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MARKET VOLATILITY: Selling everything is the worst advice

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Written by: Michelle McGrade
20/01/2016
Investors should ride the storm and avoid panic selling, says Michelle McGrade chief investment officer at TD Direct Investing. 

Taking such a short term outlook is damaging. There’s no doubt that people will be looking at what’s happening in the markets and wondering whether to sell out. However, people should not be panicking, instead, they should be looking for opportunities to add to their portfolio and stay in it for the long term.

Since the Lehman crisis in 2008, markets have grown significantly, in fact they have grown over 100% which means to sell everything then would have been the wrong thing to do. The current market bears a resemblance to January 2009, however, now while the world may have its problems it’s no longer in crisis and we should let things run their course and leave markets to rectify the issues, and central banks should step away attempting to control the global economy.

China and oil

China continues to send ripple effects all over the world. It has strong ambitions to grow up and wants to be taken seriously as a developed, not developing, country. But this takes time. Growth is slowing and the rest of the world is reeling. Couple that with oil – which was never going to stay at or over $100 forever, and how the falling oil price continues to impact companies and markets and you get volatile times.

There are continued overreactions to the situation, but oil has come down to its long-term trend and should soon settle. The Chinese stockmarket needed to rebase itself as it was built on speculation.  If you look back longer term, oil prices have been around the $30 mark and it was only when growth in China and the rest of the world was firing on all cylinders that the oil price peaked in 2009 at $140.

Not all doom and gloom

All the hype is creating a situation where people feel they need to sell.  What’s important is that investors remain focused on the long-term and find opportunities to add to their portfolio.  It’s not all doom and gloom. There are opportunities to be had in areas such as disruptive growth and sustainability; looking at companies that are driving performance by disrupting their sectors and looking for profitable ways to make the world a better place. Japan was the best performing market in 2015, and as long as you are considered there are also opportunities close to home in the UK, as companies continue to feel more positive about their outlook.

What’s important now is for people to review their portfolio and make sure it meets their investment goals. Investors need to look at the facts, seek out information on potential opportunities and hold their nerve.  It could be tempting to sell but previous experience tells us that doing this may mean you’re not in the market when the bounce back comes.

 

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