It’s easy to be confident in your investment approach when the markets are primarily going up.
But what happens when you add a little volatility to the mix?
“Markets have gone up by more than 250 per cent since the last recession, with very little volatility until recently. This is not normal – people have forgotten what normal volatility feels like,” says Tanya Wilson, a Kelowna-based financial advisor with Raymond James. “People have become complacent in their risk tolerance assessments.”
The problem with emotion-based decision-making
Complacency can lead to emotional decision-making when volatility does happen, and that’s when investors make the biggest mistakes.
Investors feel most at ease with investing when news is good, usually at the top of the market, and feel the most fear about investing when news is bad, usually at the bottom of the market. Giving in to these fears and allowing them to control investment decision-making can result in very poor investment performance.
“Money is emotional, so it’s natural, as humans, to allow emotions into the equation, but approaching investment decisions from a place of fear or greed is how we can make bad decisions,” Wilson says.
High risk doesn’t always equate to high returns, and those who get caught up in fads or buying the “sure thing,” can put their investment portfolios at risk. “I know of investors who have lost everything because they heard about the stock of a company that’s ‘guaranteed’ to go up,” Wilson says.
Is your retirement plan too risky?
For those nearing retirement, this long period of growth – and resulting complacency – may have led to investment plans that carry considerable risk.
“I believe that many investors, especially those close to retirement, have too much risk in their investment portfolios, and that’s happened because the markets have performed so well over the past decade,” Wilson reflects.
Assessing someone’s risk tolerance – and ensuring it’s reflected in their investment strategies – is difficult when markets are only going up, especially when an advisor hasn’t been through a full market cycle themselves, or experienced a recession.
“This is why you should work with a skilled, trusted advisor who has a significant amount of experience and education, and preferably one who works for an independent wealth management firm without targets for selling proprietary investment products. The clients’ best interests should always be the advisor’s No. 1 consideration.”
The core values of Raymond James and their advisors are conservatism, client-first, and integrity. This is reflected in the level of service their client’s experience.
“My team and I have a process which focuses on prudent risk management through financial planning. This is the blueprint for our investment strategy decisions. During times of heightened market volatility, our clients have a lot of peace of mind in our investment strategy and their financial well-being.”
Tanya Wilson is a financial advisor with Raymond James Ltd. Information provided is not a solicitation and although obtained from sources considered reliable, is not guaranteed. The view and opinions contained in the article are those of the author, not Raymond James Ltd. Raymond James Ltd. member of Canadian Investor Protection Fund.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
