When in­vest­ing, don’t miss the big pic­ture

South Shore Breaker - - HOME&GARDEN - KEVIN DOREY FI­NAN­CIAL FO­CUS kevin.dorey@ed­ward­jones.com

To be a suc­cess­ful in­vestor, you should take a long-term per­spec­tive. Yet, that’s not al­ways easy, be­cause most of the in­vest­men­tre­lated news is short-term in na­ture — one day you hear that the mar­ket is up, and the next day you read a neg­a­tive re­port on the econ­omy. What can you do to stay fo­cused on the big pic­ture? Here are a few sugges­tions:

Know your in­vest­ment his­tory

When the stock mar­ket de­clines sharply, ev­ery­one knows about it. But when the mar­ket grad­u­ally moves up, it seems much less news­wor­thy, per­haps be­cause it’s so com­mon. In fact, from 1919 through 2009, the S&P/TSX Com­pos­ite In­dex (TSX) has shown pos­i­tive re­turns 64 per cent of the time over one-year pe­ri­ods, 84 per cent of the time over five-year pe­ri­ods and 90 per cent of the time over 10-year pe­ri­ods. (The TSX is an un­man­aged in­dex that can­not be in­vested into di­rectly.) And you can find sim­i­lar re­turns in the United States and other ma­jor stock mar­kets. As you might have heard, past per­for­mance is not a guar­an­tee of fu­ture re­sults, and this is cer­tainly true. But as you in­vest for your fu­ture, keep in mind that the fi­nan­cial mar­kets have his­tor­i­cally trended one way — up.

Stay in­vested

Even if you know that in­vest­ment his­tory is on your side, your emo­tions might lead you to the side­lines dur­ing the midst of a par­tic­u­larly harsh bear mar­ket, such as the one we saw in 2008 and early 2009. But if you had pulled out of the mar­ket dur­ing that time, you would have missed out on the big rally that be­gan in March 2009. It’s not al­ways easy to ig­nore short-term price drops — es­pe­cially when that short-term lasts more than a year — but if you can de­velop the dis­ci­pline to stay in­vested through good times and bad, you may well be re­warded. Keep in mind that the big­gest gains are of­ten achieved at the be­gin­ning of a mar­ket rally, so if you’re al­ways in­vested, you won’t miss out on these op­por­tu­ni­ties.

De­velop a com­pre­hen­sive strat­egy

It’s im­por­tant to try to build your sav­ings by con­tribut­ing to ac­counts such as your Reg­is­tered Re­tire­ment Sav­ings Plan (RRSP) and Tax-free Sav­ings Ac­count (TFSA). Yet, you just shouldn’t sim­ply make these con­tri­bu­tions and for­get about them. In­stead, you have to de­ter­mine how your RRSP, TFSA and other in­vest­ment ac­counts fit into your over­all port­fo­lio — your big pic­ture. For ex­am­ple, do the in­di­vid­ual in­vest­ments such as stocks, bonds and mu­tual funds, in­side your RRSP and TFSA give you ad­e­quate di­ver­si­fi­ca­tion? While di­ver­si­fi­ca­tion, by it­self, can­not guar­an­tee a profit or pro­tect against loss, it can help re­duce the ef­fects of volatil­ity on your port­fo­lio. You also need to de­ter­mine if your in­vest­ment ac­counts will pro­vide you with the right mix of growth and in­come op­por­tu­ni­ties, given your in­di­vid­ual risk tol­er­ance and time hori­zon. To take all these vari­ables into ac­count in de­vel­op­ing your com­pre­hen­sive strat­egy, you may want to work with a pro­fes­sional fi­nan­cial ad­viser — some­one with the ex­pe­ri­ence and ex­per­tise to help you nav­i­gate through the in­vest­ment world, which can be chal­leng­ing.

In al­most all ar­eas of our lives, we can get so caught up in day-to­day ac­tiv­i­ties that we over­look the larger sce­nario. Don’t let that hap­pen to you when it comes to in­vest­ing. By keep­ing your eyes on the big pic­ture, you may some­day achieve big re­sults. Kevin Dorey is a Fi­nan­cial Ad­vi­sor with Ed­ward Jones. Based in Tan­tallon, Kevin spe­cial­izes in help­ing in­di­vid­u­als reach their se­ri­ous, long-term in­vest­ment goals. He can be reached via email or at (902) 826-7982. Ed­ward Jones is a mem­ber of the Cana­dian In­vestor Pro­tec­tion Fund.


When the stock mar­ket de­clines sharply, ev­ery­one knows about it. But when the mar­ket grad­u­ally moves up, it seems much less news­wor­thy.

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