BY FAZAAD BACCHUS
Markets for the first quarter of 2016 have basically been all over the place, flat, down, up, drastically down and then right back up again. In the first two months it was not a market for the weak hearted as investments value ran the real downward roller coaster. This is what investors mean when they say the market is extremely volatile. This behavior coupled with the fact that it was RRSP time didn’t put much confidence in the public’s eyes. Many individuals were skeptical, not knowing whether they should and where to invest their hard earned savings, but did it anyway to maximize on their tax return savings.
Much to the relief of investors and brokers alike, the markets came alive in the month of March. Finally after a yearlong flat and somewhat declining market, things have started turning around. Oil prices have started an upward climb and with the recent new agreement reached between Saudi Arabia and Russia to limit production, things are beginning to look hopeful. As of April 12th oil is now up to $43.53 per barrel and as I mentioned, things are looking good. Another good sign has been foreign exchange rate as the loonie has also crept its way back up to 78 cents against the US dollar. If all goes well we might be able to take that vacation south of the border this year! All of these points to a sign of a stronger economy and here is where the investors’ confidence rise and now everyone is ready to get into the market.
However the entire investment market is a cyclical one going through periods of growth, maturity, recession and bottom. Timing the market is everyone’s dream; they would love to know when the market has bottomed out and take advantage of the possible gains during the growth period. Of course if we could all buy low and sell high, we would all soon become rich, how great that would be. But that type of investing in itself lays the dilemma; how do we know for sure that oil is on its way up for good or that the loonie will continue to gain strength?
I have seen the opposing views of the gurus where one predicted that oil will rise continuously over the next two years while another predicted that this is only a short term correction. Depending on whom you follow, there may lay your investment decision. I have also seen investors who sell their investments when it’s at the bottom due to emotional fear, panic and despondency only to see the market recover in an instant, February vs. March 2016, was a clear example of this. That sort of investing is called timing the market and it’s a surefire way to increase your stress level, as it will take you through the roller coaster.
No one knows what the markets will do, however financial analysts do have an outlook based on trends, demands, political landscape etc and they will calculate the probability of market swings, up or down. In turn they will discuss with the portfolio managers who are responsible for investing your money. The portfolio manager in turn discusses with the wholesaler/advisor what they forecast, who in turn discuss with the clients/investors. This is a much better approach to investing as you are now working with a team of qualified professionals responsible for your money.
Investments should be made for the long run, at least three years, find a good Financial Advisor who can help you captain your ship in difficult times and provide you with smooth sailing in the good times. It’s not easy to invest, but it’s doable and there is help.