If You Want To Lose Money, Sell Your Stocks Now

The plunges in the past week in the stock market are gut-wrenching but those who panic and sell off right now are going to be kicking themselves later, says legendary economist and former director of The Vanguard Group Burton Malkiel. The most you should do is rebalance your portfolio.

“If increases in bond prices and declines in equities have produced an asset allocation that is heavier in fixed income than is appropriate, given your time horizon and tolerance for risk, then sell some bonds and buy stocks,” says Malkiel in an opinion piece in the WSJ today.

In other words, if you look at your portfolio and its out of balance in terms of how long you’re investing for, independent of recent events, then by all means, rebalance.

After all, writes Malkiel, “No one has ever become rich by being a long-term bear on the fortunes of the United States, and I doubt that anyone will do so in the future. This is still the most flexible and innovative economy in the world.”

I was at my mother-in-law’s house this weekend and her financial adviser called her up on Saturday to talk about “the tactical moves we need to make to protect your investments.” The guys are out there working the phones and working on the weekend. They get paid for conducting transactions so make sure you’ll only making the right ones that fit into your long-term strategy and aren’t just reacting to short-term events.

Don’t Panic About the Stock Market [WSJ]