If you’re like many Canadians who have recently decided to jump into the investment game, I can only imagine how worried you may be due to the recent news surrounding the global equity markets. You’re likely concerned about how these recent downturns impact the Canadian stock indices.
The truth is that this downturn is not unexpected. There’s a popular quote by renowned astronomer and author, Carl Sagan. “You have to know the past to understand the present.” In the investment cycle, there are bear markets and there are bull markets. Bear markets are characterized by market downturns and pessimism, while bull markets, as you may have already surmised, are periods of upswing in the market. One thing the past assures us of is that there is always a bear market following a bull market. No one can predict (Not even Warren Buffet) when exactly one will replace the other or how long each will last, but just about everyone agrees that one will replace the other at some point.
So if you’ve got money invested what should you be doing right now, considering the downturn in the market? Below are a few key things to keep in mind.
Remember that this is temporary. The good times will definitely come back. Smart investors are either buying more investment units or they are doing nothing. By nothing, I mean that they are not frantically selling off their investments.
Remember your timelines. Remember the plans you made when you met with your investment specialist? Try to remember those and stay the course. Most of the population who invest, are investing for retirement. Unless you’re retiring in the next 5 years, don’t overly concern yourself with the short term behavior of the market. Consider only the long term results. Anyone that has seen an Andex chart knows that the long term trend of the market since just about anyone can remember is upward.
According to history, Bear markets are shorter than bull markets. According to historical data, bear markets last an average of 18 months. That’s how long it takes most people to upgrade their cell phones. Stay calm and stay invested. Deciding to sell out of a properly managed, quality investment will only turn a temporary portfolio decline into your permanent financial loss.
Do not try to beat the system. The market is not like the “Kobayashi Maru” and you’re not Captain James Tiberius Kirk. Trying to time the market most often than not will lead to much worse returns. In a downturn, remember that the stay calm and steady investment strategy beats just about any other strategy.
Try your best to take the emotion out of investing. Realizing that the value of your investment just dropped by just about any percentage can cause an extreme emotional reaction in many investors, but more especially with new investors. It’s important to stay calm and automate as much of your investment strategy as possible. This is likely to keep you on track for your long term goals. Set up your contributions for direct deposit and continue making small, regular deposits and no matter what changes occur in the market during the term of your investment, you will be far more likely to accomplish your retirement savings goal.
If you’ve already started investing for retirement or general estate planning, great decision. You will not regret it. Make sure you do regular reviews with your advisor to make valuable adjustments that can keep you on track for your long term goals.
If you haven’t started investing, reach out to me directly. I will be happy to guide you through the process of choosing the right products for your long needs and goals.
Chazz is a Property & Casualty, Accident & Sickness, Life & Mutual Fund licensed Advisor as well as a Speaker on Insurance, Wealth, Retirement & Personal Finance. Chazz is also a Chartered Life Underwriter (CLU) and a Certified Health Specialist (CHS). Chazz is licensed in Ontario and Alberta.