Stock Market Down? – Do you run?


If you own a mutual fund, RRSP, RESP, RDSP or self directed account that is tied to the stock market chances are you notice on the news when the market is either up or down with most reporting being the doomsday down reporting as we like to call it.

The big question is whether it is time to sell, cash out and take your money and run?

Well before you pickup the phone, send the electronic mail or execute the sale trade ask yourself why you have this account. Is this investment account for short term or is part of an overall financial picture in the future.

Statistically, the stock market does well in the long term. Look at Warren Buffett, Bill Gates and other famous stock market players. You can actually find out for example exactly what stocks Warren Buffett invests in. However if you look at the investment strategy of Warren Buffett and most all other well known investors they invest for the long term. Warren Buffett has some stock in his portfolio that he has held for 15 years plus.

We are not saying whether it i time to sell or move into a different investment instrument but instead take a deep breath, ask yourself why is the drop in the stock market occurring. It is instability overseas, a drop in oversea markets, reported employment rates – the vast majority of stock market drops are clearly connected to a major event of some sort. Then ask yourself is this a correction. When you look at how this drop effects your specific portfolio because even though the Dow Jones index may be down by for example 10% maybe it is only effected your specific investment portfolio by only 2%.

You can also be looking at the drop in the market as a time to buy more stock as this will may lower your average cost price – things to think about.

Two words be informed. And if you hold the portfolio in a mutual fund or with a broker rely on the advise they provide (taking into consideration that fee’s and commissions will apply so if your are down 2% but the fee’s are 3% well actually you are still up 1% if you do nothing).

If your investment portfolio does not have an overall financial plan attached, you need to known where you are going to be heading, how much you need to get there and how much you are going to need to stay in that lifestyle.

Where can you go to get a financial plan? Our firm does provide fee based financial planning, meaning that we charge a fee – not a percentage or commission meaning that our financial planning is non-bias in any way which results a clear financial plan solely based on your success.

Little is really told that some mutual funds pay higher commission then others to the broker whom is also trying to act as your financial planner. How do you know. If the broker/financial planner is suggesting a specific investment ask about what the broker/financial planner makes on that investment.

However for advice on buy or sell, brokers/financial planners who do receive commissions or fee’s do work for you and are payed based on your performance – use them for some insight.

Three things to remember:

  1. Take a Deep Breath
  2. Be Informed
  3. Have a Financial Plan