By Fiona Anderson
The Vancouver Sun
Wednesday, June 14, 2006
The plunge in the Toronto stock market has some investors bailing out of equities, but if you can stand the volatility, this isn't the time to jump, advisers say.
Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, “Bear markets are just part of the game, and most people would do better if they just learned to accept them and live with them.”
The TSX composite index fell almost 300 points Tuesday, the largest single-day drop since April 2004, bringing the index to a level not seen since last November.
"That's disconcerting to investors," said John Caspar, vice-president and investment adviser.
But people who invest in the stock market understand there is volatility, and that average returns aren't earned without some drops along the way, Caspar said.
And the market has "absolutely" seen more significant falls, he said.
"Historically, volatility is what we would expect in the markets," he said. "They provide value by taking a two-step-forward, one-step-back approach, and this is the one-step back that makes the two-step forward possible.
"But that doesn't mean it's not disturbing," Caspar added.
Although the TSX is now in negative territory for the year, down 3.3 per cent, CIBC still believes stocks will rebound and ultimately outperform bonds in 2006, Caspar said.
Caspar also believes this may be the time to look for bargains, as stocks that made economic sense in May based on a company's fundamentals and share price, make more sense now.
"So, investors should be looking at this as an opportunity for entering the market," Caspar said. "And if you were already in the market, there is no reason to run and hide."
John Johnston, chief strategist, doesn't think it's the time to buy, not yet anyway.
"I don't think we've seen the bottom yet," Johnston said.
But after this summer, he expects to see "huge opportunities."
Investors who may want to consider selling are those that can't stand the volatility, Johnston said.
"The decision whether to cut and run has to be done in the context of [an investor's] objectives, where their portfolio is positioned, and what their risk tolerance is," Johnston said.
Adrian Mastracci, investment counsel with KCM Wealth Management, believes an investor who has a suitable portfolio would be comfortable with the volatility in the market and wouldn't need to bail out. But if someone feels the risk is too high, they should "bail down", getting rid of some equities and replacing them with fixed income, he said.
"Bear markets are just part of the game, and most people would do better if they just learned to accept them and live with them," Mastracci said.
There have been 23 bear markets -- which Mastracci defines as a 15-per-cent drop in the stock market -- since 1900.
"Have we weathered them all?" Mastracci asked. "Yes. Will we weather all the ones from now on? I don't know, but chances are you are going to be okay.
"So unless you have to get out today, for some reason like you can't stand the risk, over time if your portfolio is reasonably well set up you'll do reasonably well."
- - -
SEVENTH-STRAIGHT DAY OF LOSSES SEES TSX DOWN NEARLY 300 POINTS
After four years of steady gains, the commodities-driven S&P/TSX Composite Index has plummeted nearly 13 per cent in less than two months.
The index is still up more than 59 per cent since this time seven years ago.
Significant closing numbers for the exchange during that period include:
1. June 1, 1999: 6,852.38
2. Sept. 1, 2000: 11,388.80
3. Sept. 11, 2001: 7,048.80
4. Oct. 9, 2002: 5,695.33
5. April 19, 2006: 12,487.32
6. June 13, 2006: 10,904.34
|
