I'm scared. Should I sell my stocks?
Gut reaction: No! Can you make minor adjustments between stocks and bonds? Yes.
Remember, mutual funds and ETFs are conglomerations of stocks, bonds or both. Investigate the top holdings in each to understand its investing philosophy. Are they big tech companies? Energy stocks? Emerging markets? You want to stay in each category, but you can shift from stocks to bonds in those categories so you remain diversified. Stocks by their nature go up and down in value and there is no guarantee they’ll continue to pay the same amount of dividends.
Bonds also go up and down in value these days, but they are obligated to pay interest, that’s why they are safer investments, but offer a lower return. You can’t rely entirely on bonds because inflation will take its toll on the buying power of them over time. No way around it, y’all, you have to have some stocks. I go so far as to say you should always have some stocks, regardless of your age.
If you do need to make some changes because you’re too heavily invested in one part of the market, do NOT just go by which one is losing the most money in deciding which to sell. The old adage “buy low, sell high,” endures for a reason. If you sell the losers, you’re guaranteeing a loss. If you hang onto them, they might go up over time and you won’t lose any value. Wisely choose the investments, called holdings, that make the most sense in balancing your portfolio.
That’s why we have to understand our emotions when it comes to money. There are two emotions that drive the stock market: fear and greed. Fear makes us sell stocks when they’re dropping in value and greed makes us buy them when they’re nearing their peak.
So, if you don’t need the cash from your stocks, do not sell, especially if your portfolio still matches the amount of risk you’re willing to take. The higher percentage of stocks, 70 percent or more, the higher the risk. If you have investments in quality companies in a wide range of industries, size and location, you’ll be fine. Hang in there.
Don’t be afraid. Don’t be greedy. You’ll be fine.