Market Commentary

In times of market volatility it is important to revisit the initial philosophy that brought you to choose to undertake any financial strategy: long-term, conservative thought. If there is anything that the last six years have taught is it is that the markets are a long-term vehicle that can treat us very well when given time.

Based on those comments I do not intend to undermine the volatility and the effects that it has had on portfolios around the world. Keep in mind, you are not alone. However, this is the time to take a step back from emotion and separate your true investor mentality from your fair weather mentality.

A financial advisor’s job is to pair you up with the best suited money manager as possible and design an efficient strategy around that based on your needs. In this respect,long-term, conservative mutual funds that are based upon a given strategy. In times like these it is important to realize that within the ashes of a volatile market these managers are given fantastic opportunity for growth potential.

A market recovery is not only the opportune time to invest, but also to strengthen an overall portfolio. History shows us that up markets often last 3-4 times as long as down markets. Not only that buy in the last 54 years, the market has risen in thirty-six years, been even in three years, and declined in only fifteen.

The key is: do nothing as markets test our emotions over this time of volatility. Prepare for a recovery and use that as a time to add to the markets.

It is times like these to not make knee jerk decisions. Quoting Jonathon Chevreau from the National Post ‘like being bogged down in traffic, there’s little that can be accomplished by moving to the left or right lane. Selling out of stocks now to go into cash would be like leaving the 401 for a country lane. Once the cars speed up again, you are stuck going 40 clicks on a country lane to nowhere.’

Based on the statistics in the previous paragraph the odds of being successful when you are in cash rather than stocks are almost three to one against you.

In summary, true investors look at times like these as opportunities rather than tragedies. Already as I write this the markets have recovered substantially from yesterday’s “plunge”. The key is to not let fear outweigh common sense and make mistakes that may be regretted down the road.

Keep in mind that an investor’s outlook should always be minimum five years. When using the best quality money managers in the world this should manage risk. Take advantage of opportunity when it applies. Priority one is always risk management.

One should only take money out of a down market or make changes for one of three reasons:

1) you absolutely cannot sleep at night
2) you absolutely need the money right away
3) your time horizon has changed to be much shorter.


Remember: it is always darkest before dawn.