Should I be selling some of my portfolio?

Q. Dear Debbie,

The market has been so volatile the last couple of months, should I be selling some of my portfolio?


A. When we compare current volatility to the past few years, it is unsettling. Sometimes we feel compelled to do something. Yet, we need to keep recent events in perspective and remain calm because the market “ups and downs” are “normal” when one views the market from a long-term perspective. We should also remember that, even though past performance is not indicative of future results, the Standard & Poor’s 500 Index was positive in 63 of the last 87 years. Additionally, even when we saw a protracted market downturn, as we did most recently in 2008 when the Index returned approximately 37 percent, the S&P 500 returned approximately 26 percent the following year and it remained positive through 2014. We have witnessed similar market recoveries during the oil crisis in the 70s as well as when the dot-com bubble burst in the early 2000s. Often downturns such as these create investing opportunities where there was none before. Indeed, despite all these setbacks, the compound annual return of the S&P 500 from 1928-2014 is 9.8 percent.

Trying to time the market is extremely difficult to do especially when you note that six of the best days for returns in the S&P 500 occurred within two weeks of the 10 worst days. Further, when considering an investment of $10,000 made on Jan. 3, 1995, an account that remained fully invested until Dec. 31, 2014 returned 9.85 percent (or $65,453). However, an account that missed the 10 best days returned only 6.10 percent (or $32,665) and an account that missed the 50 best days returned -2.21 percent (or $6,392). In short, by missing the 50 best days of the market during a 20-year period, an investor’s returns went from 9.85 percent per year to -2.21 percent per year. Market lows often result in emotional decision-making. History makes a strong argument for investing for the long term…

The lesson? Stay patient and keep the big picture in mind. Corrections are normal and the sign of a healthy market even though they may not feel that way at the time.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The S&P 500 is an unmanaged index which cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

If you would like to submit a planning question, you can do so by emailing [email protected].


Debbie Taylor, principal of Taylor Financial Group, a Franklin Lakes-based independent wealth management firm, provides the above information. The opinions voiced are solely those of Taylor and do not reflect the views of LPL Financial, nor should they be taken as investment, tax, or estate planning advice for any specific individual. Consult with your own tax, legal or investment professional on how the information may relate to your situation. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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