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“The investor’s chief problem — even his worst enemy — is likely to be himself.” — Benjamin Graham, 1894-1976, Columbia University professor and Warren Buffett’s mentor.

In Southwest Florida and across the country, the sub-prime lending industry’s troubles have been dominating the headlines in recent weeks.

Already considered a principal source of the recent slowdown in economic growth, the United States housing sector surely didn’t need a sub-prime lending crisis. Yet, that’s what’s happened. Here’s the debate: Will severe problems in the sub-prime mortgage business push the country toward recession (as some economists think) or is this merely an unpleasant sideshow, of “grave concern,” but “contained” by economic forces already in place, as Federal Reserve Chairman Ben Bernanke suggests?

The dark side of sub-prime lending practices has been in the news before. An August 2005 Boston Globe story details how sub-prime loans — primary or refinanced loans made to applicants with poor credit histories, often because of a modest income or too much credit card debt — had risen from 1.6 percent in 2000 to 12.3 percent in 2005 of all Massachusetts mortgages.

A study by the University of North Carolina Kennan-Flagler Business School found that 20 percent of sub-prime refinancing ended in foreclosure compared to just 1.1 percent of conventional mortgages or refinancing.

More than two million people with sub-prime loans face foreclosure this year. A Center for Responsible Lending study in December found that 20 percent of sub-prime mortgages issued in 2005 and 2006 are likely to fail.

“Severe financial problems for many individuals and families,” lie just ahead, Bernanke told Congress in March.

Sub-prime lenders are feeling the heat. Since December, at least four have filed for bankruptcy, and the entire home building sector is being punished in the markets. If you’re invested in the housing sector, you should certainly be paying attention. However, it’s important to know that if you have a properly diversified and intelligently allocated portfolio working for your longterm goals, you have the best chance of meeting your personal investment objectives despite any temporary setbacks of this kind.

Only 10 percent of outstanding mortgages are sub-prime mortgages. If we imagine the worst case scenario, that all of those outstanding sub-prime mortgages were to go into default; this would only affect approximately one percent of outstanding mortgages. This is not to say that delinquencies and defaults are not up, and that much more attention to should be focused on household debt levels. So, are we “contained” by economic forces already in place, as Federal Reserve Chairman Ben Bernanke suggests? Only time will tell.

While volatile markets are difficult, times like these also highlight the benefits of a conservative investment approach utilizing the principles of financial planning. I encourage you to maintain a longterm view, adhere to conservatism and discipline, and employ diversification to reach your financial goals.

If you have queries about the housing market, the financial markets’ reaction to sub-prime lenders’ problems or other general questions, please do not hesitate to contact me. As always, I look forward to hearing from you.

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Darcie Guerin is a financial adviser and branch manager at Raymond James & Associates Inc. at 606 Bald Eagle Drive, suite 401, Marco Island. Contact her at Darcie.Guerin@raymondjames.com, 389-1041 or toll-free (866) 343-0882.