blog27jan2008

Hot Off the Web
The focus of this week’s, somewhat abbreviated, blog will be what you should or should not be doing with your portfolio in these market swoons. I am having laptop problems. My sleek new laptop has essentially packed it in (hopefully only temporarily), so I am trying to do this on my six year old laptop (with mixed success).
In “Don’t let emotions take control” the Financial Post’s Chevreau dedicates an entire column to reprinting a Larry Swedroe essay, which in turn refers to some basic Warren Buffett investing principles. Have a plan and the discipline to stick to it (the asset allocation). If you don’t have one, then develop one. One of his Buffett quotes on trying to time the market is “The only value of stock forecasters is to make fortune-tellers look good”.
Jonathan Clements in the WSJ’s “Seven strategies for a tumbling market” Strikes pretty much the same note. Among his recommendations are: (1) stay cool (don’t panic sell), (2) go shopping when stocks are on sale, (3) rebalance your portfolio if it move significantly away from your strategic asset allocation, (4) consider taking tax losses (and replace it immediately with a similar stock or fund)
And finally, Globe and Mail’s Rob Carrick in “Long-term investors sleep just fine”  talks about the typical panicked headlines at times such as this recalling Q1 2001. “They’re unnerving, these headlines, but they’re a lot easier to shrug off if you’re ready for them. And shrug them off you absolutely should. The day that pessimism consumed the markets back in 2001, the S&P/TSX composite index closed at 7,930. It gradually worked its way down below 6,000 before peaking this past July at 14,646. Now you know. Stock markets fall in a bear market, and then they fall some more. It all works out in the end.”
That makes it unanimous! Don’t panic. Sit tight and stick with your plan. If the plan (as expressed in the resulting strategic asset allocation) was properly done and was consistent with your risk tolerance, you should just ride out the current volatility.
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