|
 The
Companion Advisor: Techniques
& Methods
Investing for the Long Term
Contributed by AGF Funds Inc.
A Companion Advisor Article
On any given day, which way the market is headed is
anybody's guess. Historically, equity markets have gone up over the long
term. Since 1956, the Toronto Stock Exchange Total Return Index for the
top 300 stocks, which includes reinvested distributions, has increased
81-fold.
But markets don't go up in a straight line. Canadian
market watchers have seen a number of dips, troughs and corrections over
the years both domestically and internationally. There have been worries,
about inflation, worries about deflation and more than a few currency
meltdowns - Mexican, Brazilian, Asian and Russian. There have been repeated
commodity slumps and sell-offs. These downturns were often temporary,
although some have been protracted.
Volatility is inescapable in the short term and can
spell doom for the short-term investor. For example, at the time of the
Quebec referendum in 1995, Canadian stocks took a nasty tumble before
reaching an all-time high just two months later in December.
Tumultuous markets will always make you feel anxious.
Anxiety often leads to the temptation to get out while the market is falling,
and perhaps jump back in when things are safe again. The problem with
that tactic is that it causes you to buy investments when their prices
are high or at their peak, and sell them when the price declines, inevitably
causing you to lose money. In fact, excessive portfolio turnover combined
with a propensity to buy relatively overvalued investments and ignore
relatively undervalued ones has caused the average mutual fund investor
to under perform over the past decade. (Phoenix Investment Partners Study,
December 2000).
Experiencing market volatility is the short-term price
of garnering superior long-term potential returns on equity mutual funds.
The key to success in earning superior returns is not to lose sight of
your long-term goals, remember that equity markets do go up over the long
term, and employ an effective asset allocation strategy when you and your
investment advisor build and manage your portfolio.
* * *
|
|
Use this link to load a printer-friendly
version of this document. |
Have a question regarding this article? Use our feedback form to send us a note.
© , Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6K 1C6.
(905) 844-7700
| 
