Ask Nancy: Should I sell my stock portfolio and sit on cash to weather the market meltdown?

Dear Nancy,

The recent market meltdown has really gotten me concerned. The past couple of years my portfolio has had great returns. Last year it made over 20%. I have little to no fixed income. Not even any GICs. I have cash in a high interest savings account, but that is all. My stocks have taken a real hit to the downside. I feel like selling everything and sitting on the cash. Is this the right thing to do?

Signed John

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Dear John,

What you are feeling is not only normal, but it is part of the human nature of an investor. As an investment advisor with over 30 years of experience, I have seen markets go through periods of weakness and downturns like this. Despite how dire things look now, the markets will eventually improve.

Obviously, I can’t tell you when, but I can tell you they will. As long as your money is invested in good-quality companies that are not in danger of going broke, things should be ok. This is the time to review your portfolio, assess its overall suitability for you and look for weaknesses, like concentration, businesses that have deteriorated and high risk investments.

If you have a portfolio that pays a secure income, such as the steady dividend stream from bank shares, you should focus on that.

We are currently experiencing weakness in the real estate market. If you own a rental property, and it now has gone down in value since last year, you probably would not be looking to sell it. You’ll continue to collect the rental income and maintain the property. You need to look at your equity investments with the same attitude. As long as you are being paid the dividend income, you should probably not rush to sell.

Be reminded that your returns last year of over 20 per cent are not the norm. You should not be disappointed if this year your portfolio even has a negative return. Last year’s gain will help to keep you on track for a good average return.

The markets are grim, but this too shall pass.

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