Don't Panic Over Debt Ceiling Say Fidelity, Other Advisers

Paul Bedard

Some major financial advisers, including giant mutual fund and 401k firm Fidelity Investments, are warning investors not to panic-sell out of concern Congress won't be able to pass legislation raising the debt ceiling soon.

While there are major firms advising clients to shift U.S. bond assets to foreign bond holdings, many firms have sent out notices to clients seeking to sooth the jitters.

[See a collection of political cartoons on the budget and deficit.]

Fidelity's advice is stand firm because you'll likely miss the right time to get back in. "Now, more than ever, investors must not let the uncertainty of short term events cause them to make rash portfolio decisions. Trying to time market gyrations is difficult and often costly. History has shown that near-term market declines, although unnerving at the time, are often followed by rebounds. In many cases, investors are better served by remaining fully invested over a market cycle, enduring near-term volatility but not missing out on the subsequent recovery. Give your investment plan time to work for you over the entire market cycle," says Fidelity's Joanna Bewick.

Charlottesville, Va.'s Marrotta Wealth Management, who we've quoted before, believes that the crisis is a learning moment more than a portfolio crisis.

"If the debt ceiling is reached, the consequences will be large but not entirely harmful. The dollar will strengthen. The interest rate you get paid for your money will sharply rise. The stock market will drop simply because it will take fewer dollars now that they are more valuable to buy a share of stock. Prices will drop for the same reason. All the dire consequences of not raising the debt ceiling pale in comparison with the dangers of continuing to add to our deficit. I'm certain that partisan forces will push for the worst possible consequences if a deal is not reached, but I'm hopeful that the average American will not be snookered," says the firm.

--See a slideshow of 6 ways to raise the debt ceiling.

--See a slideshow of 6 consequences if the debt ceiling isn't raised.

--Vote now: Will there be a debt ceiling deal?