By Chuin Ting Weber, CFP, CFA, CAIA 
CEO & Chief Investment Officer, MoneyOwl 

I was watching financial news last week. So much convulsion. 
 
Selling your stocks?  
 
It might seem rational. 
 
After all, stocks have had two years of 20+% returns and are “expensive”. 
 
Recently, bond yields have spiked, that’s a bad thing for companies for all kinds of reasons. 
 
All eyes are on the US inflation number tonight. Markets don’t like a high print because it means the Fed can’t cut interest rates (stocks supposedly like that). 
 
BUT I wouldn’t sell, because:

1. The odds of timing it correctly is against you

7 of 10 years, the stock market is up.  
 
And in every one of those 7 years, including the last two, there would have been very good reasons to sell, but it would have been wrong. 
 
And in the remaining 3 years, you should have waited, too! 

2. Stocks don’t follow reason, especially in the short term.

A mix of factors affect stock prices. 
 
No one knows which one is more important on any single day – it’s a random walk. 
 
A day will come soon enough, when the stock market is up. 
 
Then, the CNBC talking heads will be flogging other “obvious” reasons: strong earnings, backed by a good economy, maybe? 
 
Sounds like a good time to buy if stocks go down because the economy is good.

3. You pay a heavy price if you get it wrong. Every “best day” you miss eats into your returns big time. 

The stock market always recovers and goes up in the long run. (Note! Applies to “whole market”, not single stocks, sectors or countries.) 
 
So why pay this price if you aren’t looking to use your money anytime soon? 
 
Fund managers have no choice but to act on macro and market data because they are judged on short term results. All the talk on CNBC and Bloomberg are concerned with “professionals”. 
 
But you’re investing for you and your family, with nothing to prove.  
 
So you don’t have to listen to people playing a different game. 

4. Selling is easy but buying back is very hard.

At which price level will you concede that your thesis was wrong? Or, what needs to happen before you go back in?  
 
It’s a huge psychological barrier you’re creating for yourself. 
 
Even fund managers suffer when they do this. Many a career were lost in 2009 because no one believed that stocks would go up again so soon after the banking crisis. 
 
May I suggest the following instead: 

(a) Ride it out

Don’t sweat the short term. 
 
Stay put in the asset allocation (mix of stocks and bonds) suited to your time horizon.  
 
If you need help doing this, look in comments for free resources we at MoneyOwl put together for you. 
 
Download our investment philosophy or create an account & use our risk profiling tool.

(b) If you must time the market, be contrarian – putting additional dry powder to work if markets come down?

Monthly investing does that to some extent through dollar cost averaging.
 
But some picking up investments “on discount” can give you a booster shot.  

That’s what we do when good stuff is on sale, isn’t it?

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While every reasonable care is taken to ensure the accuracy of information provided, no responsibility can be accepted for any loss or inconvenience caused by any error or omission. The information and opinions expressed herein are made in good faith and are based on sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. The author and publisher shall have no liability for any loss or expense whatsoever relating to investment decisions made by the reader.