Calgary investment advisor cautions against 'market panic' sell off
Advisor with 18 years experience says be smart during volatile times
With the cost of oil slipping below $27 a barrel and the Canadian dollar sitting at 68 cents, markets are plummeting and it has investors wondering what to do.
Sheryl Purdy is a vice president and investment advisor with Leede Jones Gable.
She says to keep a level head.
1) Why are people panicking?
I believe people are panicking because they believe the market knows something that they don't and that they'd better "shoot first and ask questions later" or, in this case, "sell first." I think they have seen the speed of the sell off and it reminds them of the drastic sell off days in 2008. I think that they feel 'this time I won't be the last to sell. I am going to sell before it goes any lower.
2) Should people consider selling right now?
No, I don't. I think they will regret it, and I think they should hold. The only reason that I feel someone should sell now is if they have to get the money and they cannot wait. I think that this market sell off, since the start of 2016, is far too overdone and my instincts and 18 years of experience tell me that the sell off does not make sense. It is far too dramatic, and stocks that were priced much higher 2.5 weeks ago have not incurred material changes that warrant a drop in share price to where they are today. I am shaking my head at the low valuations of shares and I am advising clients to buy, not sell.
3) What should they do? How do you withstand the volatility?
First, step away from the sell button. I communicated to all my clients this week with my thoughts on the market volatility and encouraged them to try to be smart about this volatile time, to keep a level head and do not sell terrific positions that have been carefully chosen and invested for them. I gave them ideas of how to benefit and constructive ideas. To name a few: if you have a TFSA, contribute to it and invest now. If you have an RRSP, then contribute and since this is still within the first 60 days of the calendar year, your contribution can be used towards your 2015 or 2016 income taxes. Contribute and then invest. Look for pockets within your portfolio that you can add great quality ideas that offer further diversification. What choices have been on your wishlist' Buy them when others are selling. Do not fret if it drops from this level. You have been bold, strategic and are doing what all investors should do: buy low.
4) What is the best way to keep your sanity in fluctuating markets?
Realize that the emotions of buying low are gut wrenching — this is normal. What you have control over is exactly what you choose to buy. What is your risk tolerance? How long do you have to invest in what you are buying? Is it going to add diversification to your portfolio? Ask yourself why are you making this choice? This is my job, as an investment advisor, to help guide my clients through all these questions and we discuss together what would be the best 'fit' for them. This is the fun part of my job! When you make really good quality choices, you have a higher probability of success. To keep your sanity, call your investment advisor. It is important to take a step back and use a 4,000 foot view from above. Is this market volatility going to go on for years or is this happening so quickly that it will sell itself out like a fire? Burning into itself until it burns out. After the carnage, know this — it will turn around. Markets always do. The question is: do you have to sell now? If you don't, then provided you own quality companies that do not have too much debt, or are structurally unsound, or completely illiquid, etc., then hold the great companies you carefully chose. See what others would fit within your portfolio and buy them.
5) When should we panic? Could things get worse?
As I mentioned to my clients this week ... the markets are not going to zero. The current alarmist commentary and frenzy of bearish, panic-driven short term trading ... is behaving like it is going to zero. It is not going to zero. So, in a nutshell, just don't! Of course markets could drop more but, once again, ask yourself what your timeline is. Do you HAVE to sell today? If not, then please do not despair. I am certain that no one is enjoying the shock of how dramatically prices have dropped, but I do not feel we are heading into another depression, like 2008/09. We have had such vastly different macro market conditions.
Calgary at a Crossroads is CBC Calgary's special focus on life in our city during the downturn. A look at Calgary's culture, identity and what it means to be Calgarian. Read more stories from the series at Calgary at a Crossroads.