Investors fear hard-won gains could vanish again

By Erin Ailworth and Todd Wallack
Globe Staff / August 6, 2011

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Tracy Sherman of Plymouth has plenty of reasons to be stressed about the financial markets’ swoon of the last two weeks, starting with a 12-year-old daughter who already talks about one day attending Harvard University, and a 10-year-old son who could also have expensive educational aspirations.

Like other individual investors here and across the nation, she says her confidence in her family’s ability to save for college tuition and retirement has been rattled, first by the logjam in Congress over raising the debt ceiling and now by the gloomy trend and wild turns in US and world financial markets.

“I’m nervous. I’d like to take everything out and put it in the mattress, but you can’t do that,’’ said Sherman, 44, while loading bags into her car outside a Plymouth grocery store.

Matt Liptak, a corporate recruiter from Dedham, also has been shaken by the stock market’s plunge on Thursday - a more than 500-point drop in the Dow Jones industrial average - which was followed by jittery trading yesterday. In 2009, Liptak had to pull $15,000 out of a 401(k) plan after being laid off. He has steadily been replenishing his savings since then, a march toward economic stability that suddenly seems to have hit a major roadblock.

“It is worrisome,’’ he said. “I built up my 401(k) quite a lot in the last couple of years, [and now] who knows what could happen to it?’’

So far, however, Liptak, 41, isn’t tempted to withdraw his money or make drastic changes in his portfolio, a cautious approach that most financial advisers endorse.

Still, for ordinary investors - those whose involvement in the complex world of finance involves thousands, not millions, of dollars - there was no escaping the “Will I have to start all over again?’’ feeling this week. The recent string of down days seems especially cruel because it began just as investors had nearly recouped the massive losses they suffered during the market crash that began in late 2008.

The Dow, which peaked above 14,000 four years ago, lost more than half its value by March 2009, leaving many individual investors afraid to open their 401(k) statements. For those who needed to tap into their funds, it was a particularly devastating period.

And while the uphill climb has had its bumpy moments, investors who stayed the course received a payoff - this spring the Dow was closing in on the 13,000 mark. Today, with the average well below 12,000 and talk of an economic recovery turning into speculation about another recession, the dark days of a few years ago seem uncomfortably close.

“It was off to a fairly good start earlier, but now I’m concerned,’’ said Plymouth resident Ernie Evans, a retired corporate manager who works part time in retail. “But there isn’t a whole lot you can do about it except ride it out. I’m trying not to panic.’’

That’s the approach Sue Broderick, 52, a self-employed bookkeeper from Newton, also is taking.

“I know my stocks are worth less than they were. But I’m not planning on pulling out,’’ said Broderick. She has set aside a six-month emergency fund, but believes the market will eventually bounce back and become robust before she reaches her late 60s, when she hopes to retire.

“I think you have a better chance of making a little money in the market if you can afford to keep it in there,’’ she said. “I wish I had more money to put in.’’

Vanguard, the nation’s largest mutual fund company, has noticed only a slight uptick in calls from people fretting about the market drop, said spokeswoman Linda Wolohan.

Fidelity Investments, based in Boston, has received more calls from concerned customers recently, but few of them are making wholesale changes to their investments, according to spokesman Vincent Loporchio.

Most money managers this week were advising clients to sit tight and keep their portfolios intact. It’s the long-term view typically recommended during times likes these.

“Being reactionary is not a good thing,’’ said Michael Tucci, president of Lexington Wealth Management, an advisory firm with offices in Lexington and New York City. “You read Homer’s ‘Odyssey’ and you read about the beautiful sirens and when they start singing you want to jump into the sea. So we talk [to our clients] about the idea of, ‘Hey, tie me to the mast so that when that happens, I don’t jump.’ ’’

At Reynders, McVeigh Capital Management LLC, company president Patrick McVeigh said he is telling clients to stick with their long-term plans - but to also keep an eye out for deals.

“It’s a rational thing to be scared, especially with what we just went through with the [possible debt] default,’’ McVeigh said. But “sometimes the best opportunities are when things don’t feel good.’’

For instance, McVeigh said, health care stocks could start to take off as the population ages. But he urged investors to take a cautious approach before buying into potential bargains created because of the market slump.

“You have to prepare for these things in advance,’’ McVeigh said. “You can incrementally add to things [at a time like this] but, you know, keep a solid core.’’

Sherman, the Plymouth mother of two, has a long-enough investment timeline to live with a slow and steady recovery, but she knows other investors may be facing immediate financial pressures.

“I feel I’m still young enough to take that chance and ride this out,’’ she said, but “I feel bad for the retirees.’’

Erin Ailworth can be reached at or on Twitter @ailworth; Todd Wallack can be reached at