowley notes that many people became overly confident because the market was so strong in the '80s and '90s. But, as he points out, "A rising tide takes all boats. The market is very forgiving. It's easy to think you're smart. There's a saying I love: 'Don't confuse brains with a bull market.'"
Many people who invest are looking for a quick killing.
"In the great bull market that we've been in the past 20 years, people have gotten the false sense that the market will always go up," he said.
Because of this optimism, a number of individuals became "day traders" in recent years. Many of them were washed out this past year, Crowley said. "I don't do day trading because I don't have the constitution for it. I don't want to sit at the machine all day."
Venture capitalists have also been hit hard in recent months, Crowley said. "They've been burned pretty badly in this decline" he said. "Their success was very much dependent on the ability of Wall Street to sell those initial offerings."
Crowley's advice to investors is to be patient and conservative.
"I personally don't think the hi-tech stocks will be that good for the next 10 years. Tech companies in general have used their currency broadly in the form of stock options for employees and payment for services. This results in watered-down stock."
The best bet for most investors is mutual funds, Crowley said.
"You don't get the sleeplessness you get from high-risk investments," he said. "A good mutual fund can give you these same kind of rates too, and you don't have to spend a lot of time looking at it."
Crowley's Tips for Investing
l. Before people invest at all, they should make sure they have enough for the basics.
2. A balanced approach is the best way to go. Stocks should be diversified, such as a mutual fund with a good exposure to the market. Don't invest in a tech or biotech fund only.
3. If people are going to buy individual stocks, then they should study things very closely. There are a lot of smart people looking at the markets, and it's easy to make mistakes. Study a company closely. Find out how much stock has been sprinkled around as "options." Look closely at a company's balance sheet.
4. Never underestimate the power of compounding. "So many people want to make 30 percent. I look back now, and I would have been better with 8 or 9 percent. Just the power of compounding is enormous."