by James McCrodan, Senior Wealth Advisor, The McCrodan Group –
Financial planning is the key to staying fit during turbulent times. It is the process of creating a roadmap for your financial future. A written financial plan shows you where you are currently, where you want to go and how you will get to your final destination. A solid financial plan will focus on achieving your goals – short and long term – using a number of different strategies along the way. So what should you do during a declining market to stay financially fit? The answer is quite simple: stick to your plan.
Stay Focused. Try not to make impulsive decisions based on emotions. Stick to your financial plan and think about the long-term picture. When you hear about a downward trend of the market, your immediate reaction might be to sell long-term equities to avoid further loss. While this is an enticing strategy, try not to give in to your temptations. By remaining invested you may give your portfolio the opportunity to recover any paper losses in the long run.
Maintain a Diversified Portfolio. Look at your existing investments and determine whether your funds have been allocated appropriately and according to your varying goals. A diversified portfolio consisting of stocks, bonds and cash investments tends to minimize risks. Revisit your portfolio periodically with your Wealth Advisor so that you can take advantage of the declining market and rebalance your portfolio.
Continue Regular Contributions. By making regular contributions to your investment plans, you will mitigate short-term investment risks in a volatile marketplace. When you invest on a regular basis, not only are you contributing consistently but you are also benefiting by purchasing more with the same contribution amount. In a declining market, you will be able to buy more investment units at a lower price. Moreover, if you meet the necessary requirements, you can also discuss borrowing to invest with your Wealth Advisor.
James McCrodan is a Senior Wealth Advisor at ScotiaMcLeod®, a division of Scotia Capital Inc. – The McCrodan Group at Scotia Wealth Management. For more information, visit www.mccrodangroup.ca. This article is for information purposes only. Investors should consult an advisor before acting on any recommendation. A fee based solution is not right for everyone. When making recommendations, we take a complete look at your financial situation, including risk tolerance and objectives to determine a strategy or strategies best suitable to your individual needs. Views expressed herein are solely those of the author and not those of ScotiaMcLeod or Scotia Capital Inc. ScotiaMcLeod is a division of Scotia Capital Inc., member CIPF.
