Nancy Woods discusses selling strategies.Getty Images/iStockphoto
Dear Nancy,
The markets are going through quite the "meltdown" and I know that the worst thing to do is to panic and sell my investments but I am getting really uneasy with it. Is there something else I could or should be doing? With my luck I feel that if I sell then the market will turn up and I will be regretting selling. What should I do?
Thanks,
Ian
Dear Ian,
Your feelings resulting from the current market volatility are valid. I know that I'm sounding like the stereotypical psychologist, but it is true. Investors are people who use their brains to make decisions but we are not without emotions. It is very easy to have your emotional side start to overrule your intellectual side. It all comes down to knowing what your risk tolerance is and investing and managing your money with this in mind. Another important element is knowing what you own. This doesn't only apply if you own individual stocks, but your mutual funds, preferred shares, bonds etc.
Despite the major pullback in the markets since early September, and including Wednesday's drop, the market has been so strong of late. It would have been prudent to have a portion of your portfolio in cash available to invest. I try to have a portion of liquid funds ready for my clients to take advantage of times when the market presents a good opportunity to invest. I'm not saying I am trying to "time" the market, but when pundits are talking about how we are "due" for a correction I have been inclined to increase my cash position whenever possible.
As an investment adviser, it is my job to reassure my clients that what they are holding is suitable for their objectives and risk tolerance. It is a time when I have to be in constant contact with them to review their holdings for fine-tuning to either remove or add investments to meet the current market conditions.
Instead of seeing this market downturn as being a negative event, I can approach it like a department store that is having a big sale. Stocks that I have been watching, yet hesitant to buy, I now view as at a great deal at a lower price. Then I can see the recent weakness in the markets as a great opportunity for me. Right now many of the stocks I have been holding back from buying have had their prices fall to a point that where I look again at the valuations and fundamentals. There are more stocks than ever that I am more comfortable with taking positions in.
If you think more as a buyer rather than panicking and becoming a seller you should psychologically weather through the volatility better.
Like you said, you don't want to panic, sell and then regret. In my opinion the next worst thing for you do think is, "I shoulda, woulda, coulda".
Nancy Woods is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. Visit her website www.nancywoods.com or send an email request to asknancy@rbc.com. You can send your questions to asknancy@rbc.com as well.