Markets are dynamic not static

If you want to be a really good golfer, all you need is practice. Frequent playing lets you increase your mastery over a golf course as you learn the moves and the consequences of each one. Over time, you find out that if you hit the ball to spot "A", it will roll towards the hole, whereas if you hit to spot "B", it will roll towards the water. If you practice enough, you will eventually become skilled at the game because the golf course doesn't change in response to your play.

However, investing is a whole different story. Choosing tactics to master a market is virtually impossible. This is because the market is shaped by those who participate in it, and changes are based on human reactions just as much as economics. We all know that human behaviour is difficult to predict with any accuracy. History has taught us that no course of investment action-even if executed perfectly-can be right for all markets at all times.

Stay the Course

We continue to recommend that you stay with a well-defined investment plan and not leap from strategy to strategy based on short-term trends. No matter how sound our strategy may be, it will still have good and bad years. It does not matter whether you stay with a value or a growth strategy, a Canadian or an International strategy. It does not make a difference whether you have an active or a strategic approach to asset allocation. What you have to accept in every case is that investing is about patience and adherence to your strategy, adjusted from time to time for economic changes and personal circumstances.

As the global markets move through the recovery phase, some investors might easily forget the recent past and try to re-coup their losses more quickly by switching to a different method of investing. Although it is wise to be on the lookout for approaches that fit your style and circumstances, one of the biggest mistakes is to look at only those investments that have done well in a bad market.

Where should I invest?

Panicky investors are moving money into the safety of GICs, short-term bonds, or other investments offering "guarantees" based on what many would see as almost the bottom of the market. Their decisions are based on the fear of losing even more money. However, these investments may not be suitable for the achievement of your long-term goals. In other words, guarantees may protect your money in the short term, but they may not provide enough yields on your long-term money to help you ever reach your goals. As an example, if you are saving for a retirement goal that is 10 years from now, and you plan to live another 20 years during retirement, you will have a tough time reaching that objective on a low rate of interest.

After all, investing is not always about short-term returns-it is about implementing a consistent investment strategy for the level of risk you are willing to take over time to reach your long-term goals. This is never static and should be continually reviewed.

"The only man who behaved sensibly was my tailor; he took my measurement
anew every time he saw me, while all the rest went on with their old measurements
and expected them to fit me." - George Bernard Shaw

It is similar with risk and your financial plan. Don't just look at the investment, but continually examine your strategy in light of your goals, risk, and economic conditions. The only truism that applies to any long-term investment strategy is having the discipline to stick to it through tough times.