If you are like everyone, you have been spooked by the last few years of equity returns.  Mostly, with the exception of gold, real estate, and natural resources, they've been negative.  So...how do you proceed and keep yourself at night? By managing your investment expectations and remembering the reasons why you invested for the long-term.   The following basic investment strategies provide a useful review that can help alleviate our investment concerns and provide peace of mind knowing that you are doing what is best for your investment portfolios during this market volatility.

1. Remember why you invested in the first place.

If your investments were made for the right reasons - in other words - if your goals and objectives were compatible with your investment strategy - then don't panic. The important concept is “long-term”, Investments in equity-based mutual funds, or in the individual stocks themselves, require the commitment of time. Investment specialists say we should have at least a 10-year commitment, which allows for some volatility but growth over the long-term.

2. There are sectors of the market that can be extremely volatile, as seen by the recent turbulence in the market, i.e. technology and biotechnology.

Your tolerance for risk is very important. Are you comfortable with market ups and downs? Will you lose sleep if there is a market correction? Revisit your risk tolerance. The ideal portfolio is one that maximizes the potential returns within your given level of risk.

3. While you may be influenced by the actions of others - stress and hasty decisions lead to mistakes.

Develop a solid financial plan that you can refer to, especially during market turmoil. If you recognize that a loss will occur from time to time, you will be able to make rational investment decisions and not be driven by impulse. Examine your financial goals and objectives and allow those goals and objectives to guide your investment strategy - not the “hot tips” you hear about.

4. If you are investing for the long-term, stop looking at your investments weekly, or even monthly.

Look at your investments as part of your long-term financial plan, and review them quarterly.

5. Be realistic about the returns you can expect from an investment and do your research.

Be comfortable with your choice of investments. You may wish to hold some money market funds or cash to take advantage of buying opportunities during a market correction.

6. Enough cannot be said about the benefits of diversification.

Apart from lowering the overall risk of a portfolio, most money managers believe that asset allocation will have a much greater bearing on a portfolio's performance than the individual stocks and bonds that make up the portfolio. Over 80% of a portfolio's performance variability can be attributed to the asset allocation of safety, income and growth. Asset allocation refers to building a portfolio with a strategic mix of growth (equities), income (bonds) and safety (cash) investments. By spreading the risk between the three asset classes, the belief is that if one asset class is not doing well, another one will likely be performing better.

7. Now is a good time to reduce the impact of market fluctuations.

An effective practice is dollar cost averaging, which will allow you to invest a fixed amount at regular intervals. By purchasing investments at varying prices, you may receive a lower average purchase price versus making a lump-sum investment. Regular investing also takes the guesswork out of when to invest and can help reduce overall risk by “smoothing out” market fluctuations.

All of these strategies can assist you in dealing with these turbulent times. By managing your investment expectations and remembering the reasons why you invested for the long-term, you can eliminate the worry and the sleepless nights when markets are volatile.

For more information, please contact John Klotz., BA., CFP., CLU., CH.F.C., RHU.  John is Vice President - Financial Services at LMS Prolink Ltd and can be reached at johnk@lms.ca or phone (416)-595-7484 ext. 305