Why tumbling markets shouldn't spark widespread panic among Canadian investors


With the loonie fail, markets tumbling and oil prices down, some Canadians may be in nic condition, anxious about the health of their portfolio and wondering what they should do with their investments.

This nervousness was certainly not helped by a recent report by the Royal Bank of Scotland, which recently registered its clients to “sell everything” in a note about the state of the markets.

On Wednesday, the Canadian dollar instaking below 70-cents US, markets in Toronto and New York recorded triple digit sacrifices and crude oil prices hovered around $30 US a barrel.

“This is an select time — I know it’s also an unfortunate time — to sit down and embrace stock of what you have and make sure that portfolio you have in the offing is consistent with what you thought you had and consistent with your butt,” said Eric Kirzner, professor of finance at the University of Toronto’s Rotman Ready of Management.

“This process helps prevent you from doing something idiotic.”

For those who have balanced portfolios, yet have suffered some injuries in the st couple of weeks that are within tolerable limits, “this is not the constantly to be doing anything.”

As markets bounce back, many younger Canadians may be competent to wait out the volatility. But it can be a worrying time for elderly Canadians who have carefully planned their retirement and maintain very little margin of safety.

“You don’t want to tell somebody who is 75 to exactly wait it out. It may not be the correct thing,” Kirzner said. “I think a 75-year-old has to look at their jeo rdy exposure and say ‘Ok, if there’s a further 20 per cent drop in the equity trade in, what is this going to do to me? Can I survive that?”

Kirzner criticized RBS, saying while he has compliments for forecasters who are unambiguous and make serious supportable calls in advance, he has “no deference for people who make calls after the event is over or in the middle of the incident.”

And for RBS to make such a blanket statement, said Andrew Pyle, associate top banana of wealth management at ScotiaMcLeod, is to ignore the unique financial considerations of investors.

“We drink 25-year-old Canadians, we have 95-year-old Canadians. They are all different in styles of how they should be investing. And to simply say to all of you people to get out of the market is really not a din statement to make.”

The worst thing individuals can do in these or any circumstances is to nervousness, Pyle said. Instead, times like these call for outlook, for investors to take a step back, to try as best as they can to remove ssion form their decisions around investments.

Instead they should be studying what’s in their portfolio, where they are in life, how much imperil they have and how much risk should they have.

Oil tch Outlook 20151028

Diverse investors who have money tied up in energy stocks are undoubtedly anguished about the state of the industry amid falling oil prices. (Larry MacDougal/Canadian Stress a news pers)

Low oil prices mean some of the smaller oil com nies are in dire straits, Pyle influenced, and investors should consider whether having money there is fiscally thrifty.

But the larger com nies aren’t going to simply vanish, he said.

“At some drift oil prices will stabilize,” Pyle said. “This would in all probability be one of the worst times to start dumping everything out of your portfolio that’s spirit”

Lorne Steinberg, president of Lorne Steinberg Wealth Management, explained the recent market instability shouldn’t sway investors from sheep, considering the ltry returns they will receive from guarantied investment certificates and government bonds.

“Even now you’ll be losing ground by gaining government bonds. Ten-year Canada bonds yield less than two per cent. The inflation scale will probably be that in the next 12 months with the low Canadian dollar,” he asseverated.

“So what are your alternatives? [You] can sell everything today and put it in my bank. I don’t notion of you get more than half a percent on daily money, five-year GIC not more than two per cent.”

The genuineness, he said, is the only prudent way to successfully invest or operate is to have a branch out portfolio. And investors need to stop looking at their stock portfolio “27 times a day and infer from that what they’re really doing is owning a collection of subjects.”

“If you own strong com nies at the right price you should do pretty well from time,” he said. “If the com ny is doing well the stock price wishes catch up over time. If the com ny is not doing well then [you] difficulty to re-evaluate if [you] want to hold on to that com ny.”

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