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| Adrian Mastracci, president
of KCM Wealth Management. |
By Bruce Constantineau
Vancouver Sun
Thursday, July 25, 2002
Now is not the time to panic and jump off the
roller-coaster when it's going down, money managers
warn Sun reporter Bruce Constantineau
B.C. investors are trying to ride roller-coaster
stock markets without getting sick and selling
out of panic, investment fund managers said Wednesday.
"None of my clients have 100-per-cent exposure
to equities so they all have at least part of
their portfolios in fixed-income securities,"
said Adrian Mastracci, president
of KCM Wealth Management Inc.
"That's one reason they're not jumping off
the 20th floor today."
Leith Wheeler Investment Counsel Ltd. president
Bill Wheeler said there have been few "anxiety
attacks" among clients and he's advising
nervous clients to remain calm.
"Some people are selling off some solid
equities now just because there are bids for it,"
he said. "My advice is to stay in equities.
We were active in the market today and expect
to do the same tomorrow."
Phillips Hager & North Investment Management
Ltd. president Tom Bradley said most clients are
hanging in but he acknowledged some investors
are bailing out of stocks and moving into money
markets against the company's advice.
"The pain is wearing some clients down,"
he said. "It's wearing us all down because
every day you look at your computer screen, it
gets more and more depressing.
"Hopefully, our history and discipline as
a firm will pay off and we'll weather this storm."
Mastracci said there are buying opportunities
throughout all sectors of the stock market now
but warned investors must have realistic expectations
about future returns.
"The 15-to-20-per cent [annual] returns
of the 1990s are gone," he said. "Make
sure you diversify, diversify, diversify, with
no more than four or five per cent or your portfolio
in any one security."
Mastracci said every sector of the market that
becomes hot will one day become cold so never
get too enthused about any hot sector.
"Yes, there are times when the home run
comes in but if you're looking for the home run,
you're not going to get it most of the time,"
he said. "You're more likely to strike out."
Mastracci said it's also extremely important
for investors to adhere to a loss strategy that
makes them sell a stock if it falls a certain
percentage below the price they paid for it.
"You may sell it too early in some cases
but most of the time, you're going to do the right
thing," he
said. "You don't want to ride something like
Nortel all the way down to zero."
Wheeler insists there is still a solid core of
good Canadian companies in many sectors that are
worth investing in now, companies with good earnings,
real cash flow and solid businesses.
"I think those companies will do better
than you can do in a short-term note or bond and
give you a
good real return above inflation for the next
five years," he said. "I just don't
know when [the
long-term rebound] starts."
Wheeler said the recent stock-market slide is
the biggest he has seen since the 1973/1974 decline,
which set the stage for a "good long bull
market."
"Stocks aren't as cheap now but inflation
is lower and interest rates are substantially
lower," he said.
Wheeler said now simply isn't a good time to
sell stocks.
"The time to sell is when people are euphoric
and taxi drivers are telling you what stocks to
buy and your brother, who isn't in the business,
is telling you what stocks to buy," he said.
"Now your brother is asking if he should
get out of the market. Markets move between fear
and greed and we're well into the fear mode now."
Bradley said diversification is always a good
thing and clients who questioned why they had
bonds in 1999 now are extremely happy to have
bonds in their portfolio.
But he warned investors against selling too quickly
now to move into more conservative investments.
"If you sell off now, you're basically buying
high and selling low," Bradley said. "We
really believe that over the long term, you have
to have exposure to equities to be a successful
investor for retirement. When prices plunge like
this, it's absolutely the wrong time to bail out."
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