Adrian Mastracci, president of KCM Wealth Management, says “Get defensive. Work on a personal investment strategy that will not spoil the party if you're wrong about what the economy will deliver in 2006."

Vancouver, BC (January 2, 2006): Investors are turning to what 2006 will have in store for their precious portfolios.

Oscar Wilde once said, “If you don't get everything you want, think of the things you don't get that you don't want.”

Adrian Mastracci, “fee-only” investment counsel at Vancouver based KCM Wealth Management comments, “Reading the economic tea leaves for 2006 is a difficult assignment. I can paint both an optimistic and a pessimistic outcome. The markets are going to be a predictor’s challenge.”

Think of it this way. Pretend you’re a juggler in training. You toss ten balls up in the air and you catch six of them.

The US economy feels like that for 2006. Which is pretty good under the circumstances. The reminder from Oscar Wilde may come in handy.

2006 outlook

I foresee more positive signs than negative in 2006. However, I do expect turbulence along the way. Dark clouds are always forming on the horizon. Money won’t be made every day.

History points out that the US economy has incurred scores of startling events over the years. But it has shown that it is robust and can withstand many a hard blow. With a keen ability to bounce back.

2005 was no exception for major thumps. Devastating hurricanes, rising interest rates, large trade gap, sizeable government deficit – just to name a few.

Yet, we enjoyed a crop of solid earning reports. The expectation is that 2006 will also deliver good corporate earnings, albeit rising at a slower pace than 2005.

Invest defensively

Many pundits write off the US economy. One lesson in economics is that there is much folly in this. That does not mean that everything turns out well. It never does.

What it does mean is that investors may have to adjust their investment thinking. Individually, they can’t affect the direction of the economy. However, they can affect how they invest within it.

Things can turn on a dime, even if you think you know what’s going on. So, don't try to pin your investing hopes on your guess whether the economy will deliver or disappoint in 2006.

On the contrary, be ready for both outcomes. Understand that nobody can forecast which outcome will develop with any certainty. That way you won’t invest as if a credible prediction is a sure thing.

Get defensive. Work on a personal investment strategy that will not spoil the party if you're wrong about what the economy will deliver in 2006.

6-point strategy

Investing has always been and continues to be a long-term journey. Make sure your investment foundations for 2006 are sturdy and can stand some market rattling.

I summarize my 6-point defensive strategy for the investing times ahead:

1. Diversify the portfolio into a number of asset classes. Yes, equities can and do deliver, but don’t forget those boring bonds and short-term cash. Some predictability can be a good thing.
2. Sprinkle the nestegg among a variety of sectors around the world. The biggest allocation is likely the home country. Then think about your neighbour and the global countries.
3. Decide on your appropriate asset mix and stick with it. Reduce high equity exposures when prices are high. Your profile should not change frequently. Neither in good, nor in bad markets.
4. Take a pass on chasing those sizzling, exciting, red-hot sectors. They just have the annoying habit of cooling off. Some rather quickly. Not to mention, most investors miss the exits when it’s time to move on.
5. Don’t get smitten with the fanciness of borrowing to invest. Leverage can bite hard, deep and long. Use it sparingly, if you must.
6. Focus on the quality of the investments. If you crave a little raciness, set aside a specific amount for such picks. That way you won’t be burned badly if the unthinkable happens and the engines stop.

You probably won’t get everything you wish for in 2006. Keep in mind Oscar Wilde’s wisdom. Anticipating some market fluctuations is smart thinking.

My guess for the markets in 2006 is a rollercoaster with volatility. Adopting the 6-point strategy will be a healthy dose of defence for the portfolio.

The goal of investing is to be right more often than wrong. Yes, prepare for both outcomes. That way, the potholes won’t hurt as much.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.