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August 09, 2021

Don't be spooked into selling, suggests author Burton Malkiel

The stock market's gyrations over the past few days have spooked even the most savvy investors but those who run for the hills at this point will likely regret it, maintains Burton Malkiel, author of the popular "A Random Walk Down Wall Street" and now a Princeton economics prof.

Burt "Investors who have sold out their stocks at times when there have been very large declines in the market have invariably been wrong. We have abundant evidence that the average investor tends to put money into the market at or near the top and tends to sell out during periods of extreme decline and volatility," Malkiel wrote in the Wall Street Journal yesterday.

Good advice but tough to do when many believe a mean, old bear has been unleashed. Nonetheless, investors should stay the course, Malkiel advises.

Where there's risk, there's return, and without taking advantage of scary times like these, the profits will be very hard to come by down the road.

And if you simply can't step up to buy then you should at least consider rearranging your portfolio a bit to bring it back to your intended allocations.

"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," he says, adding that "years from now you will be glad you did."

In other words, even though the market is still tumbling, don't panic.

Tell us: Is this what you're doing? Or is 2008's debacle too fresh in your mind to do anything else but sell?

By Gordon Powers, MSN Money




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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...