Should I sell my losers now or wait for a better day?

Many investors, including institutional ones, routinely sell their losers right away thinking this is a good strategy to follow. In my opinion this is a very poor idea.

Many years ago I had a client who sold all his US investments at a loss. He thought he was being smart. Six months later the US stock market rebounded sharply and the securities he had sold at a loss earlier climbed back dramatically.

Recommendation

Never sell your stocks at a loss without assessing their future outlook. Do not let a paper loss affect your judgement.

Carry out some detailed fundamental analysis on both the industry and the specific company to determine if the current problem is a short or long term one.

If the company’s issues are short term in nature only, my advice would be to hold the stock until things improve.

On the other hand, if you determine the issues are more long term in nature, you can liquidate your position and move into something with a better outlook.

 

Picking your own stocks vs. using an ETF or mutual fund – Which is a better choice?

Many advisers encourage the use of mutual and exchange traded funds over individual stock picking. In fact many actually discourage investors from buying stocks on their own.

There are many flaws to their argument as follows:

When the equity markets go down in a recession there is nowhere to hide if invested in a fund or ETF.

Owning individual stocks enables the investor to better control their overall portfolio volatility or risk. Proactively managing your investments through stock selection, asset mix and equity sector allocation can materially lower your level of risk. In the early stages of a recession this can mean increasing your weight in cash and reducing your exposure to more volatile equity sectors and higher beta stocks.

Conclusion

For many investors risk reduction is equally as important as absolute investment returns.

How to Invest Your monies in a Pandemic World

Equity markets initially collapsed, then subsequently rebounded sharply.The S& P 500 and TSX Composite are still off 16% and 19% respectively from their recent highs.

A global economic recession is clearly evident.

Many investors either have no cash or are virtually all in cash at this time. These are both bad long term strategies.

China has been vigilant in controlling this pandemic in their own country. Daily new cases and deaths in China are on the decline and have been for quite some time.

In the US and many other countries, the amount of daily cases has only seen a plateauing with no meaningful declines yet. Reopening the US economy, without a vaccine or effective anti-viral readily available, may well lead to a surge in new cases and deaths this fall according to Dr. Fauci, the head of the US Centre for Disease Control.

Consumer spending represents 70% of many domestic economies including the US and Canada. Unless the public feels completely safe, they are going to be very careful about travelling, staying in a hotel, shopping in bricks and mortar retail stores, attending a sporting event.

Specific industries are thriving in this Covid-19 era while others are really struggling and are unlikely to survive in the same form as was the case in the pre- Covid world.

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