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| Adrian Mastracci, president
of KCM Wealth Management, says "The tried
and true investment strategies still work
very well. And they are expected to continue
working past 2003." |
For Immediate Release
Vancouver, BC (January 1,
2003): Investors have been dancing too
long with the furry creature, lovingly called
the bear.
Adrian Mastracci, investment
counsel and president of Vancouver’s “fee-only”
KCM Wealth Management,
comments, “The question on the minds of
many investors is what’s going to work in
2003 to turn the ship around? In a year, likely
with continued uncertainty, the last thing you
want to do is pursue a wrong strategy. ”
“Lots of investors have endured a difficult
time in a forgettable 2002. Actually, a forgettable
three years,” says Mastracci, “Hopefully,
they can look ahead to getting the investment
efforts back on the rails.”
“The tried and true investment strategies
still work very well,” explains Mastracci,
“And they are expected to continue working
past 2003.”
Mastracci adds, ”So, keep it simple, choose
wisely and skip the fanciness.”
“Investing is about setting your course
of action to achieve a specific personal return,”
notes Mastracci, “And, after the volatility
of the last three years, preservation of capital
still ranks high on the list.”
“Pace yourself. Accumulating your nest
egg can is normally a slow process,” indicates
Mastracci, “Your portfolio can be built
one brick at a time. The foundation of successful
investing requires plenty of patience and clear
investment policies that suit you.”
Mastracci outlines some considerations in 2003:
Investing is not a straight
line
Investors, and the professionals too, would prefer
the investing experience to be a straight line
sloping up. However, reality is anything but.
Picking a market direction is difficult enough.
Too often, however, investors do the exact opposite
of what’s good for them.
Let me illustrate. Why is it that when stock
markets reach new highs, investor instincts say
buy. Conversely, when they reach new lows, investors
cannot jump off the train fast enough.
Now think of this. When you next rebalance the
portfolio, consider lightening up the outperformers
and buying more of the underperformers. Oddly
enough, this is a novel concept.
Too many investors choose the exact opposite.
Such as those who have just jumped from stocks
to bonds in a big way.
It has been said by many that the herd is usually
wrong. So, refrain from going there.
Investing is about encountering uncertainity.
Plenty of it, often when you least expect it.
Instead of looking in the rear view mirror, peek
down the road. Ask what is likely to develop.
And, more importantly, what you should be doing
for your nest egg.
Investors know that bull markets do not last
forever. Now the hard part is convincing yourself
that the same applies to bear markets.
Keep your finger off the panic button as you
accumulate your nest egg. Factor in some market
drops in your investment expectations. An oversupply
of patience with your investments is a real treasure.
Reasonable expectations
Consider what you want your nest egg to do for
you. Revisit your goals annually to reconfirm
that you are on the right track. The portfolio
is influenced by your closeness to retirement,
present age, appetite for risk and investment
personality.
It is also affected by your capital and saving
capacity available for investment. The rate of
return required to achieve and sustain your goals
is an essential ingredient for your portfolio.
If you are in the midst of retirement, your nest
egg has likely suffered some setbacks. It may
be prudent to revisit the retirement game plan
to ensure that what you are doing is still appropriate.
Investment cocktail
Investment mix decisions have the biggest impact
on portfolios of any single factor. Neither stock
selection, nor market timing is even close. Therefore,
know your investor profile and resist the temptation
to invest outside of it.
Investment mix is the combination of asset classes,
such as cash, bonds, and equities. It is also
about choices such as large versus small companies,
growth versus value.
Your mix of assets considers not only your goals,
but also your investment horizon. Even at age
65, your horizon could easily be 15 years or more.
Skip the many tempting fads. Most investors miss
the turn when it is time to get out. Instead,
make sure you have a broadly diversified portfolio.
Being diversified reduces the risks you take.
Portfolio diversification is about constructing
your nest egg with different elements. However,
selecting the individual securities is not about
always being right.
Diversification allows for the potential of being
right more often than wrong. This is what successful
investing is all about.
Consistent returns
Far too many investors are preoccupied with accumulating
a portfolio of yesterday's winners. This is an
excellent strategy on how to get burned.
Stop the preoccupation with past investment returns,
benchmarks, and chasing yesterday's winning stocks
and mutual funds. Successful investors have learned
that.
The most important element is the rate of return
required to achieve your chosen goals. This rate
becomes your minimum investment target for your
portfolio.
The primary strategy should be to achieve consistent
returns in your overall portfolio, rather than
being in the top quartile at all times.
A portfolio with emphasis on consistent returns
will serve you better than one with emphasis on
performance. Especially yesterday's performance.
Lingering losses
Making portfolio selections is not about always
being right. Part of investing is about coming
to grips with the prospects of being wrong. It
is never pleasant, but astute portfolio managers
do admit to being wrong.
The likelihood of that 50% loss seeing a 100%
gain just to recover back to break-even is too
often just wishful thinking.
What hurts portfolios the most is not incurring
the losses. Rather, it is keeping them far too
long.
Be objective, know when to fold and cut your
losers. Every loss starts out as a very small
loss.
Less tinkering please
Make an effort not to take the art and science
of investing so seriously. Many women investors
have the better answer. They tinker less with
their portfolio than men do.
If you must tinker, spend more time on the investment
policies and strategies that you ought to be following.
Put selection of investments last on the list.
Do not shower so much attention on your portfolio.
Being totally up to date on all the financial
happenings and nuances of the day is not that
important. Getting so close to the action makes
you miss the relevant stuff.
What then is a concerned investor to do? For
starters, stop reacting to every daily market
sneeze. Stand back and take a deep breath. Avoid
making those hasty decisions.
If stocks have that risky feeling for you, prune
them gradually. On the other hand, if stocks have
the bargain bin feeling, buy them gradually. You
do not have to make all your bets all at once.
“Don’t settle for the cookie cutter
approach. Look ahead, chart your personal course,
instead,” remarks Mastracci, ”That
is what’s going to work in 2003, and thereafter.”
“Implement and stick to a game plan tailored
for your needs,” adds Mastracci, “And,
don’t be swayed by the flavour of the day.”
“Keep the game plan as simple as possible.
Understand what you are pursuing,” points
out Mastracci, “Especially, the investments
you select and all their costs.”
“Listen to your intuition,” summarized
Mastracci, “If something about your plan
does not feel right, seek another opinion.”
“I know that it is hard to stick to a game
plan during uncertain times, like the present,”
concludes Mastracci, “Stay with the basics.
Investing does not have to be complicated.”
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