The Personal Financial Planning Committee of the New York State Society of CPAs, Inc. requested that Bill Kriesel prepare a press release discussing current market conditions. To date, the NYSSCPA has not issued the press release, but we felt we wanted to get the information out to our clients as soon as possible. The following is the draft of the press release provided to the NYSSCPA public relations office.

This week has been one of the most challenging weeks the markets have faced, due to the bankruptcy filing of Lehman Brothers, the sale of Merrill Lynch to Bank of America and concerns about many other widely known financial companies.

The financial planning committee of the New York State Society of CPAs felt that it was important at this time to address risks inherent in the financial markets, as well as stating the availability of CPAs and other financial professional’s availability for consultation.

 It is understandable that the current state of the financial markets, and of the leading companies in the industry, can cause concern.  However, our general advice is to remain calm and not act based on emotion. Keep in mind that historically after other significant drops, the market has usually recovered within a short period of time.  A recent example of this is the September 11 terrorist attack, with the S&P 500 and Russell 2000 indexes gaining approximately 20% and 30% in the six months following the stock market lows after this tragedy.

Some advisors would argue that many excellent businesses are currently being sold at levels much below their fair market value and that this market turmoil is merely another downward cycle common to the market.  Other advisors are stating that this could be the start of a significant downturn and are expressing concerns over the viability of the whole financial system.

We feel that due to the steps already taken by the United States and several foreign governments, and the communication apparent between the government and the private sector, that our financial systems, although obviously changed, remain strong.

Each person should use this as an opportunity to evaluate their own risk tolerance and determine if it is appropriate for them to participate in the equity and bond markets.  All investments contain different elements of risk, including overall market risk, individual company risk, interest rate risk and default risk.  It is important as an investor to understand these risks, and make certain that your investment portfolio is tailored to meet your level of risk.

CPA’s and other financial advisors are available to assist individuals in determining their individual risk tolerance. If as an investor you are distressed or confused about the current markets and the effect on your investments, you should contact an advisor to review your particular situation.

In the near term, the current markets extreme volatility may continue. There has been, and will continue to be media coverage that ranges from declaring disaster to identifying this as a purchase opportunity.  It is important for you to filter through this information and to educate yourself on the current market conditions to determine the appropriate course of action for you.  Financial planners would caution you not to act on emotion, but on the results of gaining an understanding of the current market conditions and making certain that you are invested in a diversified portfolio based on your individual risk tolerance.

Prepared by William T. Kriesel, CPA/PFS, CFP ®, a member of the Personal Financial Planning Committee of the New York State Society of Certified Public Accountants.