Investing during volatile times
Unless you have been living under a rock these past few weeks you have noticed the major swings in the equity markets. If it isn’t the news about Greece, it was the slump in oil prices or the economic slowdown worries of China. You can list more too. There aren’t very many rays of sunshine out there right now. As an investor, what are you to do? Over my 22 years in the business here is what I have learned.
I have yet to see someone who panicked benefits from that moment of panic. If you keep emotion out of your investing decisions you would be hard-pressed to make a poor decision. It is your money so I know it is hard to keep emotions out of it but if you can, that goes a long way to make sure you don’t panic.
Don’t have all your money in Canadian Equity or Global Bonds. Have your investment fingers in all aspects of the investment pie. Make sure you own some bonds, some Blue Chip equities, Europe, USA, etc. By diversifying via geography and/or sector for example you will have money in areas that will be performing well. You will also have money in areas that won’t be performing great right at that moment but they will at some point.
Have a plan
If you have a plan on why you are investing, a purpose for your money then you will the proper vision for your money. We preach long term vision but sometimes we are investing in the short term and with that in mind we would invest our money properly. A written plan, have something down on paper that shows what you are investing for and why will also go a long way to successful investing.
Be realistic with your return assumptions
Have realistic expectations on what kind of returns you will get on your investment. If your expectations are way out of whack to what you will most likely get in return, you will always be disappointed. It will never be good enough.
Rebalance your portfolio
Don’t get greedy. Rebalance your portfolio. Take some profit and move it somewhere safe. Purchase equities when they are down from a cash position. If you never rebalance and the market corrects then that profit that you could have had will be gone. There is nothing wrong with making a profit and keeping it.
Review your portfolio
Review your portfolio regularly. Review with your Advisor or review it yourself if you are a do it yourself person. Do not ignore your portfolio no matter how much money is in there. It is your money so take it seriously.
These are just a few of the things that I have seen successful investors do that unsuccessful investors don’t do. They are simple yet effective. Saving is hard, spending is easy. Saving requires sacrifice for the future. Saving is discipline and discipline is hard. Stay focused, do not listen to the white noise out there. There are no experts out there when it comes to the market. If any of us were experts we wouldn’t need clients, we wouldn’t need to work and we wouldn’t give our secrets away. Put your money away, have a plan and don’t panic.
Never panic and always have something to do with your retirement life
Investing during volatile times
The most important things you’ve said are, in order (my opinion):
– have a plan; this will determine the returns you will expect, the levels of diversification and risk present in your portfolio, and the level of involvement in monitoring your portfolio
– review your portfolio; even if most of us are not day-traders, we must be involved in the management and monitoring of our retirement capital; even when relying on advisors, we must be aware of what/where our money is invested.
If you know enough about your portfolio, you won’t panic; you may need to act, but it won’t be erratically.
Investing is not a static endeavour. The internet for instance has changed everything for the retail investor. Financial products and companies change all the time. ETFs did not exist when I started investing, but mutual funds did. REITs did not exist. Income trusts were dramatically chopped in October 2006, but trust units and royalty funds still exist to provide cash for shareholders. Closed-end funds are a relatively recent financial product available on the TSX.
RRSPs are not that old and TFSAs are very recent.
Re-balancing is part of the function of mutual and closed-end fund managers; that’s why so many of us use these investment vehicles that charge management fees.
Personally, I diversify with TSX listed companies or funds which are involved in foreign markets; I don’t invest in foreign companies, it’s just too “foreign” and complicated to me. I also invest only in Canadian companies or funds that pay me cash; I am just not dedicated enough to monitoring my portfolio or searching for opportunities nor smart enough to know when to buy and sell for profit.
I have too much money in the bank, none in the market – yes sad. I was planning on entering then covid hit. I wasn’t prepared in March or April when the prices dropped. 59 yo. hubby 64. I transferred some of my TFSA to Wealthsimple and it has been sitting there a few weeks … would I be foolish putting it into VRIF.TO right now? If the market goes south, it seems it will be irrelevant other than the etf price? It would give me 4% which is fine by me. I want to do something just for the sake of putting it somewhere and collecting some income off of it. I could put it in etf and just forget about it. Kind of my style. Just not sure how much risk is in an etf… This money is basically extra .. not really needed. I have about $250000 in non registered I need to do something with too.
I guess my question is … if you had tfsa and non registered funds $375,000 … would you do any initial investing right now? I am only talking etfs … right now looking at simple stupid vanguard etfs where they do the balancing.