5 Timeless Tips on Managing Market Ups and Downs
Market volatility is unnerving, for even the savviest of investors. In this article we provide you with some key tips on how to manage – and potentially benefit from – market volatility.
The notion of investing without volatility is as illusory as a car without an engine. Like it or not, the two concepts invariably go hand-in-hand, but does that mean you should avoid volatility – and investing – altogether? Market uncertainty can naturally cause panic and lead to poor investment decisions. But by recognizing short-term market uncertainty for what it is, you can help ensure that it doesn't derail your long-term financial plan. Here are five tried and tested principles that can help you gain needed perspective:
"Investing is more intelligent when it is most businesslike."
- Billionaire investor Warren Buffett
Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decisions Under Risk”, Econometrica, 47,2, pp. 263–91.
Source: Bloomberg. S&P/TSX Composite Total Return Index, November 30, 2006 to November 30, 2016. It is not possible to invest directly in an index. Assumes reinvestment of all income and no transaction costs or taxes. Value of investment calculated using compounded daily returns. Missing 10, 20 and 30 best days, excludes the top respective return days.
Based on 3-year annualized returns ending December 31 of the S&P/TSX Composite Total Return Index from 1960 to 2015.
Based on 3-year annualized returns ending December 31 of a portfolio of 50% the S&P/TSX Composite Total Return Index and 50% Canadian Fixed Income Composite from 1960 to 2015. Canadian fixed income composite consists of 80% FTSE TMX Canada LT Bond & 20% TMX Canada Residential Mortgage Index from 1960 to 1980; 100% FTSE TMX Canada Universe Bond Index from 1981 to 2015. Source: Morningstar. Returns are calculated in Canadian currency. Assumes reinvestment of all income and no transaction costs or taxes. The portfolios are hypothetical and for illustrative purposes only. It is not possible to invest directly in an index.
Source: Morningstar. Priced in Canadian currency, as at December 31, 2015. Assumes reinvestment of all income and no transaction costs or taxes. Annual returns compound monthly. The asset classes are represented by their indicated indices and the balanced portfolio is hypothetical in nature. This information is for illustrative purposes only. It is not possible to invest directly in an index.
Registered trademark of The Bank of Nova Scotia, used under licence.
Copyright 2016 1832 Asset Management L.P. All rights reserved.
ScotiaFunds® are managed by 1832 Asset Management L.P., a limited partnership the general partner of which is wholly owned by The Bank of Nova Scotia. ScotiaFunds are available through Scotia Securities Inc. and from other dealers and advisors. Scotia Securities Inc. is wholly owned by The Bank of Nova Scotia and is a member of the Mutual Fund Dealers Association of Canada.
This document has been prepared by 1832 Asset Management L.P and is provided for information purposes only. Views expressed regarding a particular investment, economy, industry or market sector should not be considered an indication of trading intent of any of the mutual funds managed by 1832 Asset Management LP. These views are not to be relied upon as investment advice nor should they be considered a recommendation to buy or sell. These views are subject to change at any time based upon markets and other conditions, and we disclaim any responsibility to update such views.
Information contained in this document, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and 1832 Asset Management L.P. is not responsible to update this information. To the extent this document contains information or data obtained from third party sources, it is believed to be accurate and reliable as of the date of publication, but 1832 Asset Management L.P. does not guarantee its accuracy or reliability. Nothing in this document is or should be relied upon as a promise or representation as to the future. Investors should consult their own professional advisor for specific investment advice tailored to their needs when planning to implement an investment and/or tax strategy to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed or insured by the Canada Deposit Insurance Corporation or any other government deposit insurer, their values change frequently and past performance may not be repeated.
2265-2016-0113 RT F