I was reading an article by Dan Bortolotti in Moneysense magazine called “How to Prepare for a Bear Market.” He’s all about index investing, couch-potato style which means that he just has a few index funds that he puts his money into in certain ratios, which is kind of my style.
Everyone is predicting a bear market in the coming year or two, in which case more active investors would get defensive by moving into cash, bonds, precious metals or things like inverse ETF’s. Except Bortolotti doesn’t buy into this conventional “wisdom” and says that even though it may seem kind of crazy to do nothing, it’s actually the best strategy because no one can really market time with any sort of accuracy.
He says that if you must do something (even though he doesn’t recommend it), you could re-balance your portfolio because it’s probably heavier on stocks and lighter on bonds either by selling some stocks and moving into bonds or just by adding more money into bonds.
I like this guy, a lot. It’s a good dose of common sense in the sometimes pretty wacky world of financial advice. Doing nothing when everyone is fearful, or greedy is much better than following the herd.
Here’s a book by the same author, which I’m sure has plenty of fabulous advice for the Canadian investor: Beginner’s Guide to Personal Finance
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