Investment Planning

The following seven strategies will help you feel more comfortable when the markets are turbulent.

1. Focus on the long term –Markets do move up and down on a day-to-day basis, sometimes rapidly. Historically, however, the long-term trend has been up.

Your best approach is to stick with your long-term investment plan and remain focused on your goals. While market swings may cause some concern, be confident that your plan is tailored to your risk tolerance and that as the market fluctuates daily, the returns generated will generally remain within your comfort level.

2. Invest regularly – One of the most important components of investing successfully is following a regular schedule. Even small amounts invested regularly accumulate to large sums over time; by investing regularly when markets are down, you can take advantage of the temporarily low cost of equity investments, which can enhance long-term growth.

Your personal schedule should specify how much you will invest and when. It could be a monthly contribution to your Registered Retirement Savings Plan (RRSP) or an annual amount to a child’s Registered Education Savings Plan (RESP). The key is to continue to follow this schedule throughout market volatility.

3. An optimal asset mix – Your optimal asset mix refers to the combination invested in equity and fixedincome investments given your particular tolerance for market risk.

Different assets have varying degrees of volatility and tend to react differently to market conditions. By holding a mix of assets, you can maintain a volatility level that you’re comfortable with, while being in a position to benefit from whatever asset class the market is favouring.

4. Diversify at home and abroad – An optimal asset allocation should be diversified. Since different segments of the market may behave differently than others, diversification will improve the overall risk profile of the portfolio. Mutual funds offer a ready-made, well-diversified investment and holding more than one type of fund within each asset class can increase diversification. To capitalize on some of the international investing opportunities available, and further increase the diversification of your portfolio, hold mutual funds that invest outside of Canada. Our Symphony Strategic Investment Planning™ approach provides a well diversified, optimal portfolio tailored to your requirements.

5. Set goals for motivation – Perhaps you want to accumulate funds for your retirement or for a child’s education. Or maybe you want to finance your own business. Such quantifiable goals can be a great motivation in times of market turbulence.

You can sit back and see just how far you’ve come, and reassure yourself that you’re well on your way to reaching those goals. An optimal asset mix should be crafted for each of your financial goals.

6. Work with your advisor – We will work with you to devise an investment plan to meet your goals and objectives over the long term. During periods of market volatility, we can be your sounding board. With experience gained from investing through several market cycles, we’ll help you remain focused.

7. Revisit and revise – Once your investment plan is in place, we will review your progress regularly to revisit your goals, your investment time horizon and how you feel about risk. We will also adjust your plan and rebalance your portfolio if necessary. It is important to rebalance your portfolio on an ongoing basis to ensure that your asset mix continues to reflect your risk tolerance.

Some special considerations for retirees

Volatility in investment markets can be especially unsettling for retirees and those approaching retirement.

If you are close to or currently drawing a retirement income from your investments, you have a more immediate need for some of your investments. This means that it may not be possible to wait while markets completely recover before you sell some of your holdings to fund your retirement income. Nonetheless, it is still possible to enjoy the potential future returns of the markets without subjecting yourself to more risk. Here’s how.

Hold your investments – You don’t have to sell all your holdings at the same time to provide your annual income if your investments can continue to provide income during market volatility.

So, even if some investments have dropped in value, you do not necessarily have to sell them at a loss.

A significant portion of your money can remain invested, generating additional long-term growth as markets recover.

Use money market investments To further reduce the potential need to sell mutual fund units in a down market, hold one to three years’ worth of income in a stable liquid investment such as a money market mutual fund.

This way you will have access to a stable source of income to outlast a market downturn. When markets recover, you can “top up” your money market fund as you redeem other investments.

Start now – Whether you are already drawing a retirement income, or will be doing so in the next few years, review your holdings today. If you plan ahead, you will be well-positioned no matter what happens down the road.

Ask for expert help – If you understand your investments and are confident that you have a sound portfolio, you are well positioned for the future. Remember too that when you want to review your portfolio, rebalance your holdings or capitalize on buying opportunities, we’re here to help!

The bottom line:

It’s much easier – as well as more rewarding – to stay invested. That way you can be sure of getting in on the market’s upswings when they occur.

Patience and discipline are key to investing through all stages of the market cycle. Staying with your longterm strategic investment plan will keep you on the road to achieving your financial goals.