Stay The Course With Your Investments

The last several months have seen a lot of economic turmoil.  The debt crisis in the US, new governments in Greece and Italy, riots in Africa, unmanageable debt and austerity measures have made a roller coaster ride of our own stock markets.  This is when many investors get nervous and start wondering if they should sell, sell, sell and put everything into gold.

Revisit Your Investment Plan

At some point, either on your own or with the assistance of your financial advisor, you made a financial plan (you do have a plan, don’t you?).  Take a look at it and see whether it still fits your financial objectives.  Has anything changed in your life?  Do you need to start reducing the equities portion of your portfolio to reduce volatility if you have a need for cash in the near future?

Chances are, your original plan still suits your personal needs and goals.  For most people the best course of action is no action.

When To Sell

Financial advisors are happy to give advice on what and when to buy, but they usually leave the decision about selling up to you.

There are really only three reasons to get rid of an investment:

1.  You need the money.
2.  Your investment objectives have changed.
3.  You realize your purchase was a mistake.  For example, if you can’t stand volatility, stocks simply may not fit your needs.

Can You Time The Market?

Lately I have seen the TSX, S&P, DJIA, gold and oil and gas go up one day only to drop the next day – sometimes only a couple, and other days they all seem to be in tandem.  Can you time it so you buy on a downward dip?  I think you would have to be an expert or awfully lucky to be able to get it right.

The best course is to check out the fundamentals of a particular stock you’re interested in, pick a price you’re comfortable with and then go ahead and buy.  If you choose a dividend paying stock you’ll still come out ahead even if the price dips a bit after you’ve bought it.  You can’t earn any dividends if you sit on the sidelines waiting for things to calm down.

Stay The Course

Above all, keep a clear head, don’t panic, don’t get emotional and don’t make bad decisions.  Buy if you have the opportunity.  Sell if you have one of the three reasons to sell.

The best returns are made when stocks are left alone to ride out the volatility.

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  1. Monica on November 15, 2011 at 8:39 am

    In these days of economic uncertainty due to domestic and foreign crisis, it is hard not to panic. However, you listed excellent ways to keep one’s calm, determine the best options for investing short term and long term, and when/why to sell or buy. Thank you for putting it in plain language that even new investors can understand.

  2. the Paperboy on November 15, 2011 at 11:49 am

    Great article, especially in times like these. I completely agree with what you said about timing the market – the point about not earning dividends when sitting on the sidelines really got to me. Thanks for the reminder to stick to the plan!

  3. krantcents on November 15, 2011 at 12:51 pm

    I review my asset allocation annually. I normally do not make big changes. AS I get closer to retirement, I am starting to shift toward more stable investments.

  4. Jovie Onyema on November 16, 2011 at 8:17 am

    I agree with you. In the face of uncertainties, a panicking investor is set to create great losses for himself. Staying true to one’s plan and being able to see how everything will play out in the future will really help.

  5. dave on November 16, 2011 at 11:35 pm

    I would disagree. Dividend paying stocks can fall almost as much as non dividend paying stocks. thereby wiping out all of your dividend gains. You need to periodically check your stock holding to see if they have broken technical support levels that you set. For example sell if it drops through a long term trend line. If you buy and hold forever you may find you have gained nothing in ten years. Simple technical analysis protects your gains and limits your losses. And no i am not talking about trading a lot of positions. just keeping a periodic eye on things.

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