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By Adrian Mastracci
North Shore News
Business Section, "Loose Change"
Sunday, June 2, 2002
These days one of the frequently asked questions is: what will
it take to move those sluggish stock prices?
We have global markets with minds of their own. They revel in the
sideways dance, while investors become frustrated by the lack of
direction. One step forward... one step... Oh, you know it well!
Simply put, the markets don't like uncertainty. What those markets
really need is a dose of plain old-fashioned earnings for stock
prices to move up convincingly.
Investors looking to build solid retirement portfolios, the kind
that pay off with long-term results, are advised to refrain from
rushing in to clean house at times like this. Investment patience
is more than just a virtue. It's a way of life.
If not, you'll always be buffeted by the ups and downs of the markets.
No doubt, you've noticed the frequent gyrations over the course
of market cycles.
Uncertainty in the markets may continue from a variety of fronts.
It does not matter whether it's technology, communications, oil,
debt laden consumers, interest rate jitters or a slew of other factors.
We may well continue to experience frustrating markets in search
of directions.
Investors who get caught up in the daily volumes of conflicting
research, advice and predictions, face the danger of damaging their
portfolios. They can also place their financial security at risk
with emotional knee-jerk reactions to the markets.
Let's be clear about the markets. Earnings, earnings and more earnings
will raise and sustain stock prices in the long term.
So what can we do while we wait patiently for the earnings? Besides
standing back and taking a deep breath.
There is good news. The sun will rise and shine again. In the meantime,
let's learn from our peers who have succeeded in diminishing the
impact of the bulls and the bears.
Introduce some order into your finances. Start by asking the question,
"What is important about your financial security to you?"
- Is it enjoying a comfortable retirement with your family?
- Is it the growth or preservation your nest egg?
- Is it your small business, RRSP or RRIF?
- Is it estate planning and minimizing taxes?
- Is it funding education for the children or grandchildren?
- Is it leaving a legacy to a charity and to your loved ones?
Examine your retirement goals, your investor profile, your appetite
for portfolio risk and your investment horizon. Follow this by evaluating
the appropriateness of your current portfolio mix.
Wrap up the session by preparing your written game plan. The one
containing the investment policies and strategies you will follow
to create and manage your retirement nest egg.
Focusing on your game plan is like building your home - you start
with the blueprint. A periodic assessment, say annually, keeps you
on track towards your destination.
Plan to encounter some nasty speed bumps along the way, but do
stay the course and don't react with emotion. Your personal game
plan provides guidance to better portfolio decisions.
Retirement nest eggs are created over time by buying a portfolio
of companies that have the potential to increase their earnings.
In turn, this enhances the values of your investments.
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