This might boost returns over the short run by forcing you to buy
stocks during a market decline, which then sets you up nicely for the market rebound.
It's difficult to watch your investments decrease in
value during market declines, but we need to keep some fundamental investing principles in mind.
While we seek to produce strong, long - term absolute returns, we know that losing
less during market declines is an important element of reaching our long - term goal.
Bonds have also been less volatile than stocks, and they've held up better in down markets, and that can help investors stay invested,
even during market declines.
This strategy also allows the investor to allocate the funds more aggressively, knowing that a guarantee is in place if they were to pass
away during a market decline.
Worse, when investors sell in droves (such
as during a market decline), the mutual fund has to liquidate holdings to pay them, which can mean forced sales and tax consequences for the fund's other investors.
But to be a successful investor, you need to reverse those feelings, so you stand
pat during market declines and, better still, seize the opportunity and invest more.
Portfolio returns will be
lower during market declines and higher in years when markets rise, but how do you know if you've done well or poorly?
FFCM is currently co-portfolio advisor of AGF U.S. Sector Class, a fund designed to participate in rising markets while placing an emphasis on minimizing drawdown and preserving
capital during market declines.
This is predicated not on selling your common stock
positions during market declines, but on having the perseverance to use these inevitable sell - offs to purchase additional shares at lower prices.
Or perhaps more fairly, the conventional concern is that individual investors are too emotional to stick to a «roller coaster» plan involving mostly stocks and will panic
sell during market declines, resulting in lower actual returns than if they had followed a more «balanced» plan.
The underlying index for the iShares Edge MSCI Min Vol EAFE Index ETF (XMI) has historically lost
less during market declines, while still capturing meaningful gains during upswings, according to Morningstar data.
On Thursday, Cabot Market Letter and Cabot Top Ten Trader Editor Mike Cintolo wrote about the Conservative Aggressive style of investor, and also discussed the two ways to go about managing your
portfolio during a market decline.
During a market decline, traditional investments can lose money and your savings may not have time to recover — especially if you're near retirement or already retired.
During a market decline, dark pools can help facilitate big sell orders from fund redemption without having to smash the open market and cause stocks to crash.
During a market decline, traditional investments can lose money and your savings may not have time to recover — especially if you're near retirement or already retired.
This is a key principle that guides our portfolio management decisions, and it is never more important than
during market declines.
I know that there will be times when the conversation won't be pleasant (like many I've had
during the market decline), but that's when it's most important to be discussing the issues.