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By Peter Brieger
National Post
FP Money Section, Money Wisdom
Saturday, September 01, 2001
Reading newspapers lately can be nothing short of a nail-biting
experience for many investors. Falling growth rates, sinking markets
and slumping consumer confidence have conspired to rattle the nerves
of even the most hardened investor.
But bear markets are just an uncomfortable reality the investors
should learn to accept into their long-term plan, says Adrian
Mastracci, a fee-only financial adviser with KCM Wealth Management
in Vancouver. To help clients cope with the shaky equities landscape,
Mr. Mastracci has put together five points to help team the effect
of a bear market:
1. Don't panic
Bear markets are a natural part of the investment process. “You
may need more patience and determination to whether the storms”,
he says.” But you will improve the probability of achieving
your unique goals.”
2. Consider your investing personality
What is your time horizon, appetite for risk and minimum return
needed to achieve your goals? Draft a game plan with a trusted financial
adviser, Mr. Mastracci says. “Building a home and a portfolio
had much in common -- the annual results are far better if you start
with a blueprint for each.”
3. Forget market timing
Don't try shifting in and out of investments to beat the market
because it doesn't work often enough, he says.
4. Don't try to get rich on one stock
This goes especially if you're investing in the company you work
for. Pay attention, Nortel Networks investors. “In baseball,
its preferable to get on base frequently, rather than aiming for
the home run every time,” he says. “The same applies to
your investment portfolio. Trying to achieve your portfolio return
on one or two investments is another low percentage strategy fraught
with financial dangers.” You may win occasionally, Mr. Mastracci
says, but the losers can seriously dent your portfolio.
5. Always remember your long-term goals
Make sure you’ve figured out how much you might need to look
after your long-term needs. Never forget those goals in favor of
short-term gain. “The winning bear market strategy is to face
the bear on your terms while keeping your investment cool,”
Mr. Mastracci says.
“By my count this is bear market No. 10 since the Second World
War. So don't fold your tent. Rather, stand up to the bear as high
as you can. You may still experience some mauling, but at least
the severity of the damage will be contained.”
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