Guiding the jittery

BOSTON – So you’re trying to save for retirement, but at a loss for what to do after seeing the market slide to 1997 levels? Don’t worry so much – at least you’ve got good company.

Professional money managers are also in uncharted territory. They’re unsure how to respond to clients who are adrift after seeing the market sink below the worst-case scenarios they set in their investment plans.

In a week when the Dow Jones industrial average sank below 7,000 points, the Associated Press asked several money managers how they’re dealing with market forces and investor behavior that are defying expectations:

•Mark Travis, Intrepid Capital Funds, in Jacksonville Beach, Fla.: Many of Travis’ private clients are at an age where they’ve protected themselves from stock volatility. They’ve put more than half their savings in bonds or money-market funds. But when the markets plunge, they can get just as jittery as investors who have everything riding on stocks. These days, Travis spends more time than usual on the phone with nervous clients.

The challenge comes in reminding people that benchmarks are just a general gauge of performance. Travis measures performance of his company’s mutual funds by comparing against the areas of the market that each fund tracks.

•Ben Inker, director of asset allocation, GMO LLC: Inker helps his firm’s money managers make investment decisions and right now he calls stocks “compellingly cheap.” Since October, that’s where Boston-based GMO has been shifting more of the $86 billion it manages for institutional clients such as endowments, foundations and pension funds.

Inker takes heart in the opportunities for long-term investors who stick to their plans. “Stocks are cheaper than they have been in a long time. And as bad as the economy is, it will not be bad forever.”

•Kent Croft, chief investment officer of Baltimore-based Croft Funds: Research shows the disappointment most investors feel from a market loss is deeper than the joy they experience from a comparably sized gain. “It explains why the market goes down a lot faster than it comes back up,” Croft said.

He thinks investors are naturally optimists, even if many are now racked by fear. At such times, they’re prone to latching onto any news that breaks the barrage of negative headlines.

So Croft is carefully watching for any indication that the economy may be turning a corner, or that the Obama administration’s rescue measures may be gaining traction. “When you finally get some whiff of something suggesting that things may be less bad down the road, things can turn,” he said.

At such times, market watchers shouldn’t disregard seemingly remote factors that can nevertheless influence how willing investors are to buy or sell. So Croft says it’s not beyond the realm of possibility that investors may take a cue from the arrival of spring.

“People are just sick and tired of being negative. The days are getting longer, and that type of thing can affect mood.”