In the wake of this week’s financial crisis, many investors have lots of questions about how the crisis affects them. So, in today’s post, I’ve interviewed several prominent Financial Advisors to answer some commonly asked questions about the recent events. The excerpts below offer sound advice from seasoned professionals and should help anyone make sense of the financial crisis and what to do. If you have any additional or more specific questions you’d like answered, please email financialadvisors [at] posipeople.com.

Question: With all the recent turmoil in the US financial markets – the sale of Bear Stearns, the government takeover of mortgage lenders Fannie Mae and Freddie Mac and now the collapse of Lehman Brothers – what does this mean for the economy as a whole?

Answer: The US economy has shown time and again that it is diverse, flexible and resilient. While I would hardly say that this latest calamity isn’t severe, it is not time to run for the hills. We have seen this kind of major disruption before – the dot com boom and bust of 1999-2000, the energy crisis of the 1970s, the Great Depression of the 1930s – and yet, the US economy continues to grow and evolve and is, today, the largest, most important economy in the world.

Question: So you don’t think Wall Street’s ills will affect Main Street?

Answer: Well, I would hardly say that. The economy is vulnerable for sure and is showing weakness is many areas but this is not the end of the world. We will emerge stronger than ever soon enough.

Question: Can you describe, in layman’s terms, what just happened to these financial institutions and what are the implications moving forward?

Answer: Basically, these firms were overinvested in what turned out to be bad ideas. Just like an individual should be wary of a portfolio that is heavily concentrated in a few rapidly appreciating assets, large institutions can fall victim to the same mentality. It is always tempting to stray from your core strategy when it seems like everyone else is getting a higher return than you are by chasing the latest fad or bubble.

Whether you are an individual or a large corporation, you want to make an investment because you believe in the inherent value of the underlying asset, not because you are speculating on its rise. This can be easier said than done, however, when your peers are posting eye-popping returns but, ultimately, being disciplined is the safest, if not most exciting, way to go.

Question: The Dow dropped over 500 points in one day in the aftermath of Lehman’s collapse, what does this all mean for the average investor?

Answer: If you have a well thought out, long-term plan in place, I would say that you should just stay the course. The market goes up, the market goes down. It’s the nature of the beast. If you believe equity investments are the best way to build long-term wealth, recent events shouldn’t change that thought process.

A well planned out, properly diversified portfolio will help to mitigate investment risks over time. Conversely, a poorly thought out plan, or, worse yet, no plan at all, can be problematic. A well conceived financial plan that is diligently followed and carefully monitored is essential, especially in times like these.

Question: What is a good financial plan? (Answer after the jump.)

Answer: Every investor is different so there is no specific definition of a good financial plan per se but the general characteristics include a plan that takes a comprehensive view of accumulation (investments) and protection (insurance) needs while offering the flexibility needed to change with the times. If your financial structure is too heavily weighted on one side or the other or if you have no ability to easily modify things later on, you should re-examine what you are doing.

Other issues such as tax implications, portfolio design and what I call “multi-tasking of assets” (using the same dollar investment to address multiple goals rather than taking a one dollar one goal approach) also come into play. I always recommend speaking with a financial professional at least once per year – just like you would have a physical exam or dental check up – as a first step to good financial health.

Question: Are there any “safe havens” for investors now?

Answer: I don’t look at investing in those terms. Individual investors who try to time the market by chasing returns, will end up facing significantly higher risks and dramatically increased volatility in their portfolios than those who follow a diversified, structured strategy. Frequently, those investors actually do worse over time than those who invest regularly for the long haul.

I’m much more of a tortoise than a hare when it comes to investing. I actually get more excited when the market goes down than when it goes up as that, to me, signals that stocks are “on sale” and I can buy more with the same dollar investment.

Question: Are you talking about “Dollar Cost Averaging”?

Answer: Yes. While it is no guarantee that you will always make money, by being systematic with your investments, you can take the emotion out of situations like the present one as well as ensure that you are always moving forward financially.

Question: Any last words?

Answer: If you have a good plan, relish the buying opportunity and stay the course. If you don’t, well…

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For more information on these or any other personal finance topics or, for suggestions on future topics for blog postings, please email financialadvisors [at] posipeople.com.

Disclosure: At the time of the writing of this post, I have no financial relationships with any of the individuals interviewed.