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If You Can’t Stomach A Downturn, Stay Out Of The Market

A sharp downturn on stock markets in the summer of 2015 caught many investors by surprise. Emotions took hold for some – even though a correction is a perfectly normal event on stock markets – and many saw the drop as a signal they should unload investments. John Carswell, the president of Canso Investment Counsel, told Financial Pipeline co-editor Malcolm Morrison that if you can’t stomach such a downturn, you shouldn’t be in the markets.

JC: When people say “Should I be in equities?” And I go, “Could you laugh about a 20 to 30 per cent loss?” and they go “No!” – well, then you shouldn’t be entirely in equities. (On) October 19th 1987, they were down 20 per cent in a day thanks to program trading. So if you look at it, you know we’ve had flash crashes and this and that, and if you can’t stand the thought that your money could go down, then you shouldn’t be in equities. But if you look at the richest people around, they own equities. Like Bill Gates, at Microsoft, he owned the equities in Microsoft. Apple Computers, Steven Jobs owned equities in Apple Computers. So how do people get to be very wealthy? They get to be very wealthy by owning equities in companies. Now, sometimes they’re private companies and you can’t own that equity. But in general, if you’re in the equity markets and economic growth is two per cent, the equity markets will give you two per cent.


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