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The Latest Market Crash - Don't Panic

The correction everyone has been talking about is finally here, with the TSX losing over 1,400 points over the last couple of days. Today (Tuesday, February 6) the market is chaotic and it is unclear whether the worst is over, or it is only the beginning.

The professionals have been looking at the situation for months and some have been moving their customers out of equities and into cash, but it is unlikely that any advisor or stock-picker was prescient enough to predict the exact timing of the drop.

And that is the problem. The experts have been predicting a correction for the last year or more. Now we know that selling on January 4, 2018 (at the peak of the TSX) was the right timing. But what if you had listened to some of the pundits earlier and sold one year ago when many people started to worry about a correction? Had you sold on February 6, 2017 would mean you would have missed the current downturn, but you would have also missed the end of the latest bull market - essentially you would have been in exactly the same position as had you held your portfolio through the period as the TSX on February 6, 2017 was about the same as it is today.

And had you sold around September 2017, you'd actually be worse off.

And that sums up the problem - most people can predict that the market needs a correction but no one can consistently predict the timing of the correction. The same was true for all the big crashes that preceded this one.

So, what is an investor supposed to do. You really have two choices: 1) Find a financial advisor and let them worry for you - that is their job full time. or 2) Try not to worry about short term market fluctuations and instead invest for the long term, following the advice and strategies we give on this site. Either way, now is not the time to panic as the damage is likely mostly done. Stay calm and invest for the long term.

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