Navigating the Markets This Year
Never before — not even during the global financial crisis — have investors come to me with such specific concerns about the movements of the markets and governments around the world.
We’re living in unprecedented times, so we certainly can’t predict what 2017 will bring. And if you know us, you should know not to expect hot stock tips or “sure bets” from us either. But I do have four suggestions that I believe can help you reach your goals.
Prepare for uncertainty. Several political and economic events caught observers by surprise in 2016, including the results of the Brexit vote in the United Kingdom and the presidential election in the United States. Markets respond to surprises with volatility, and we expect more surprises in 2017. With a new U.S. administration comes the potential for changes to policies that may affect you. Some may be beneficial; some may trigger market volatility. The best approach in any environment is to remind yourself to maintain a long-term perspective and ensure their portfolio is balanced and diversified.
Save more. In addition to potential near-term volatility, we expect the stock and bond markets to produce lower returns in the next ten years than they have over the past several decades. This will place the burden on investors to save more. We recommend you save 12% to 15% of their income (including any employer match) for retirement. Saving more is an asymmetrical proposition: If you don’t save enough and the markets don’t bail out, there’s nothing you can do. If you over-save and do well, great — you can retire a few years earlier.
Safeguard your assets. As the threat of cyber crime continues to grow, we work hard to protect our clients’ assets and data. But investors must be aware of the risks and take precautions too. You should consider your best way to secure assets, whether it’s using a security code as we do at our office, or other secure options you may have available.
Stay well-informed. Great investors understand how all the pieces fit together. Become familiar with all the funds in your portfolio and know the role that each one plays in your investment plan. If you stay abreast of the markets and economy, make sure you take control of your emotional behaviours and understand the need to resist the urge to act.
Hold on tight — from what I’ve seen so far, it looks like we’re in for one heck of a ride this year! Discipline is what it takes to block out the noise, commitment is what it takes to walk the path to financial success and patience is what it takes to reach the goal.