To Wait, or Not to Wait, for a Market Crash?

Many market pundits, analysts, economists, and fund managers have spoken ad nauseum of late about how overvalued the stock markets are right now. I’ve covered this a lot as well. From a personal finance perspective for those with RRSP portfolios, I’m going to discuss whether divesting funds and trying to time the market makes sense, or if just waiting things out is a better idea.
In general, I’m a big believer in staying invested at all times. Loading up on cash if one sees the writing on the wall (i.e., not investing those dividends back into stocks but letting them pile up, or adding some cash and leaving it there) isn’t a bad idea. But fully divesting of all of one’s holdings has been proven to be problematic for one’s long-term returns. This is because nobody, and I mean nobody, can pick the exact top or bottom of any market. The gains one misses from the “up” days far outweigh the losses on the “down” days
Another thing investors with brokerage or investing accounts can do if one is worried about a market crash is this: never invest on margin. If stocks fall, the incurred margin calls and the fees one will be charged to sell stocks one might otherwise like to keep, could be catastrophic.

Investing on margin is just asking for trouble, and I’ve never been fond of this strategy, ever. A margin loan is a loan like any other, just backed on stocks, so if you think stocks have the potential to fall in value, this is a very dangerous play indeed.

Invest wisely, my friends.