For those concerned about how highly valued stocks are today relative to their historical average, now may be a time investors may consider taking some money off the table. For those with Registered Retirement Savings Plans (RRSPs), such a strategy has never been a good one long-term.
For those with a truly long-term investment time horizon, staying invested in good times and in bad (and adding more when the market dips, if possible), is the way to go. For those concerned about a market correction, beefing up one’s savings account to have the cash necessary to deploy in such a downturn is a good idea.
Getting out of the market or trimming positions could not only result in underperformance in the near-term, particularly if the market continues to rise as we come out of this pandemic, but could impact longer-term retirement goals.
As long as interest rates stay at or near these levels and fiscal and monetary policy continues to be highly accommodative, stocks should do just fine. Investors worried, and thinking about hitting the panic button may be punished by doing so.
However, if a downturn does occur, having plenty of dry powder and buying the dips has been a proven long-term strategy for success. Stocks don’t remain in the gutter for very long, as we’ve seen with previous crashes. Sometimes it can take years for stocks to recover, however, if one is investing with a two- or three-decade long-time horizon, a few years really is nothing in the grand scheme of things.
Invest wisely, my friends.
