Bailout questions, answers from financial experts

As the federal government's bailout of the financial sector takes shape, where's the smart money going? The Sacramento Bee asked five finance and business experts what they've been doing with their own investments in the last two weeks, and how the bailout has changed their thinking about the future.

Brad Barber

Professor of Finance

University of California, Davis, Graduate School of Management

Q: Have you made changes to your portfolio?

A: I have not. Generally, I'm waiting to see how things shake out. When you do something (in response to a crisis), you're managing your portfolio through the rearview mirror.

Q: How worried were you about your portfolio last week?

A: Personally, I wasn't anxious about it. I think we have reasonably strong institutions both politically and financially, so that a crisis would be resolved one way or the other.

I do think there'll be an economic slowdown that results from all of this. But I don't think it materially affects what one's going to do. There's a saying that you should worry about things over which you have control and not worry about those things over which you have little control. And this is one of those things over which I personally have very little control - and I think that's true for over 99 percent of the population.

Rashida Lilani

Owner, Lilani Wealth Management, Roseville, Calif.

Q: Any changes to your own portfolio?

A: I actually bought some financial stocks on Wednesday. I bought a sector fund which has multiple financial holdings around the world. I am buying. I am not selling. I definitely believe in buying low and selling high, and I try to implement that in my own portfolio. It's hard to convince some of my clients to do the same, but some of them have taken my recommendation and gone out and bought.

Q: How worried were you last Wednesday during the depth of the crisis?

A: At some point, we're all human, and we think from the heart instead of the mind. So you do have anxieties, even if you're a financial planner and you live and breathe this stuff. But knowing better than to just look at the headlines helps. I focus on the long-term objectives instead of the short-term volatility.

Chris Ailman

Chief Investment Officer, California State Teachers' Retirement System

Q: Any changes to your portfolio?

A: No. I'm a very long-term investor. My wife often laughs - I tend to forget about my own money until the very end. Some of it also has to do with the fact that I'm a government employee, so my personal finances are very visible and exposed. To make it easy, I'm just in big broad mutual funds that hold the whole market.

Q: As the manager of a $155 billion pension portfolio, has the bailout plan made you sleep easier?

A: Yes. I was very encouraged on Friday when they announced the plan. If it's managed properly, I actually think the government can make money on this. And it bought us some time to work out the problems (in the credit markets).

Elfrena Foord

Principal in Foord, Van Bruggen, Ebersole & Pajak, a financial planning and wealth management firm in Sacramento.

Q: Any changes to your personal portfolio recently?

A: No. In terms of managing money, you want to take a big- picture perspective. We're not reacting to current market conditions because then it gets emotional. I think you're better off making decisions that are more studied, and you can't do that when the fire is happening.

Q: With the bailout moving ahead, are you looking to invest in stocks now?

A: The market hasn't gotten that cheap, so we're telling people, "Let's let things settle. Let's be patient."

There are a lot of factors still to be played out here. The market is a leading economic indicator, so it will recover before all the dust has settled, in anticipation that the dust will settle. But we've still got a lot of things going on.

Dennis Tootelian

Professor of Business, California State University, Sacramento, and director of the CSUS Center for Small Business.

Q: Has the bailout prompted you to make changes in your investment portfolio?

A: Not yet - but I'm sure thinking about it. The problem, of course, is if you're going to start bailing out of what you've got, you're going to take some heavy hits. I'm probably not going to do anything real quick. But ultimately I'll probably start to shift (from stocks) over to fixed-income investments.

Q: What factors are influencing your decision?

A: I was getting ready to move things over anyway, and the crisis has accelerated things. I just don't see a lot of growth potential. I see a lot of risk, and the market is unstable.

E-mail Jim Downing at jdowning(at)sacbee.com

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)