Navigating Market Turmoil: Should We Sell Out Now? (Part 4)
In the final part of our four-part series, we address a question weighing heavily on retirees and pre-retirees: Should we sell out now and see how things go? With global markets facing uncertainty, the urge to move to cash can be strong. This newsletter provides general insights to help you navigate this decision, without offering personal financial advice.
The Appeal and Risks of Selling Out
Selling investments during market turmoil—often called “going to cash”—can feel like a safe move when volatility dominates headlines. However, this strategy carries significant risks:
Locking in Losses: Selling after a market decline crystallises losses, potentially reducing your portfolio’s recovery potential.
Missing Recoveries: Markets often rebound unexpectedly. For example, after the March 2020 crash, the ASX 200 gained over 30% within six months, rewarding those who stayed invested.
Re-Entry Challenges: Deciding when to reinvest is notoriously difficult, and missing the best-performing days can drastically lower long-term returns.
The graph below illustrates the impact of missing the S&P 500’s best days over a 20-year period, highlighting the cost of market timing.
Graph: S&P 500 Returns (2005–2025) with vs. without top 10 performing days. Data source: J.P. Morgan (2024).
Missing just the 10 best days over two decades reduced returns by nearly 50%, underscoring the value of staying invested.
Factors to Consider
The decision to sell or hold depends on your unique circumstances:
Risk Tolerance: Retirees prioritising capital preservation may prefer lower-risk assets, while pre-retirees might tolerate volatility for growth.
Income Needs: Selling out may disrupt dividend or withdrawal strategies, impacting retirement income.
Opportunities in Downturns: Market declines can allow rebalancing or investing in undervalued assets, but these moves require careful planning.
Rather than reacting impulsively, consider reviewing your financial plan with a professional. A licensed financial planner can help ensure your portfolio aligns with your goals and risk capacity, potentially identifying strategies to capitalise on market conditions (ASIC, 2024).
Final Thoughts
Market volatility can test even the most seasoned investors, but history shows that staying disciplined often pays off. By focusing on your long-term objectives and seeking professional guidance, you can navigate uncertainty with confidence. Thank you for joining us for this series—we hope it’s provided valuable insights.
For tailored advice, contact a licensed financial planner.
References:
J.P. Morgan. (2024). Guide to the Markets. Retrieved from jpmorgan.com.
Australian Securities and Investments Commission. (2024). Investing Basics. Retrieved from moneysmart.gov.au.
Disclaimer: This blog provides general information only and does not constitute financial advice. It has not taken into account your objectives, financial situation, or needs. Before making any financial decisions, you should consider whether the information is appropriate for your circumstances and seek advice from a licensed financial adviser. Past performance is not indicative of future results. Investments carry risks, including the potential loss of capital. Fitrio Wealth is an Authorised Representative (1234878) of Charter Financial Planning Limited; ABN 35 002 976 294, Australian Financial Services Licence Australian Financial Services Licensee and Australian Credit Licensee; Licensee No: 234665.