S&P/TSX Loses 400 Points - Time To Sell? Or Time To Buy?

Canadian blue chips have shed almost 400 points over the past 5 days, leading some investors to consider buying given the opportunity to buy at a discount compared to the record prices only a few days ago. Other investors are considering selling, seeing the drop as the start of a downward trend.

So, what to do when the markets take a dive? First and foremost, don't panic, investors have lost significant money by not staying calm in this situation.

The important thing to realize is that unless you are actively trading your account, creating and leaving positions quickly, short term fluctuations in the market shouldn't be the cause for any specific action for a amateur investor. Leave the day trading to the professionals who spend all day studying the market for a living, or hire an investment advisor who can give that same professional focus to your portfolio.

When you look over the longer term (1 year), the recent downturn, is only a small correction in an otherwise appreciating market.

The most important thing to do in this situation is to continue to follow a smart investing plan, utilizing the strategies discussed on this site, including the 12 Principles of Equity Investing.

So, if you were planning on buying equities this month as part of your overall strategy, now might be a good time to make that investment. If you had not planned to make any moves this month, then this small (so far) correction should not be a reason to adjust your plans. If you had planned to sell this month then unless you had strong convictions the stocks you are looking to sell will continue to head south (you'll always find experts on either side of the issue), then sell as planned.

The point is to adopt strategies for long term financial success and stick to your plans because history has shown us that no one has been able to consistently time the market (predict its ups and downs).