by Deborah Reid, Raymond James Ltd. –
Catastrophic events, such as out-of-control wildfires and devastating floods, cannot be predicted. However, we can decrease the probability of being victim to the crisis by choosing not to live in flood zones or forested areas, or alternatively by depending on insurance to protect our assets. Unfortunately, many victims of these recent events found themselves without protection, which can be financially devastating. Whether they rebuild or move away, the result of having to draw from savings or increasing debt load can be a crushing blow to one’s long-term financial plan. Those with insurance coverage, however, have comfort knowing that the financial support from their insurance company ensures that there is little effect on their financial independence.
Imagine how easy life would be if investors could rely on insurance against potential losses during severe market corrections. We haven’t had a major market correction since 2008, so many investors may forget the pain of losing 20% to 30% of the market value of their stock portfolio. It is only natural to forget since memories fade the further we are from the event. History tells us that we are due for another major market correction, so what steps have you taken to protect your investments?
Unlike disaster victims who can rely on insurance to protect their assets, investors must rely on other methods. Your financial advisor knows you, your tolerance to loss and your investment timeframe, and can discuss options suitable for you. Whether it is a matter of taking gains to increase cash or fixed income, ensuring your stocks are adequately diversified or implementing complex strategies such as hedging, there is no time like the present to review your holdings and evaluate your comfort level.
The following are questions that may prompt you to make changes to your current portfolio.
- How did I feel during the 2008 market correction?
- How did the market correction affect my investment portfolio?
- Did I lose sleep over the drop in value of my investments?
Although we can’t predict natural disasters, we do know that it is only a matter of time until there is a “catalyst” that will have a major negative effect on the equity markets. Don’t get caught off guard; take time today to prevent tomorrow’s capital losses.
Deborah Reid is a financial advisor with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James. This article is for information only and should not be considered investment advice or a solicitation to buy or sell securities. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.
