Don’t You Just Love Market Volatility?

(March 2009)

Has market volatility made you feel uneasy about your future? You’re not alone. Some people have tried to react to the situation by moving money around and converting to cash. This may not be the best course of action. Although the market is not rewarding investors right now, confidence is re-building and exceptional values are being realized by those with a long-term perspective.

Let’s go back to basics. Have your goals and objectives changed? Are you still thinking long-term, or have you succumbed to the hype and media stories about pending doom and gloom? There is no doubt that markets have been volatile for quite some time and the media has successfully created an atmosphere of fear and worry. This fear has caused some to panic and sell their investments. But is this the correct response to the current situation? We don’t think so.

There are many reasons to embrace market volatility. Let’s illustrate by example. Most of us probably don’t go to the store and search out the most expensive items to buy. We are natural bargain hunters. We look in flyers for products on sale. During the current market situation, the share price of many great companies has gone on sale, yet fear has caused panic-stricken investors to sell these great companies at discount prices. You must remember that for every seller of shares there is a buyer. That’s what makes the market. Only time will prove who was smarter: the buyer who bought a bargain, or the seller who sold at a loss.

When markets appear to be in crisis, it’s easy to lose perspective. As mentioned earlier, unless your goals have changed, you’re probably not finished buying equities yet. Review your time horizon and determine if you really need your money to be in cash today. History tells us that the biggest rewards are realized by the person who buys at the lowest points in the market cycle.

But do you have the knowledge and courage to make these decisions yourself? If you answer no, there are options. You can hire a professional money manager to do it for you. Mutual funds are one example of professionally managed money. These money managers employ proven investment strategies that work. But you must give them time. Embrace market volatility now and reap the rewards over time.

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.