This article was first published in the Globe and Mail on March 15, 2025. It is being republished with permission.
by Tom Bradley
In recent weeks, I’ve had a few clients wondering about reducing their equity exposure and sitting out the current chaos. The plan would be to lay low until things settle down and then reverse the trade.
It is indeed a crazy time, and the emotion quotient is off the scale, which is generally not a good recipe for making dramatic changes. There may be things to do in your portfolio, but spoiler alert, selling out is not one of them.
Before making specific recommendations, let me summarize my response to clients.
First, I remind them that Mr. Market knows more than we do. A lot more. He sees the chaos we see, as well as the array of opportunities and areas of growth. The market isn’t shuddering after reading the morning news like we are because it has already processed it and is looking further ahead.
There’s been evidence of this in recent weeks. On a few occasions, the market moved very little (if at all) when there was a horrendous announcement out of Washington. When it did drop meaningfully, it recovered the next day.
This disconnect between news and market reinforces what has to be part of every investor’s expectations. Short-term market moves are totally unpredictable. Even the keenest market observers don’t know what’s going to happen tomorrow, next week or next month. If a friend or financial adviser confidently says they do, tune out and look elsewhere for advice.
I also remind clients that for their first x years with us, they’ve built wealth far in excess of inflation. They’ve done it by sticking to a plan through all types of market conditions, including severe pullbacks in 2008/09, 2011, 2015, 2018, 2020 and 2022.
I point out that their portfolios are global in nature and not overly sensitive to what’s happening in Canada. A vast majority of the companies held are driven by sales and profits from around the world.
And then the clincher. If they want to liquidate their stocks, they have two decisions to make. The first is when to get out, which sets the stage for the second, when to get back in. If they think getting out at the right time is hard, try going the other way. I’ve dubbed it the hardest decision in investing.
Having said all of that, there may be things they, and you, should do.
Rebalance – It’s been a long period of good markets and generally the equity content in portfolios has crept up with stock prices. You may now be off your plan, or more specifically, be holding more stocks than your strategic asset mix calls for. Your SAM as we call it, is a long-term framework that fits your portfolio to your goals, time frame and investing personality.
If you’re carrying slightly more risk than originally intended, or are way out over your skis, some rebalancing is in order. Markets have been bouncing around so it might not be the perfect time to take profits and add to cash and bonds, but your portfolio is likely still close to its all-time high.
Diversify – If, in the good times, you tilted your portfolio toward particular industries, geographies or types of companies, then consider diversifying more broadly. The range of possible market outcomes is wide, making it a poor time to hang your hat on a few focused bets (including going all cash).
Plan to spend – And if you’re going to need cash in the next one to three years, don’t hesitate. Put it aside in a money market fund or GIC. This is pretty standard advice but is often ignored when markets have been good for a long time. Investors don’t want to miss out on potential returns. The operative word here is “potential.” Just do it.
Similarly, if you’re retired and drawing on your portfolio, it’s a good time to replenish your spending reserve. We’ve been advising clients in our Retirement Withdrawal Program to top up to a full two years of anticipated spending.
We’re living through volatile times and there will be dislocations. You may feel it at work or in the grocery aisle. Your portfolio, if properly diversified, is absorbing the same blows but is looking further ahead and assessing where things will be years from now.
If you need an emotional release, I suggest leaving your portfolio alone and taking it out on your tennis partner or a punching bag at the gym.
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