Hanging Tough in Turbulent Markets

by KYW's Salil Gutt

The past few months has been a rough ride for investors in real estate and the stock market. Academic research shows investors prefer making a lower rate of return than losing money. It's easy to be lulled into a false sense of complacency when the markets are booming. It's when the market plunges that we understand our true tolerance for risk.

The worst thing one can do is sell in a plunging market.  That's the time to buy. It's when the markets are rising and the pundits call for even rosier times ahead is when one should start to sell. Easy to say, hard to do but that is how long term investors become wealthy. To invest when your stomach is churning a little bit. 

Now is the time to do some hard soul searching about how much you should have in stocks. There will always be periodic downturns, some more severe than others. Once you come to a conclusion recognizing you will sacrifice growth for safety then wait for the next market recovery before starting to sell and rebalance your portfolio.