Surviving the Market Correction
While it certainly is a worry for some, when the market drops as sharply as it has recently, it also brings to light the opportunity that can arise from refining, not abandoning, your long-term risk/return strategies. If you are feeling uncomfortable, you can now revisit your asset allocation plan, to ensure your risk level is appropriate to your current portfolio.
Can you find your advisor today? Has your advisor reached out to you personally to offer direction or advice regarding your plans and your specific portfolio? October has been described as The Month of Crashes, with historic market drops in 1907, 1929, and 1987. Read more about the month of October being volatile, and it’s equally volatile cousin, September. It’s not all doom and gloom in the Canadian Economy however, with the Canadian Unemployment Rate falling to 6.80%, its lowest since December of 2008.
Why is the market correction happening now? Canadian markets are being driven down, and the TSX is affected by the drop in world crude oil prices. For example, on October 16th, WTI Crude traded below $80 for the first time in 2 years; world demand is dropping for oil. Production and supply continue to increase from North American suppliers, however. Prices for gas have been so high, and for so long, that people and businesses have been forced to make adjustments to lifestyle and operations practices, just to save money. Usage is down, and supply is increasing, so prices will drop. For now.
Is this a crisis or an opportunity? According to the Financial Post, it’s an opportunity to reflect on your plans, and talk to your financial security advisor about what corrections, if any, can be made with your portfolio.
So now what? Here is our three-step plan of action to survive the market correction:
- Acknowledge: Is there an issue with your portfolio of investments? You may be bombarded with information and news that raises sincere concern. The challenges in Europe, the Ebola scare, the trouble with terrorism in the Middle East…do you feel this has or will affect your investment strategy? If the answer is Yes, we have next steps to take appropriate action.
- Review: Pull out your investment statement. Is there anything you are not comfortable with? Don’t throw out the baby with the bathwater. We may have discussed why you have so many fund options to choose from in the past, and this is because some will go up, and some will go down over time and the balance of these makes up your individual portfolio. We have set up your portfolio to work in most market conditions, and have professional fund managers whose job it is to maximize your returns.
- Reconsider: It may be time to reconsider your risk tolerance. Fill out or update your Investment Voyageur with us, and determine if your needs have changed over time. With this tool, we will now do one of two things:
- Stay the Course – Your portfolio is in the area of your risk tolerance
- Something has changed – It’s time for a re-balance and a change from your existing investments to take you beyond the current market correction.
There are still 2 ½ months left of 2014, and as of October 16th, the TSX was up 1.4% over the year. Until a negative number appears over a year’s time, it’s not time to panic yet. It may be frustrating that your money didn’t grow, but you are still saving, so still on the right track. If you have friends or family that have concerns for their investments, and need an advisor, please share our article, and our contact information. We are taking appointments here in our office to be available to everyone needing advice or a consultation. We will go the extra mile to ensure our clients are satisfied with their investment direction, so contact us to arrange your appointment with Specialty Wealth & Financial.