Is it Too Late to Sell?

Did the market bottom today?  Does a VIX near 60 signal capitulation?  Are there some compelling buys out there? 

We don’t know if the bottom is in.  Maybe it was today, maybe it is tomorrow.  It might be next week.  That said, it could be a major mistake to sell out and risk missing the rebound, especially since the market averages are already down -35% from their peak a year ago. 

If you sell, you raise the specter of a WHIPSAW.  Getting whipsawed increases your pain as you lose the resulting gain of the next move up.  Be careful, be very careful!

For many, if you are long stocks, you are investing for the long term, you have earmarked these assets for “growth,” you are clearly allocating to an asset class that has historically done better than fixed income.  If you sell now and hope to buy back at lower prices, you assume you can time the bottom.  If you didn’t recognize the top 12 months ago, what makes you so confident you can recognize the bottom?  Let’s say you sell, what happens if the market suddenly rallies?  When do you reinvest?  If you think stocks are a better buy next week or next month when they are higher, that is illogical, then you wouldn’t sell today in the first place, as they are fundamentally better priced today.

Maintaining your long-term strategy is tantamount on days like today.  Reacting to the news of the hour won’t fulfill your long-term financial objectives.  Bottom line, it’s important to maintain your allocation and to stick with your strategies.  Take some time, be patient, and think through the ramifications of any decision you make, especially if you are considering selling your equity holdings at current prices. 

Good Luck.