A tough year for 2000

As I write this final article for 2000, I can’t believe 365 days have gone by so quickly. World Markets have gone through a rough roller coaster ride this year and much of it has resulted from sharp movements in the technology sector.

Unfortunately, there have been more downs than ups in markets around the world. In fact, 17 of 24 national indexes lost money this year. The biggest losses came from the Asia Pacific region with Singapore losing 27.24%, Japan losing 20.18% and Hong Kong experiencing an 18.91% loss.

Overall, the world market according to the Morgan Stanley World Composite was down 11.57%.

Crisis creates opportunity

As we move into 2001 and the upcoming RRSP season, it is an important reminder that the Chinese symbol for crisis is composed of the character for danger and opportunity.

Although markets have had a difficult time in 2000, it does represent a good buying opportunity for the future. If we take a look at all the market downturns since 1950, there is a very good chance that markets will return positive returns in the next 12 to 18 months.

As you look at returns in the newspaper or on your annual statements, it will be very easy to fall into investor psychology and think that because markets went down last year, they will keep going down in the new year. However, remember that markets go up every time they go down and over the long-term, markets will rebound to new highs.

Summary of principles

I offer you some sound investment principles for the future. They represent common sense and should not be new to most investors. As we move into the new year, these principles are a reminder that some things really do not change.

  • Try to invest with logic over emotion. It is emotional decision-making that often gets investors into trouble.
  • Employ some patience with equity investments – they will go up given time.
  • Make sure you understand the risk of your investments because risk determines performance (not the other way around).
  • Avoid market timing because trying to pinpoint the highs and the lows of the market is impossible.
  • Diversify your holdings. Holding investments outside the technology sector proved to be an important risk managing strategy.
  • Good research leads to good decisions. Make sure you take the time to research your investments properly.
  • Develop a plan. Having a plan helps you to keep focused on the bigger picture instead of short-term market movements.
  • Keep it simple. Sometimes common sense goes a long way. In a complex and confusing world, keeping it simple can make a big difference.

All the best in your future financial endeavors and thank you for your continued support. I look forward to providing more financial news in the new year.

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