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Investment Outlook: What's In Store For Rest Of 2022? – Forbes

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It’s already been quite a year for investors. Since the start of 2022, the US S&P 500 stock index has plunged by more than 20%, officially taking it into ‘bear market’ territory.

In the UK, the FT-SE 100 index of leading companies can thank the fact that it is composed largely of ‘old economy’ stocks – commodities, energy, financials – for its relatively modest 3% decline

Wherever investors look, however, economic fear is in the driving seat thanks to the combination of post-pandemic global inflation, rising interest rates, extensive lockdowns in China and the war in Ukraine.

None of these events were on investors’ radar this time last year – a stark reminder of how quickly economic and geo-political circumstances can change and affect our savings and investments.

As we move into the second half of 2022, the UK is being stalked by the threat of stagflation. The prospect of a full-blown recession is not out of the question.

Against this gloomy backdrop, we’ve asked commentators to share their thoughts on what investors can learn from events in the first part of this year and how they can position themselves for the remainder of the year.


Brian Byrnes Head of Personal Finance, Moneybox

It’s been a tough first half of the year for investors, but there are some lessons we can take and reasons to be positive.

A key reminder should be the unpredictability of markets. ‘Value’ stocks [companies under-appreciated by the market] weren’t predicted to outperform ‘growth’ stocks [businesses expected to grow at a quicker than average rate], inflation was predicted to be “transitory,” and few predicted the UK market to outperform the US.

As investors, we should learn not to try and predict such movements and certainly not try and invest on the back of such predictions. Instead, we should aim to build our own personal financial plan based on factors within our control. 

For example, if, as investors, we can keep a sensible amount in cash savings, use our available tax wrappers [such as individual savings accounts] efficiently, and invest regularly into long-term diversified portfolios, the unpredictable nature of markets has less of an impact on us than it does for those investing for short-term gain. 

It’s also important, if possible, to keep our regular investments active as we are getting much more for our money than we were six months ago.


Annabel Brodie-Smith Communications Director, Association of Investment Companies

It’s been a challenging year for investors as prices rise and the terrible war in Ukraine has given inflation another unwanted boost.  Many experts are predicting that inflation will remain high while the economy looks close to recession.

 In these tough conditions, it’s important investors have a diversified portfolio, take a long-term view and, if in doubt, they should talk to a financial adviser.

Investors don’t need to rely solely on shares, but can also consider other relatively resilient assets such as infrastructure and renewable energy, which can be accessed through listed investment companies.

There are also a number of investment companies which aim to preserve investors’ capital by investing in a range of assets including inflation-linked bonds, gold, and carefully selected equities. These can add some defensive ballast to investors’ portfolios.

Income will be a high priority for some investors in this difficult environment. Some property investment companies deliver income which is contractually linked to inflation through indexing or upward-only rent reviews, providing some comfort to income seekers when inflation is rapidly rising. 

Of course, dividends are not guaranteed and property would suffer from a prolonged downturn or if lockdowns returned. In general, investment companies have a strong track record of delivering income in difficult times, because they can hold back some of the income they receive from their portfolios to boost dividends when times are tough.

There are seven investment companies that have increased their dividends each year for fifty years or more, and 19 that have increased their dividends every year for over 20 years, known as the dividend heroes.

Investment companies have important features which can help investors when prices are rising and the economy is suffering. They provide permanent capital and are listed on the stock exchange, allowing investors to buy and sell their shares easily on the stock market. This means managers can take a long-term view of their portfolio and are never forced sellers.


Rob Morgan Chief Investment Analyst, Charles Stanley

Falling markets are one of the biggest challenges faced by investors. But these testing periods are an inevitable part of investing. In the long term, they can also present good opportunities to acquire assets as others despondently sell.

Bear markets blow excess froth and complacency away. Highly priced assets with overly optimistic projections built-in come back down to earth. More resilient, diversified portfolios do, inevitably, take a hit. But they live to fight another day and harness the next bull market.

It is generally wise to stand your ground and resist the urge to trade choppy or volatile markets.

Selling out involves two decisions: selling and then rebuying – and it is fiendishly difficult to time these actions correctly. What’s more, you’ll stop the flow of income from dividends and interest from your investments. Over the long term, dividends are an important source of return.

If the bear market is a wake-up call that your portfolio wasn’t sufficiently diversified, then consider taking measured action to ensure you have a better balance going forward. Blending investments with different characteristics and styles is often more useful than relying on geographical diversification.

For instance, more value-focused or dividend-oriented strategies offer something different to those whose portfolios have become dominated by growth companies.

Portfolio construction is important. But time is your best friend, so don’t underestimate the power of even modest investments early on in life. You don’t have to shoot for the moon. In fact, a more measured and disciplined approach is likely to be more sustainable and reliable over the longer term than chasing the latest fad or fashion.

Don’t stop the investment habit at just the wrong moment. Remember, when markets go down it can be a good time to accumulate.

Dips in the market, particularly in the early years, could even work to your advantage provided you have committed to investing for a lengthy period.

If your chosen investment has become cheaper to accumulate it means your investment buys more shares or units to keep for the long term.


Graham Bishop Chief Investment Officer, Handelsbanken Wealth & Asset Management

Financial markets are in the process of digesting a regime change at central banks, creating some volatility, and it can be very difficult to hold one’s nerve during such turbulence.

However, staying invested throughout a range of market conditions, rather than attempting to ‘time’ markets to perfection by moving in and out, is usually the best course of action.

History has shown that it takes time for markets to calm, but that these periods usually prove to be temporary.

With volatility comes opportunity, and we believe that bond markets are starting to offer some value again. Yields have risen, and we are seeing selective opportunities in a range of areas, from high-yielding Asian debt to short-dated UK government bonds.

With investors understandably preoccupied by fears of economic slowdown, we think they could be undervaluing critical areas of the stock market.

The share prices of small and mid-sized US companies have been harshly penalised: they appear to have been priced for impending severe economic recession, which we do not believe is likely.

Unduly overlooked areas like this can offer the potential for attractive future returns.


Alice Haine Personal Finance Analyst, Bestinvest

The markets may appear a little too topsy-turvey for the appetites of more nervous retail investors, but while some might be tempted to panic, sell their holdings and flee the market altogether – crystallising their losses in the process – the best strategy is to do the exact opposite.

Investing when markets are down makes sense if you adopt a long-term view of at least five years or more.

For those worried by the current volatility, waiting for the bear market to end to scoop up investments at bargain prices is not a wise idea, either, as again there is no crystal ball to tell you when the market has bit the bottom.

That’s why taking a long-term view is the best strategy because time in the markets, rather than timing the markets is the secret to riding out the daily ups and downs. Plus, by staying invested, you avoid missing the ‘good days’ when share prices can increase significantly.

The best approach for the rest of 2022 and beyond is to drip feed in smaller amounts either monthly or quarterly no matter what the price is at the time. That not only makes you disciplined about investing on a regular basis, but also minimises risk by ensuring you invest during the lows, when equity prices are cheaper, as well as the highs.

This strategy takes advantage of pound-cost averaging, which cushions some of the effects of volatility by averaging out the price you pay – making your investment costs lower over the long-term and, hopefully, the likelihood of securing decent returns much higher.

It also removes the emotion that is often tied to investing, meaning you can focus on life’s other priorities rather than panicking over the state of your portfolio.


Matthew Roche Associate Investment Director, Killik & Co

Markets have demonstrated their capacity for turbulence in 2022. Such turmoil is often as a result of emotion-over-reason and sentiment-over-analysis of company fundamentals. Many investors have taken fright and sold up.

Markets always have the capacity to move lower. Alas, no one rings a bell at the bottom. It is therefore vital that investors maintain a cash buffer for emergencies and plan major outlays well in advance.

If investors ringfence cash for these purposes, the money they are investing can genuinely be thought of as ‘life-time’ savings. As such, there should be no reason to be a forced seller in a bear market. Doing so would mean turning ‘paper’ losses into ‘actual’ losses. 

We are focusing on a number of long-term growth themes including:

  • Climate change incorporating energy renewal, energy and management businesses.
  • Demographics & consumer preferences – such as changing consumer habits and innovation in healthcare.
  • Infrastructure renewal – physical infrastructure and resource scarcity.
  • Technological advancement – cloud, data, AI, digital transformation, ecommerce and electronic payments.

Scott Spencer Investment Manager, Multi-Manager Team, Columbia Threadneedle Investments

An investment theme that will serve retail UK investors well is to know that valuations are important once again.

The recent market bubble reflected the changes to the economy during the Covid-19 pandemic. Even now, it is difficult to discern whether the shift to working-from-home was temporary and will tail off as lockdowns end, or whether it marks a permanent change.

What do we know in the aftermath of this market bubble? Well, that some, but not all, cryptocurrencies are pointless and so have no value outside the enthusiasm that they generate.

Also, that large US technology companies – which are strong businesses that will continue to generate profits and growth for years to come – are better value after their fall.

The bubble saw a detachment of the market from fundamentals. The rise of inflation and increase of interest rates has meant that profits in the future are less valuable.

After the bubble, in a time of inflation and rising interest rates, it is crucial to ensure that investment is based on fundamentals. To be able to calculate valuations, the company must have assets and sales and profits and pay dividends to shareholders.

We remain mindful however, that we will see a weakening economic backdrop translate into a weaker environment for corporate earnings and, as we move into recession, it seems likely defaults will pick up.

So, we are moving cautiously. Equity and bond markets look set to remain volatile, but we will continue to see strong reversals from time to time as markets trend lower.

In the short term, market attention will soon turn to the Q2 earnings season and the focus will be on signs of earnings slowing. So far in this sell off, market prices have moved lower, but earnings expectations remain stubbornly high.

For the moment we remain cautious until we have a little more visibility on the outlook for growth, earnings and rates, something that may require a little patience.


Simon Gergel Fund Manager, Merchants Trust

In times of economic uncertainty and volatile stock markets it is best to focus on the medium to long term and try to avoid making decisions based upon short term news-flow and market noise.

We try to identify soundly-financed companies that we expect to emerge from current uncertainties with a strong, enduring business. We will look to buy these, if short- term volatility has left them trading at a significant discount to their future intrinsic value. 

At the moment some of the best value is evident in the house building, retail and consumer sectors. That said, it is important to understand individual business models and risks.


Thomas Gehlen Market Strategist, Kleinwort Hambros

During these times, we rely on three main themes. Firstly, rather than following media-driven sentiment, trust the data. Inflation shows signs of peaking and monetary policy, while tightening, still remains loose by historical standards, so a severe recession is not our base case. Avoid panic and rash decision-making.

Secondly, maximise diversification. Throughout the cheap money era [when central banks globally deployed vast swathes of quantitative easing akin to printing money], it paid off to simply concentrate investment in equity growth trackers.

Given the heightened uncertainty, diversification has come back into focus. This includes traditional safe havens such as gold and government bonds, but also riskier yet less correlated asset classes such as commodities, hedge funds or infrastructure.

Lastly, remain flexible: we currently prefer a neutral stance on risk assets and some cash reserves to enable a rapid response should market conditions worsen or, indeed, turn for the better.


Dan Boardman-Weston CEO & CIO, BRI Wealth Management

The circumstances that have led us to this uncertainty may be novel, but uncertainty itself is not.

During times like this, it’s important to recognise the role emotion can play in investing as well as recognising it is also the first step in taking advantage of it.

Fear, desperation, panic, capitulation, despondency and depression are all emotions that we may feel about the markets over the coming period. Calm, rational thinking is essential, however, and it gives the patient and logical investor opportunities to generate attractive long-term returns.

Markets are likely to remain volatile over the coming months and so it makes sense to try and strike a balance between ‘offence’ and ‘defence’.

By ‘offence’, I mean that if investors are sitting on cash balances, then gradually investing some of that into the market would make sense over the coming months. So, too, does looking at relative value opportunities between and within asset classes.

For example, the FTSE 100 is down barely 1% this year due to its exposure to oil, mining and banks, whereas the FTSE 250 has declined nearly 20%. If that trend persists, then recycling capital from one area to the other could provide long-term opportunities.


Graham Bentley CIO, Avellemy

Unusually, even lower-risk investors have suffered because their ‘safe haven’ investments such as gilts and corporate bonds have suffered double-digit falls this year. Additionally, many investors in this situation are taking regular fixed withdrawals from diminishing pension portfolios and cannot ‘buy the bottom’ with new money.  

That said, good companies don’t stop being good just because their prices fall. Equities go up over the long term, and it is better to buy them when they’ve fallen a lot.

Investors and their financial advisers might want to consider discussing a counter-intuitive strategy with their clients, for example, increasing equity exposure to protect their portfolios.


Jason Xavier Head of EMEA Capital Markets, Franklin Templeton

Recent events, such as the pandemic and the war in Ukraine, highlight the need for liquidity [a measure of the ease with which an asset or security can be converted into ready cash] in investment portfolios.

In addition to the low costs and transparency benefits of exchange-traded funds (ETFs), investors are increasingly embracing their liquidity, too.

The robustness of the ETF eco-system has allowed investors to navigate these uncertain times as it has during past instances of market stress and will continue to serve investors as the economic backdrop remains challenging.


Adrian Gosden Investment Director UK Equities, GAM Investments 

The outlook for investing in complex. Interest rates need to rise to bring inflation under control. Investors fear this may induce a recession.

Given this outlook, investors should concentrate on investing in equities that can deliver a robust and growing dividend. This will ensure you receive an income stream that has a good chance of keeping pace with inflation.

The UK market has a good income stream from dividends at the moment, but also has the advantage of significant corporate activity and share buybacks. This means you have a good chance of benefiting from more than just the dividend in 2022 and into 2023.


Mike Stimpson Partner, Saltus 

The overall message to investors is “keep calm”. We are most likely passing through the worst period of market worries. Employment is high and wages are rising. Recent price falls have thrown up great opportunities as an enormous amount of bad news is now ‘in the price’.

We are also passing through the peak of inflation over the next three to four months. The pressure will start easing towards the end of 2022 and this will help markets find their feet. Keep thinking long term and, if you can, keep saving in ISAs and pensions. This is a good time to buy assets after their falls year-to-date.

Market volatility is a fact of life and it isn’t going to change but the good news is that the flipside of volatility is opportunity. A professional asset manager, with a global reach, can scour the world using market volatility to pick up great assets at good prices.

This is exactly what we are doing adding to everything from US small companies to gold.


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Smart Money: The Top 10 investment mistakes – Alaska Highway News

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I have been doing this work for a long time. Nearly 30 years. And over that span I continue to see people make the same, preventable mistakes, over and over.

Here’s my Top 10 list of unforced investment errors.

1. Getting your financial advice from social media. If you have a question about money, what makes you think your equally uniformed friends have the correct answer? People with accounting questions will consult an accountant. People with medical concerns will seek out a doctor. But people with investing questions turn to Facebook or TikTok. It’s nutty.

2. Believing in fairy tales. Yes, I understand the allure of instant riches. Especially if someone is promising outsized returns with no risk. But huge returns with no risk is a fairy tale. Or a scam.

3. Being a perpetual GIC investor. Guaranteed Investment Certificates have their role in financial planning, but if you find yourself continuously rolling over your GICs at maturity because you don’t know what else to do then what you end up with is a permanent string of low-paying investments. On an after-tax, after inflation basis you are almost certainly losing money. How safe is that?

4. Buying on greed. If the reason that you want to buy an investment is because it is showing impressive past performance and you want to get in on the action, chances are very good that you are not making a rational investment decision. And if the investment has already gone up by that much already chances are that its too late.

5. Selling on fear. If the reason that you want to sell a quality investment is because it is showing disheartening past performance and you want to get out to avoid the pain of loss, chances are very good that you are not making a rational investment decision. And if the investment has already gone down by that much already chances are that it’s too late.

6. Confusing investment costs with losses. Buying the lowest cost investment is not the same thing as buying the best investment. If you can replace the diversification and investment decision making process at a lower cost, you might be on to something. But buying an investment only because it is cheap is a good way to end up with junk.

7. Overthinking. You really don’t need to wait until you master the nuances of a covered call strategy or do up a 200-column spreadsheet with correlation analysis before you take action. People can get overwhelmed by the choices and end up paralyzed into inactivity. Simple is usually better than complicated. Just get started.

8. Overconfidence. This one is a biggie. Way too many people think they know what they are doing with their investments, but that’s only because they don’t know what they don’t know. The tricky part is few readers will recognize themselves as being overconfident, just like everyone thinks that they are an above average driver. But if the roads are filled with great drivers, why are intersections with four way stop signs so difficult for people to figure out?

9. Burying your head in the sand. Sometimes financial decisions cause great angst, and the way that some people deal with money decisions is by not dealing with money decisions. Ignoring the situation might be a coping strategy, but it’s not going to get you anywhere. Unpleasant jobs are a fact of life. Pretending that they don’t exist doesn’t make them go away, and procrastination can allow small problems to fester into big ones.

10. Confusing wants and needs. You may want a shiny new toy right now. But you still need to eat when you get to retirement. A high consumption lifestyle is fun, but draining your retirement funds to finance it is short-sighted.

These preventable mistakes are well-known. Even so, I can assure you that people all over the world will continue to make all of them.

But you don’t have to be one of those people.


Brad Brain, CFP, R.F.P., CIM, TEP is a Certified Financial Planner in Fort St John, BC. This material is prepared for general circulation and may not reflect your individual financial circumstances. Brad can be reached at www.bradbrainfinancial.com.

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Three strategies to help you take the emotion out of investing – Financial Post

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Martin Pelletier: Never let emotion drive the investment decision-making process

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Investors sometimes need a friendly reminder to play the long game, especially during these uncertain times when many are wondering if the recent market rally is just another head fake or the beginning of a sustainable recovery.

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We can’t blame them for their trepidation, because pundits keep telling us to place our bets on red or black and whether central banks such as the United States Federal Reserve are going to pivot or not with their ongoing tightening.

Strong employment data has central banks hiking rates by 75 basis points, sending markets lower one day, only to be followed by consumer price index data that has them hiking just 50 basis points, sending markets higher with the magnitude dependent on the level of duration exposure.

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This isn’t surprising given just how addicted we’ve become to loose monetary policy.

That said, there is something that we think can really help keep you centred and on the right path going forward: Instead of getting caught up in all this binary nonsense, remember that both bear and bull markets come and go, at times faster or slower than others, but they all ultimately come to an end at some point.

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The bottom line is that over the longer term, there must be a return on invested capital or else the system breaks, and the winners have always been those betting on capitalism, not against it.

Therefore, you shouldn’t get distracted by the daily ups and downs, but stick to your investment plan and play the long game. This doesn’t mean not being active in the management of your portfolio, especially when it comes to managing risk, far from it.

But, most importantly, never let emotion drive the investment decision-making process. Here are three ways to help prevent this from happening to your investment process.

Goals-based benchmarking

The problem with indexes is figuring out which is the correct one to choose to compare against your portfolio. This can lead to performance chasing even among investment pros who face career risk for not beating the hottest market.

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Since the Fed began quantitative easing back in 2009, the low-rate, longer-duration tech-orientated U.S. equity market has been the top performer, but many forget that during the prior decade, resource-based, commodity-oriented markets such as Canada and emerging markets were the ones in the spotlight.

Avoid all this by charting your own course. Set a target return to meet a certain financial goal specific to you and your family and reflective of the market conditions of the time. Then, position your portfolio to try to meet it by taking as little risk as possible.

Risk management

Understand there is a time to add risk and a time to reduce it, but not in an all-or-nothing fashion, otherwise there is the chance of missing out on market recoveries by capitulating at the bottom or, worse, adding at the top just before a market meltdown for fear of missing out.

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We’re eating our own cooking when it comes to this. Our risk-managed, goals-based approach meant slightly underperforming on last year’s rally, but greatly protecting this year’s downside. As a result, this has given us the ability to add more risk to portfolios over the past few months following this year’s large market drawdown.

This is another reason why my outlook has been more bullish over the past few weeks than others. By minimizing losses, I’ve prevented emotion from clouding my vision.

  1. A construction worker works on a new house being built in a suburb located north of Toronto in Vaughan.

    Martin Pelletier: The end of cheap labour is a good thing for society, despite inflationary fears

  2. Traders work on the floor of the New York Stock Exchange.

    Beware of cherry pickers: Mixed economic data means bulls and bears both have strong cases

  3. The Federal Reserve building in Washington, D.C.

    Normalized interest rates are the cure, not the problem

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Always keep moving

Movement is life, and those who become complacent end up being left behind. It is common among those in my industry to tout buying, holding and forgetting about it. For the most part, the thesis is right, but it shouldn’t be used as an excuse to not actively rebalance.

For example, a few months ago, we were adding to our underweight position in longer-duration growth segments of the market such as the S&P 500 given its large multiple contraction, which more recently is showing its merit. At the same time, we’ve been selectively adding to the energy space on the large selloff in June given our favourable long-term outlook for the sector.

Remember to play your own game, not someone else’s and you will do just fine. This is easier said than done, but we think deploying the aforementioned strategies around an individualized investment plan can greatly increase the probability of achieving your financial goals and objectives.

Martin Pelletier, CFA, is a senior portfolio manager at Wellington-Altus Private Counsel Inc, operating as TriVest Wealth Counsel, a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax, estate and wealth planning.

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Time to sell? How to manage your investment property as interest rates rise – Financial Post

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There are a few key things that owners should consider to decide if their investment is worthwhile

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Inflation is up more than 8%, the highest yearly change in almost four decades, according to Statistics Canada. And in a scramble to bring that inflation rate down, the Bank of Canada raised its benchmark rate to the highest amount since 1998: 2.5 per cent.

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The hope is that inflation gets back to a normal two per cent by 2024. For borrowers with fixed mortgage rates, they would have locked in a certain interest rate when they purchased their property. For variable-rate mortgages, the interest rate that the borrower pays is tied to the central bank’s inflation rate.

Canadian borrowers are dealing with a five-year fixed rate of around 4.5 to 5.5 per cent. Variable rates are in the 3.8 to 4.5 per cent range. And rates are at least two per cent higher than a year ago.

Now that the days of easy money are a distant memory, real estate investors affected by higher interest rates may have to adjust behaviours in order to maintain a positive cash flow—or at least break even during this difficult time.

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Remember, real estate is a long game

Big real estate investors, such as developers, buy properties to hold for years, through many up and down cycles.

“My views are that if you are going to invest you should be a long-term holder,” says developer Gino Nonni of Nonni Property Group.

“I don’t know how often you can buy something and then turn around and make a substantial profit in a short period of time. At minimum, mom and pop investors pay their mortgage down and typically the value of the asset will go up.”

He believes the shortage of land will always constrain supply and put pressure on prices. The result is a secure, long-term investment.

“That’s the way I view it, and that’s what I tell my friends when they ask. I tell them to always hold.”

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Put your investment in perspective

Millennial broker Jacky Chan, president of BakerWest Real Estate, has been investing in real estate his entire adult life. He prefers real estate to other investments because it’s less volatile, and with the world’s population growing by about 80 million people a year, people are always going to need a place to live. Prices may slow down, but overall they go up.

“The faster an investment moves, the closer you need to monitor it, especially with the recent hype of NFTs and cryptocurrency,” says Chan. “But look at any real estate market in the world with a growing population, and it was definitely cheaper 50 years ago than it is today.”

Two things matter in real estate investment, says Chan: positive cash flow and appreciation. If the investor isn’t over-leveraged by too much debt, they should maintain a long-term outlook and not get spooked by interest rate hikes.

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If you own a $1 million property and have a $500,000 mortgage at five per cent, you are, in simple terms, looking at $25,000 interest per year.

If the property increases by five per cent in a year on the $1 million investment, that’s an increase of $50,000, so the owner has a net positive of $25,000.

“Even though the rate has gone up, the real estate value is still increasing.”

When things are getting tight

Let’s say you purchased a condo to live in, and purchased another as an investment. With interest rates climbing, what happens if you took out a variable rate mortgage and the rent isn’t covering the higher mortgage payment? Mortgage advisor Alex McFadyen, of Thrive Mortgage, saw a lot of people buy second properties in the last couple of years, and they might now find themselves stretched. All experts will tell you that selling off the property should be a last resort, but how do you avoid that when costs are mounting?

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“Ask yourself if the property itself is really underwater, or are there expenses we can remove or eliminate?” says McFadyen. “That’s the first thing we determine.”

He gets his clients to write down all their property expenses, including management and maintenance fees, taxes, utilities, and any upcoming repairs on the home. If it’s a primary property that’s causing them stress, then he asks them to write out a cash flow budget spreadsheet to see what’s coming in and going out. McFadyen finds that the main culprit for expenses is often a car loan or credit card debt, or — more commonly these days — travel debt. Cut those debts and throw that money at your mortgage instead, he advises.

Take control of the situation

If expenses are truly unmanageable, McFadyen advises that clients consider consolidating debts with a loan, such as the possibility of taking out a second mortgage or home equity line of credit(HELOC) to get it under control. He predicts consolidation will be a “massive trend” in the next 12 months.

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“I ask my clients, ‘are you able to sleep at night right now?’ If someone isn’t able to effectively get out of debt, what is the downside of setting yourself up with a second mortgage or HELOC to help things?”

McFayden has a client who owes nearly $75,000, which caused their credit score to go down to the low 500s (a good score should stay above 650). By consolidating their debt, it became a more manageable single payment instead of several payments that were only covering the interest owed. The key thing is to do it before you’re drowning in debt.

Restructure for bumpy times

Long term, everyone agrees that real estate will go up in value, so do what it takes to get through the interim.

McFadyen is helping some of his clients to re-amortize their 20-year mortgages to 30 years, for example. With a longer amortization period, the clients have reduced monthly payments, which helpsto reduce expenses and eliminate payment shock.

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McFayden also advises mortgage holders coming up for renewal to consider a refinance option and lock into a one- or two-year mortgage, until rates settle down. If historical trends are an indicator, we are near the peak, he says. A lot of his clients are taking that approach because there is good value in short-term mortgages, if rates do come back down as expected. That means the borrower isn’t locked in at a higher rate. Additionally, they don’t face a huge penalty, if they do want to take advantage of lower rates.

“We’ve seen folks worried about rising mortgage payments and we’ve helped them lock into short terms, to stem the tide,” says McFadyen.

But also, know when to sell

That said, when a person is over-leveraged, with negative cash flow and sleepless nights, then it could be time to sell that investment property. You’ve got to think about your mental health, advises McFadyen.

“If you are significantly underwater and it’s not only impacting your quality of life and there are no options to re-amortize or consolidate debt, and you can’t afford to make payments and it’s impacting your quality of life, and if the property also has upcoming expenses, then we would recommend letting it go,” he says. “If they are in so much stress and they have the ability to get out from under it, they should consider it as a last resort.”

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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