Scary Markets: Ignore Your First Impulse
Submitted by Parkhouse Financial / Portfolio Strategies Corporation on September 1st, 2015
Recent market volatility across the global economy has left many investors feeling unsettled. Rattled even.
The impulse when living through this type of market turbulence is to do something. Anything.
But, before you do, considering the following:
1 - You are not the market.
Unless you are 100% equity invested, and none of my clients currently are nor have any of you been for some time, your portfolio is not a direct reflection of the stock market.
2 - Corrections are normal.
To the beginning of this week, we just experienced the largest correction – approximately 10% down – since 2012.
However, on average, we see three 5% corrections per year, one 10% corrections per year and a 20% correction every 3 years.
3 - Stocks generally move higher.
Instinctively, you know this to be true: ownership in quality businesses will pay dividends (pun intended!).
4 - The timing of such market volatility provides us with opportunity.
The role of the institutional fund managers we’ve hired within your portfolio is to make specific security selections, e.g. sell one bank stock to buy another.
Our job together is to make the more mid- and long-term decisions towards equity versus fixed income allocations: higher equity after a downturn (buying low!), lower equity after a large run up (selling high!) and during times of volatility.
As I’ve been very forward about with clients over the past couple of years, since the initial volatility of the current bull market began a year ago this week, the opportunity lies in having already decreased equity in anticipation of this type of extreme market volatility, and, preparing to take advantage of it when we see a much bigger correction, i.e. a 20% down bear market.
Two Articles Putting Scary Markets into Perspective:
The Long-Term View by John Poulter, Chief Investment Officer, Portfolio Strategies Securities Inc (first link at top of page entitled “Market Comments and Outlook – John Poulter, CIO)
The Burning Question: Is this the end of the bull market?
For this to be a much bigger correction, you have to believe that either the U.S. is close to a recession or that we are at risk of a global financial crisis.
My overall belief is that we are in a low for longer (interest rates), slow for longer (growth), but also lasting longer (economic environment).
Slow economic growth, with significant bouts of volatility, is likely with us for a sustained period of time.
Ease Your Mind: And Protect Yourself from Your Own Impulses
A practical investment solution combining active and passive portfolio management, strategic asset allocation for enhanced diversification, and, automated rebalancing are critical components to delivering value throughout varying market cycles.
As a professionally designated Portfolio Manager, I can provide you hands-on, discretionarily managed investment solutions, tailored to your unique objectives and risk tolerances.
Contact me directly at 416.838.3617 or nparkhouse@pssecurities.ca to discuss.
Sincerely,
Nathan
