This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Defend Against Downgrade With Dividends

BOSTON (TheStreet) -- Oliver Pursche, manager of the $20 million GMG Defensive Beta Fund (MPDAX), said one of this largest clients phoned him late Thursday concerned about the sharp selloff in equities. Like most individual investors who were lost and blindsided by the bleeding, Pursche's client was looking for direction.

"He was very nervous. He wasn't quite freaking out, but he said 'Oliver, this is one of the times I need you to tell me everything is OK,'" Pursche said by phone Friday from his office in Suffern, N.Y.

Find Dividend Stocks, Funds and ETFs >>

In the time since that broad drop in stocks Thursday, uncertainty about the future has been ramped up following the decision by Standard & Poor's late Friday to strip the U.S. of its prestigious triple-A rating. With little indication about how global markets will react to the downgrade of U.S. debt, investors are left without answers on how to navigate the storm.

Pursche, though, manages to volatility and risk, not return. Volatility had been increasing heading into May, so he raised cash and increased his firm's exposure to short-term bonds. While many prognosticators and commentators are split about whether equities are a screaming buy or whether this is the beginning of Armageddon, Pursche told his client that the best course of action is to remain calm.

"History has shown time and time again that investors who allow their emotions to get the best of them tend to dramatically underperform the markets and fellow investors who have the fortitude to stick with their plan," he says. "Our advice and actions aren't about catching a falling knife. We're comfortable about our allocation."

Some investors are worried that the market will experience a crash like the one that occurred after the collapse of Lehman Brothers in 2008. Last week, the Dow Jones Industrial Average had its biggest loss since those dark times, so investors are rightfully worried. Pursche, though, argues that conditions are much different than they were three years ago.

"The market crash of 2008 and early 2009 was caused by a combination of excessive leverage, in particular in the financial markets, and a lack of liquidity," he says. "By contrast, today, banks and other institutions have decreased leverage -- in some cases as a result of being forced by new regulations -- and governments around the world have stepped in and continue to provide enormous amounts of liquidity. Structurally and fundamentally that is a very different environment than three years ago."

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,915.07 -70.54 -0.42%
S&P 500 1,964.68 -8.15 -0.41%
NASDAQ 4,396.2040 -22.83 -0.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs