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Written by Singlife | 03 Mar 2021 |
You know that awkward moment where the market isn’t doing so well, and you are itching to withdraw your funds for fear that your returns are going to fall off a steep cliff?
Well, we know the feeling. Remember- losses are not “real” until you actually make a withdrawal. So, what are some factors to consider before withdrawing, then?
1. Paper loss vs. actual loss
It may feel like you’ve lost money when your investments go down. But consider this: you have not lost money yet. You’ve only incurred a ‘paper loss’. You only lock in your losses when you actually sell your holdings.
2. What’s your investment strategy?
Most people invest because their strategy is to buy “low” and sell “high”. Cashing out when your investments are not performing means you bought “high” and sold “low” instead.
Alternatively, other strategies like dollar cost averaging already take into account market voilatility, and if so, the dip in investments is part and parcel of the journey.
3. Are you thinking long-term or short-term?
Investment is a long-term journey. Bearing that philosophy in mind allows one to accept that the stock market will rise and fall, but will generally trend upwards in 3 to 5 years.
With time, markets rebound, and your portfolio will still have a chance to turnaround. In contrast, selling your units means there is no hope of recovery.
4. Have you considered all options & opportunity costs?
Instead of withdrawing, you may consider switching your portfolio to rebalance your holdings.
Remember, there is an opportunity cost of holding cash: while you don’t risk losing your money to investments, you lose the chance for it to grow while invested, and for your earnings to compound! Furthermore, the option of keeping cash in hand is no defense against inflation.
5. Of course, it all depends.
That is not to say you do not withdraw your money upon a loss. We all have different risk apetites and financial goals. For instance, if your investments have a shorter time horizon, you may not be able to wait and ride out the short term market voilatility as it may not recover in time for when you actually need the money.
The key to informed decision making is to consider more factors (like the above) before withdrawing! So, to withdraw or not to withdraw, that is the question.
Note that Grow is only available to Singlife Account customers.
Note that the performance for your Grow portfolio is not guaranteed and the value of the units and the income accrued to the units (if any) may fall or rise.
Grow is protected under the Policy Owners’ Protection Scheme which is administered by the Singapore Deposit Insurance Corporation (SDIC). Coverage for your policy is automatic and no further action is required from you. For more information on the types of benefits that are covered under the scheme as well as the limits of coverage, where applicable, please contact us or visit the LIA or SDIC web-sites (www.lia.org.sg or www.sdic.org.sg). This advertisement has not been reviewed by the Monetary Authority of Singapore.