Q: What should I do when there are global stock market selloffs like those which occurred on August 5, 2024?
A: Markets rise and markets fall. Generally speaking, percentage gains and losses are in a fraction of one percent range. Sometimes they go higher. Occasionally they go much higher. On Monday, August 5, 2024, the S&P/TSX lost 2.1% of its value. The NASDAQ slid 3.4%. The Nikkei 225 lost 12.4%. The DAX was down 2.3%. Fear ran rampant. If even professional traders are running scared, should I run as well?
The answer is a resounding no. A long-term investor knows that it is time in the market that matters, not timing the market. In the long term there will be many ups and downs. Some of those will even be much bigger than others. That said, even a large one-day change will barely register a blip over a 5 year, 10 year or 20year period.
Professional traders are concerned with daily and even hourly trade movements. It is what they are paid to deal with. Long term investors like yourself pay themselves handsomely by riding out the ups and downs of the market. In fact, by doing nothing, investors benefited by today’s headline: “Global Markets Rebound after Selloff Scare Dips Stocks” (attributable to CTV News on August 6, 2024).
It can be a little unnerving to see the news of declines. The reality is that over the course of every year, there are many ups and downs. Sometimes declines are classified as a correction or even a recession. Just as the weather changes over the seasons, the market makes swings in both directions. That is part of every investment cycle.
Fortunately, when we look over what has transpired in various markets over days, weeks, months, years and even decades, we see the same patterns. Have faith that we will see these movements again and again. By patiently riding the ups and downs, your investments will bear fruit. Plus if those investments have guarantees (which we strongly recommend), then your assets will be somewhat or even entirely protected.
Getting back to what should you do when there are global stock market sell offs, you should really do nothing! Understand that this simple strategy is one of the keys to your long-term success. What else can I do? You may consider rebalancing your portfolio, dollar cost averaging or buying on the dip. If you would like to discuss these or even other strategies, contact your Account Manager for an appointment.
Lastly and perhaps most importantly, here is what you shouldn’t do: do not worry; do not sell your assets at fire-sale prices; and don’t buy into the argument that the end is near. It isn’t!! Trust yourself at this difficult time and trust MWFS to guide you to your investment success. We have the expertise to support your questions.
