Market Minute
Dear friends and clients,
A “bump” in the market tends to happen every couple of years but history has proven that the mutual fund investor who stays invested profits. The investor that does not profit is the one who consistently buys high and sells low, who lets emotion rule, who listens to banks and other independent advisors recommend selling product and paying a high penalty to transfer-out. Penalty charges are not always applicable to mutual fund investing.
Paying a penalty every couple of years to move investments around is the absolute worse mistake investors make. In my eyes an advisor who recommends a client to sell out investments at a loss and pay a large penalty should not be in the money management business period. If you are not happy with a situation or a product there are better options available than for you to throw hard earned money at it.
An advisor you can trust should be going above and beyond to assure that you do not incur early redemption penalties and you are invested in quality product. In some circumstances I will even absorb a portion or 100% of a penalty charge for a client.
A question which was asked by one of my investors “is there an advantage right now to moving investments to a different sector or a different geographic location”. My answer was “there is no advantage right now to moving investments to another sector or geographic location seeing that almost every area of the market was seeing red especially worldwide financial markets – most mutual fund investments hold a large component of financials”.
Remember that certain investments pay monthly distributions to your account every month whether in a bull or bear market. Holding distribution paying investments such as dividend funds during a contractual period like this is a major benefit to you as an investor.
I feel strongly that we have reached the end of the extreme market volatility experienced over the last four weeks. Most portfolios have seen a 4-5% loss. It might be turbulent for a few weeks longer but we should eventually get back to some normality.
Over the last five years most equity investments averaged approximately 1% return each month. This means it could potentially take four months to recoup the loss. Best case scenario we see 2-3% gain in one month period and another 2% the following month. Keep in mind that a 4-5% loss on paper is not extreme and can easily be recovered.
Is this a buying opportunity or a time to sit back and reflect? What if you could purchase $20,000 worth of a dividend paying investment at a low of $7.32 (a unit) which is usually valued at approximately $7.80-$7.90 (a unit)? Do you buy it now or wait until it is back up to around $7.80 and mainly seeing gains through reinvested dividends?
This is what I have to contemplate every day and discuss with some clients. There are pros and cons to both buying now or waiting… but if you told me that you have a minimum of a three year time horizon before you need the money – I would say this is a perfect buying opportunity for you!
Stay positive – Stay confident – Stay invested
Arron Appleton
Investment Advisor
FundEX Investments Inc.
c/o: Applestock & Associates Inc.
265 Yorkland Blvd., Suite 401
North York, ON M2J 1S5
Bus: (416) 221-1313 ext. 4517
Fax: (416) 498-4667
Email: aappleton@baywoodfinancial.com
Visit: www.investwithapplestock.com
