For Jack Becker, diversification has been a shelter for his savings against the current financial storm. But many others counting on that 401(k) nest egg are getting left out in the cold.
Becker, 73, of Reisterstown, is a retired city school administrator and also owned a television store, which he sold in 2003.
Like others, he’s watched his stock in Coca-Cola Co., Colgate-Palmolive Co. and The Southern Co. drop over the last month.
But thanks to a strong IRA, dividends from those stocks and other holdings, he said he’s riding things out without too much trouble.
“I’m not as bad as the people who had Lehman Brothers, and some of the others right now,” Becker said. “My feeling is if I were 40 years old and I had it all in stocks, I’d be scared.”
Monday brought even more reason to be scared, as the Dow Jones Industrial Average closed down 369 points, despite Congress’ passing of a federal bailout package on Friday. The Dow at one point Monday was down 800 points before recovering, its largest-ever one day drop, and fell below 10,000 for the first time in four years.
The plummeting stock market has shattered 401(k) and mutual fund portfolios across the country, experts said.
The average U.S. diversified equity fund lost 9.96 percent in the third quarter and 18.98 percent this year, according to mutual fund tracker Lipper Inc.
“It’s devastating to 401(k)s,” said Ted Provenza, a certified financial planner with the Owings Mills-based Provenza Group. “What else are they going to count on? They better count on their personal savings. What I’ve advised people to do is move into a stable-value fund.”
Provenza said he’s advised those who are qualified to roll their 401(k) into other areas, including a more stable IRA, or to restructure their investments to provide a guaranteed monthly income.
Public outlook on the crisis is not optimistic. A majority of Americans think it is “somewhat likely” or “very likely” that the country will slip into a depression equal to that of the Great Depression, according to a CNN/Opinion Research Corp. poll released Monday. About 60 percent of respondents said such a downturn was likely, with 21 percent saying it was “very likely,” according to the poll.
Ron Cole, 62, a market analyst, and his wife, Shirley, 62, said they’ve moved holdings in foreign markets back to American companies over the last month.
The Pasadena residents were also concerned about large companies scaling back benefits to retirees.
“It’s been a little scary, understanding what’s going on,” Ron Cole said. “I feel sorry for some of the people who have retired and big companies have cut off their benefits, and they have to continue working.”
Local stocks
Here’s how some of Baltimore’s largest publicly traded companies fared on Monday:
Company Open Close Change Percent
from Friday Change
Constellation Energy $28.49 $26.83 -$1.79 -6.3
W.R. Grace $11.00 $10.84 -$0.60 -5.2
Legg Mason $32.55 $34.10 +$0.10 +0.3
T. Rowe Price $48.55 $52.18 +$2.30 +4.6
Under Armour $26.16 $29.12 +$2.11 +7.8
The Associated Press contributed to this story.
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