Personal Investor: It's time again for a portfolio gut-check
By now, investors should have at least had a peek at how the October market carnage has hit their portfolios. You can’t go back in time but you can assess the damage and use the broad market selloff as a time for reflection and learning. Here is a composite of timeless investment advice from professional traders and investment advisors in times like these.
- While we may feel inclined to dump the investments that took the brunt of the hit, it goes against the most basic investment strategy: buy low, sell high. Markets tend to oversell and if there is a holding you’ve had your doubts about, wait for markets to stabilize before you act.
- Markets tend to act in tandem. Compare the performance of your holdings with the broader benchmark and other stocks in the sector. The TSX Composite index is down 7.4 per cent so far this month. If your overall losses are less, you have beaten the index.
- Some sectors have been hit harder than others. The S&P 500 Technology Index is down by nearly ten per cent this month while the S&P 500 Consumer Staples index is flat. A well-diversified portfolio made up of several sectors and geographic regions can cushion the blow.
- If this downturn was more nerve-racking than others, it might be because you are closer to retirement and concerned your portfolio does not have as much time to recover from these sorts of market dips. Review your overall strategy to be sure your portfolio is defensive enough to take on the next market drop. It might be time to boost your weighting in fixed income.
- If everything checks out and you have cash, buy cheap stocks or top up existing holdings. You liked them when they were more expensive. Now, they are on sale.