Economists at the Royal Bank of Scotland have warned their investors to get out of the stock market – saying 2016 will be a cataclysmic year. An I.U. economist says Hoosier investors shouldn’t have such a knee-jerk reaction.
Falling oil prices and volatility in China are affecting the markets and are two of the reasons the Royal Bank of Scotland urged investors to sell everything but high-quality bonds. IU associate professor of finance, Robert Neal, says not so fast.
“You don’t see a bunch of other brokerage firms saying, 'sell! sell!,'" he said. "You see a lot of them urging caution and diversification, which I think makes much more sense.”
Neal says trying to “time” the market is not easy.
“The challenge is that most people, when they make that decision to sell – they don’t really know when to get back in the market – and consequently they wind up missing the significant upward moves,” he said. “And ultimately they wind up being worse off than if they’d just held their money throughout the period.“
Neal’s advice for most investors is take a long-term perspective and ride the ups and downs. He suggests you look at your financial goals, the years you have to invest, identify your risk tolerance and adjust your allocations accordingly.
