Adrian Mastracci, portfolio manager at KCM Wealth Management, says “Currency adds another dimension to portfolio risk."

Adrian Mastracci, portfolio manager at KCM Wealth Management says, “Don't reach for the panic button. Don't make big changes. A simple, logical plan is usually better.”

Fundamentals are always in fashion. Such as thinking long-term, diversifying broadly and avoiding a large loss.

Currency adds another dimension to portfolio risk. Hence, it’s best to view such investments as longer journeys than most.

A lot of daily noise is floating in the markets. So, a little perspective on currencies:

• The loonie has risen from 85 cents in February. Not because Canada is strong economically. Rather, more because the US dollar has been weakening.
• Be careful. Currencies can fall as fast as they advance. Maybe faster. Moreover, they are not predictable.
• My guess is the loonie may continue to rise until the US trade deficit begins to shrink. So, keep an eye on those figures.
• Economies generally thrive more with strong currencies. But, exporters face more difficulty keeping costs in check.
• Now may be an opportunity to convert some loonies to greenbacks. Especially, for those who spend time in the US and require a cashflow in US funds.
• Investors who buy US equities and fixed income should pay attention to quality issues. Sacrificing quality for yield can be a dangerous strategy. Recent market events confirm this.
• More documentation will be required. Such as the currency entry and exit points for each investment.
• The question of hedging vs. not hedging comes up. There is a cost to hedging, but there is no one answer fits all.
• Stay within a comfortable mix. Say 40% to 60% allocation to equity. Concentrate on bigger companies who can survive a downturn better than most.
• The US still has a hangover from the cheap debt party. Perhaps, step in gradually. There is no need to be fully invested all at once.
• In the US, exporters are winners with a weak US dollar, while importers are suffering. It’s the opposite in Canada.
• A weak US dollar also contributes to inflation and squeezes US pocketbooks. Canada had a taste of this when our loonie was around 65 cents.
• One day, the US dollar will rise again. Like the loonie did for Canada. So, don't be surprised when this happens. I doubt the US dollar will be weak forever.

Be prepared for more currency fluctuations. Contemplate portfolio changes carefully.

Stay disciplined, year in and year out. Slow and steady wins the race.

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.