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| Adrian Mastracci, president of KCM Wealth
Management, says "It's essential to have an investment
strategy at times like this. Along with the patience to stick
with it." |
For Immediate Release
Vancouver, BC (August 6, 2002): It’s confession
time. I'm recovering from a recent setback.
I returned from the family camping trip to the great outdoors.
The first three days were a resounding success. Everything was clicking
along just fine. Especially, the roasted marshmallows around the
roaring campfires.
On the fourth day, my fortunes changed dramatically. Having moved
to a new campsite, kindling was nowhere to be found. I didn’t
have the right stuff.
Fanning the campfire only produced brief moments of glory. The
gloomy looks on the children's faces were unmistakable.
They were relying on me, but I had to admit defeat. All I could
do was to watch the smoke. I was going nowhere fast.
My campfire plan was simply not delivering as expected. Worse,
I had not expected to disappoint.
After many valiant tries, I stood back amid my frustration. I had
a thought.
Stock markets can also behave just like my stubborn campfire. Often
much worse!
Investors still remember this scene. Their portfolios were motoring
along quite well. Yes, there were some moments of irrational exuberance,
as Alan Greenspan put it.
For the most part, investors were delighted. Even with their investment
advisors. Those were the days of 10% to 15% annual returns being
normal expectations.
Then, out of nowhere, this stubborn bear market enters the stage.
He’s a one-man show (you're right, women wouldn’t do
this). One with an agenda of his own.
A bear with plenty of life and muscle to stick around. One who
is not easily pushed about by those bullish creatures. He’s
enjoying fanning his own raging fire.
The bear takes full control. He takes all investors on a wild ride.
Suddenly, most portfolios start heading south. Signs of rallies
fade faster than my campfire.
The same song can be heard over and over. Fears, emotions and losses
rule the investment landscape. In addition, the bear is yet to show
vital signs of hibernation.
It’s essential to have an investment strategy at times like
this. Along with the patience to stick with it.
Asset mix decisions are by far the biggest influence on portfolios.
How much is invested in the combination of stocks, bonds and cash
instruments, explains on average 94% of the contribution to total
returns.
Successful investing is not about what’s hot today, the coming
week, the next quarter or the next year. It’s about what investors
would like to own five years from now.
Investors, who need their money before a five-year time horizon,
should stay clear of stock markets. The mauling inflicted by this
stubborn bear market has driven that point home.
Now that investors live longer, it’s become a bigger challenge
to provide retirement income. Some years, investors just can’t
squeeze any gains out of anything they touch. More savings may be
required.
It brings new meaning to investing being a marathon, not a 100-yard
sprint. Especially, for women investors who live longer than men.
Now, back to my campfires. Thankfully, the rest of the trip turned
back into a roaring success. I regained my campfire competency.
Roasted marshmallows once again made their way to those happy faces.
And, on the other matter, investors ought not to let their portfolios
go up in smoke. Asset mix is key.
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