Why you Shouldn’t Withdraw Investments When Markets are Down
In this we’ll be discussing why you shouldn't withdraw investments when markets are down in Canada.
First of all, it's important to understand that markets are cyclical, so it’s natural for markets to go up and down. It’s part of how markets work.
It can be concerning to see markets going down, but it's important to remember that historically, markets have always recovered from downturns.
The wrong thing to do is what a lot of people do – they think "But if markets are going down, isn't it a good time to sell my investments and protect my money?"
If seeing your investment go down causes you stress and you can’t sleep at night, sure, but it’s a bad idea.
Why is selling when markets are down a bad idea?
Simply put this is very detrimental to your long-term investment goals. When you sell investments when they're down, you're guaranteeing a loss.
While it may feel like you're protecting your money in the short-term, in the long-term, you'll miss out on the potential growth that your investments could have had if you had held onto them.
You have to remember that if you bought 100 shares or units in that investment, you still have 100 units or shares of that investment. It’s just the dollar value of them went down for now. When the price goes back up over time you will still have 100 units at the higher price.
If you bought something you believe in and that has true value, when the price goes down it might actually a good time to buy more at a discount.
If you ever hear the term buy low, sell high – that's what this is. The smart investors buy when markets are down.
The problem is that most people buy high and sell low – they buy when the market is hot and everybody’s talking about investing. Then when things turn downward they sell because of fear. That’s a guaranteed way to lose money every time.
On this blog we talk mainly about conservative financial planning, mainly using life insurance and private wealth management.
The key part of this is having a smart financial plan that’s designed around your life and your goals for the future. As long as your life situation hasn’t changed dramatically, you generally shouldn’t make knee jerk reactions when markets go up or when they go down.
The best investment you can make is into yourself – really know what you want, where you’re going and how you’re going to get there. Then set up your investments accordingly and don’t let market fluctuations shake you out of your position.
A good time to sell when markets are down
Now this isn’t a 100% true every time, not to sell when markets are down. But in general most people shouldn’t do anything.
A good time to sell when markets are down is towards the end of the year when investors sell off their loser investments to lock in the loss and write it off against their income or gains on other investments.
This only works with non-registered investments and doesn’t work with investments in your RRSP and TFSA because you can’t write off losses in these accounts.
Anyways, if you want to know whether you should sell – has your life circumstance dramatically changed since you made your plan? Or are you just panicking and potentially making a bigger mistake and guaranteeing your losses?
It’s also good to talk to your financial advisor or investment advisor before making a knee jerk reaction and selling everything when markets drop.
Why Insurance is a good investment in fluctuating markets
One of the main reasons that we put such a heavy focus on life insurance, and specifically whole life insurance when we do planning here at Safe Pacific is because any funds that hit your cash value account in a whole life policy are immediately vested and guaranteed.
Selfishly it’s so we never have to make that awkward phone call telling clients that we’ve lost all their money due to the stock market crashing.
We sleep really well at night – and our clients sleep really well at night knowing that any of the cash funds inside their life insurance policies is totally guaranteed and can never go down.
Which makes Life Insurance a great conservative investment while markets are fluctuating.
Contact Us
At Safe Pacific Financial, we specialize in helping Canadian business owners, incorporated professionals, and investors structure life insurance for maximum wealth protection, tax savings, and business growth.
If you would like to discuss whole life insurance or investments, we’re happy to chat and see if we can be a good fit to work with you. Fill out our contact form and we will get back to you within 24 hours on business days.
Related Insights
How Life Insurance Works in Canada
Most Canadians believe life insurance is simply a backup plan. It is something you purchase in case the worst happens so your family is protected....
The Canadian Business Owner’s Guide to Wealth Management
You’ve built a successful business. Your corporation is generating profits. Retained earnings are accumulating. On paper, everything looks strong. Now is the perfect time to...
How to Use Whole Life Insurance as Collateral for Tax-Free Loans in Canada
What if you could access capital for your business, investments, or retirement — without selling assets, triggering capital gains, or paying tax on withdrawals? You...
How Canadian Business Owners Can Stop Losing Money to Taxes
How Canadian Business Owners Can Reduce Taxes Using RRSPs & TFSAs Are you a successful Canadian business owner, real estate investor, or incorporated professional? If...
The Core Principles of the Infinite Banking Concept (IBC): A Canadian Perspective
Managing your finances in today’s world means more than just saving money—it’s about creating a system that gives you control over your wealth, both now...
The Rockefeller Strategy: How Whole Life Insurance Creates Generational Wealth in Canada
When people hear the name Rockefeller, they immediately think of massive, enduring wealth. Founded in 1870 by John D. Rockefeller, Standard Oil built one of...
Why Get an Infinite Banking Whole Life Policy for Your Kids?
Why Get an Infinite Banking Whole Life Policy for Your Kids? At Safe Pacific, we’re often asked by both parents and grandparents: “Why would I...
What is the Million Dollar Baby Plan and how does it work for Canadians
What is the Million Dollar Baby Plan and how does it work for Canadians? What if you could set up a secure, tax-free financial foundation...
Why Life Insurance is Essential for Business Owners
If you’re a business owner or a high-income incorporated professional, you know that managing risk and building financial stability are essential to your success. Life...
Episode 5 of the Infinite Banking Concept Series - Leaving a Legacy
Welcome to the fifth and final blog in our comprehensive series about the Infinite Banking Concept in Canada. Throughout these four previous blogs we’ve talked about...
Episode 3 of the Infinite Banking Concept Series - How Policy Loans work and what is the Adjusted Cost Basis?
Let’s look at a Whole Life Insurance Policy Illustration that's correctly set up for the Infinite Banking Concept. In this illustration with a Canadian life...
What is the Immediate Financing Arrangement?
Who is this for? We tell everyone that they shouldn’t set this up unless they want and need life insurance. If you have someone you...
