We don’t know what the future holds for investors; no one does. What we can tell you is that the media has once again succeeded in creating significant fear about investing. This is just at the point in time that people should be courageous about investing and their investments.
How many of you sold some, or all of your investments recently? You just couldn’t take the “losses” any longer. How many invested in guaranteed investments with your RRSP contribution? You just couldn’t stand the “volatility” any more. But you committed to move your money back into mutual funds when things settle down. The risk of this action is that you miss the turn-around that inevitably occurs when markets recover.
We’ve all heard it before, “Buy Low and Sell High.” So why do so many people show fear and run away when the market declines. This is precisely the time to have courage. Good quality and profitable companies with sound management and expanding markets have had their share price decline significantly over the past few months. These companies are not going away.
There are those who boast about having some clairvoyant ability to be able to time when to get in and when to get out of the market. The vast majority, professionals included, admit with honesty that they have no idea when it’s the right time to sell or buy into the market.
This emotional roller coaster ride is not new and it’s been seen before. The late sixties saw a rapidly rising market come to an abrupt end in 1974 with the oil embargo and Nixon’s resignation. Then again in the eighties with the 30% one-day drop on October 19, 1987. And once again the markets peaked and fell when the technology bubble burst in 2000. This is the pattern of the past and will continue to be the pattern of the future.
So what is the average Canadian investor to do? Strap yourself in, like on a roller coaster. Know and develop an understanding that markets have ups and downs, just like a roller coaster ride. Don’t un-strap and jump off in the middle of the ride. This could prove be detrimental to your long-term financial health. The best course of action is to stay on the ride, stay invested, and bring new money into the market while its “On Sale.”
This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 613-798-2421 or E-mail at rick@invested-interest.ca.