by Scott Ronalds
Buy low, sell high. Four words that epitomize good investing. If you can adhere to this strategy, you’re sure to do well over time.
But what about sell low, buy low?
We’re at a place in the market cycle where most investors are looking at negative returns over the past several months. Indeed, major stock markets are down 10% to 20% from their highs. And bonds are down double digits, too. Disciplined investors know that now isn’t the time to be selling or shaking up their plan.
There is an exception, however. If you’re making a lateral move—selling a stock that’s down to buy a more attractive stock that’s also down, for example—it can make good sense to ‘sell low, buy low’. The same applies to a fund or ETF. You may be upping the quality and return potential of your portfolio by moving on from an unfavourable holding and investing the proceeds in a better investment that’s on sale, so to speak.
Our managers have done some of this in 2022. They’ve sold certain investments that have lost their appeal due to a weaker outlook or worsening fundamentals and have invested the proceeds in enticing companies that were previously deemed too expensive but have now become more attractively valued. Examples include:
- selling Dassault Systèmes and buying Dolby Laboratories (Global Equity Fund)
- selling Philips and buying Zoetis (Equity Fund)
- selling Winpak and buying Aritzia (Small-Cap Fund)
- selling ITT and buying Viscofan (Global Small-Cap Fund)
We’re also running into more scenarios where investors are wary of transferring their portfolio to Steadyhand because they’re in a loss position with some of their current holdings. It’s rightfully engrained in them not to sell low. But there are times to remember the exception to the rule. If you’re not happy with the returns, service, fees, or approach of your current provider, it’s probably time to move on, be it to Steadyhand or another firm.
And importantly, because our funds haven’t been immune to the broad decline in stocks and bonds this year, you’d be selling low, buying low. They may not be the four sweetest words in investing, but they’re far from the worst.
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