Your Money  

Keep volatility in perspective

Whenever the investment ride gets bumpy, as it was through parts of 2011, it’s important to step back and keep volatility and emotions in perspective. Regardless of what markets are doing from day to day, the long-term trend has historically always been upward.

And in any kind of market — rising, falling or staying steady — it is important to keep in mind the principles of sound investing. A well-structured, diversified portfolio that’s based on a long-term strategy can often be the foundation of investment success.

Focusing on the long term

For long-term performance, consider a mix of assets from the three main asset classes — cash or cash equivalents, fixed income, and equities — for your portfolio. Each can bring important qualities to your portfolio.

  • For security: Cash, GICs, Money Market funds, Savings accounts. These investments provide a stable base for your portfolio as well as liquidity so you can get your money out on short notice. But the low returns generated by interest earnings may not outpace inflation over the long term.
  • For income: Bonds, Bond Funds. Fixed-income investments such as bonds and bond funds generate cash flow and are less volatile than growth-oriented investments. However, they can still fluctuate in value, decrease in value when interest rates rise and increase when rates go down.
  • For growth: Equities, Equity Funds. This asset class is the most volatile over the short term but has historically provided better performance than guaranteed and fixed income assets and outpaced inflation by the widest margin.

Remember inflation

Don’t forget about the effects of inflation. Over the long term, secure guaranteed investments that pay interest and protect your principal may not provide sufficient returns to keep you ahead of increases in the cost of living. For example, if invest in GICs and they are earning 3% and inflation is running at 3%, you’re just breaking even.

While it’s important to have an element of safety in your portfolio, too high a concentration could hinder your ability to reach your long-term growth objectives.

If you have any questions or would like a review of your current investments, please call 778-478-9759, or email [email protected]

This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.

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About the Author

Kevin J. Zakus has over a decade of experience in Financial and Investment Planning. He has a diverse practice which includes individuals and families starting the financial planning process, to established individuals and corporations requiring more complex planning.

Most recently Kevin served as a Branch Manager and Financial Consultant with a National Financial Planning Firm in their Calgary and Kelowna Offices. In 2006 Kevin and his family relocated to Kelowna where he continues to build his practice and spend time with his family.

When he is not meeting with clients, Kevin and his wife Julie, try to keep up with their four children and the many activities they are involved in. When they aren't running kids from one event to another, they enjoy spending time boating on Okanagan Lake, travelling, horseback riding and touring local wineries.

Areas of Practice include: Investment, Retirement, Insurance, Estate and Tax Planning.

Email: [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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