There will always be a reason to sell your shares. If you look at the graph below, you will see that since 2009 there have been many very good reasons to sell your shares, but the markets just kept on going up. One of the reasons may be that you only ever hear the bad news, but for every negative there are usually two positives. Last month there was another reason to sell some shares, namely the increasing inflation pressure and potential for interest rate increases, but after a very mild pullback the equity markets just raced higher again.
Now, we have to understand that there will indeed come a time when your shares will take a deep dive down, but the reason will most probably be something you have never even known to exist until it happens.
So if this is a situation that continues to repeat itself, over and over again, why listen to those unfortunate investors who have been sitting in cash for as long as they can remember, just watching the train of missed opportunities speeding away from them? The irony is that when that disaster does occur and the markets fall, they will once again miss the investment opportunity because they will be too afraid to invest again.
The best way to deal with this problem is to follow a strategy of rebalancing your portfolio. As the equity markets go up, take some profits off the table and accumulate a bit more cash than usual. When the markets go down, start buying back some equities and lower your cash position. We will start seeing interest rates rise over the coming months, which may see the returns on your equity funds decelerating, but at the same time you will get better returns on your money market funds. The counter-argument is that even with interest rates rising; with all the stimulus cash in the system; and with the Covid restrictions diminishing; you will see consumers spending more and the shares of the companies providing those goods and services going up.
Only time will tell which one of these two scenarios play out but while we wait, make sure you have some money on both horses in the race.