Top 5 Moves To Combat Correction Jitters
Investors are licking their wounds as the TSX is struggling over the past 2 sessions and finishing off 3.1% lower. I’m not much of an economist, but word on the street is that south of the border, Treasury yields and mortgage rates are edging higher. Higher rates mean less borrowing, which slow the economy. That’s economy 101 for you.
Predicting the direction of interest rate movement is an impossible job as evidenced by the volatile bond pricing. Since my own performance has been mediocre at best, I’ll persevere by sticking to the buy-and-hold strategy, in good and bad times.
No one can predict the correction’s debut, duration or magnitude. One can only tell when the correction is already here, but by then it’s too late, and selling will not send him back in time to recover his losses. There has never been a correction not followed by a rally througout the the stock market’s history. By having the will power to stay invested, investors improve their odds of making a come back.
Yes, I know. It’s easier said than done, and I’m still haunted by the dreadful memory of the dot-com calamity, but I have something to prove.
The measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.
The challenge is here. This is my moment. I know I’m worthy of becoming a contrarian investor, instead of fleeing along side of the herds with my tail between the legs. In this article, I’ve compiled 5 simple reminders to resist the urge to sell. Of course, I love to know what you think.
- Dividend investors crave for yields, not capital gains. A correction is a terrific time to accumulate more high-quality dividend paying stocks and income trusts at attractive valuations.
- Over the short-term, the market price does not represent the intrinsic value. Behind the scenes, it is still the same business with the same working capital and earning power.
- I’m a long-term investor. Volatility is part of the routine.
- Most investors cannot time the market successfully. Selling would be an attempt to time the market.
- History proves that the market always compensate those who stay invested during market setbacks.
I guess I’m an anticipatory type of guy. I’d rather post this article too early than when most people have already sold.
Hey Jungle,
Good post, although with respect to point 2 if interest rates are increasing the cost of capital for companies is going to go up (particularly for mature firms). This does affect their future earning potential since they will base their investment decisions on their cost of capital.
Also, I agree with point 5 in general but it’s not always the case. People who stayed invested throughout the 70’s werent rewarded at all. I just wrote about this in more detail.
Keep up the good work!