Stocks or bonds? Here’s where to park your money as recession fears ratchet up

Almost one in four Canadian investors are worried about leaving their money in the stock market amid a looming downturn, but experts say it's usually a mistake to cash out.

Almost a quarter of Canadian investors said in a recent survey that they’re thinking of cashing out their stock investments after a rough year for the markets and rumblings of a possible recession. But experts are cautioning against rash decision-making in the heart of a downturn.

Results from an online survey for price and rate comparison site Finder published last week show 7.5 million Canadian respondents (24 per cent) have no confidence in the stock market and are planning to “cash out” before the end of the year.

The remainder had varying levels of confidence in the stock market, but only nine per cent said they were “very confident” that their portfolio returns would meet or exceed their expectations for the year.

Conditions in the stock market have not improved since the survey was conducted in July. The Toronto Stock Exchange (TSX) hit a new low for 2022 last week, with sectors such as tech taking heavy losses this year.

Wall Street officially entered a “bear market” in June after dropping 20 per cent from recent highs at the start of the year, marking the barometer for a prolonged downturn on the stock market.

Romana King, senior finance editor at Finder, tells Global News that the emotional urge to act and take control of your investments by cashing out or jumping onto a hot new position should be treated with restraint.

“If you have an impulse to do something, I think that’s the moment you need to stop and take stock, quite literally — take stock of your stock,” she says.

When investors see their portfolios taking a hit in a bear market, it can be tempting to “cash out” and avoid further losses, King says. But doing so only “crystalizes” losses to date, she notes, and can come at the expense of gains when the market cycles back towards growth.