investment planning

Portfolio Diversification

Looking back over the past few years, one thing is certain - we can never be absolutely sure what the financial markets will do at any given time. We can study charts and graphs, both historical and forecasted, we can consult with economic experts, business leaders, and government officials, we can look at inflation and interest rates, and still we cannot predict the markets with absolute certainty

Don't Give Up on Growth

If you are a prudent investor, then you have a financial retirement plan that will ensure you have sufficient funds for the lifestyle you envision after you stop working. What constitutes sufficient depends on your ambitions and your hobbies, and also on how long you live. People are living longer, and it's not unreasonable to think that you could live into your 90s.

Turning Fear into Opportunity

During any given time period, either greed or fear drive investment prices up or down depending on the mood of the majority of investors. During 2011, various global events have continued to weigh on investor confidence as the world watches and waits for the U.S. economy to regain it's prominence as the world's primary engine of growth.

Canadian Market Recovery After Financial Crises

During financial crises, stock prices suffer. However, they typically recover over time.

This chart illustrate the cumulative returns of a balanced (60% stock/40% bond) portfolio after five historical financial crises. In the short term, uncertainty from such external shocks can create sudden drops in value. For example, the portfolio posted a negative return one month after the October 1987 stock-market crash. Over a longer period of time, however, returns were much more attractive, and investors who stayed the course reaped considerable rewards.

Now is the time to be especially wary

Uncertain economic times and rising rates of unemployment are creating a new breed of desperate people. Some are turning to frauds and scams as a way out of their troubles. Others are becoming more susceptible to schemes they had hoped would help but are being bilked out of their dwindling cash reserves instead. Hard times tend to bring more frauds and scams out of the woodwork.

Cooler heads will prevail

The newspaper headlines read: 'Roller coaster stock markets have investors feeling queasy' (The Globe and Mail; 'The stock market crash: History repeating itself?' (The Calgary Herald); 'Uncertainty continues to pummel stock markets' (Sudbury Star); 'The next market boom may be a lifetime away' (Financial Times). Interestingly enough, these headlines are from November 2002. One year later, the S&P/TSX Equity Index was up 20.8%; and two years later had soared by 40.7%.

Great Depression 2.0?

It's been a long and volatile quarter in the financial world. Markets are taking most investors on a wild and sometimes frightening ride, the news about corporate failures and bailouts is confusing and the economic news is almost certainly disheartening.

As some in the media eagerly seek to assign blame for the current stock market turmoil, others are predicting a global doom reminiscent of the 1930s.

Despite the media's best efforts to draw comparisons between today and the Great Depression, there are KEY facts that often get overlooked.

Cycle of Market Emotions

Getting emotional about investments can easily lead to poor decisions as investors fall prey to negative thoughts and fears. The chart below helps to illustrate the emotional aspects of investing.

The human brain constantly searches for trends or patterns in things, trying to make sense out of even random events and data. This essential life skill is not very helpful when it comes to investing.

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