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Colin Barry, MBA, P.Eng, CFP
Colin Barry, MBA, P.Eng, CFP

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Personal Wealth and Finance

Investing with an advisory team

March 1, 2024

If you are an investor who remembers the mortgage debt crisis of 2008-9, you know that the stock market lost significant value. From an investment standpoint, the real downside occurred when some investors sold off their equity holdings due to fear mid-way or near the end of the market devaluation.

The current market has responded to higher interest rates after rapid inflation, which accelerated through the pandemic, notably in the real estate sector. The interest rate hikes have added risk to some securities held by the banking sector in the USA. The war in Ukraine has added volatility to the energy sector, affecting the stock market’s response to several other supply and demand variables worldwide.

The growth we had seen in the past was based on low interest rates and leverage. And now, with interest rate hikes, we are unwinding all that, which is why having a financial advisor and a team of investment analysts backing up the advisor is essential. On the upside, we have seen a very active buying period in the stock market in April 2023. Note: in an inflationary or recessionary period volatility generally is present and any valuation of the stock market can go either up or down.

Looking forward, hindsight is 20-20. The people who financially survived this market anomaly were the ones who did not sell their good stocks and equities held by investment funds. Many risk-averse investors who may have been tempted to sell but did not, in the long run, received a blessing in disguise! They had an opportunity to hold on and patiently watch their funds’ unit values increase again in one of the most extended bull market periods to 2014.

Investor risk is part of life in this world. Geopolitics, macro- and microeconomics, corporate banking and national solvency pose a significant financial risk to the world’s capital markets. Massive debt held collectively by individuals, companies or sovereign nations can indirectly affect currencies, bond markets, and interest rates.

Bull and Bear markets are cyclic. The nature of the market is cyclic. If there is a hurricane warning, you know it is coming and don’t pitch your tent near the beach. Yet, with the stock market, you rarely know when a correction or a bear market is coming (when the stock markets decline 15-20% in value for some time). Investment fund managers will work to retain your value while looking forward to the markets’ recovery in these periods. The intelligent investor who is well-studied and cautious is nevertheless a risk taker, realizing that one must hold on to investments patiently until the stocks in the fund portfolio regain any lost value and enter a rising bull market period.

The pandemic created a lot of fear, causing a massive sell-off in the stock markets. Many investors made a lot of money when the stock market returned with huge gains.

The market moves in mysterious ways. Though the major world stock markets went through a correction in early 2015, we saw some significant markets in North America break records. On March 12, 2015,  for example, though four of our Canadian banks were down below 10-17% from their 52-week high, the Canadian TSX was only a quarter of a percent below on the same day.  This shows how various sectors can be in or out of favour and move up and down due to market concerns. Despite the TSX doing well, on March 12, 2015, the TSX Energy sector was down 38% due to the oil prices dropping worldwide, presently a great time to buy when stock prices are lower in energy-related investments.

Moving money in a family of funds Most funds allow you to carry a portion or all of your money into the money market, bond, and balanced funds amidst an investment fund family (those offered by the same company), or your advisor may be able to move them into an alternate investment vehicle.

Buy more fund units when prices drop. Consider seeking opportunities among bargain-priced investment fund units. In this way, wealth can be created when buying stocks of many companies held by investment funds when they are priced lower. If you take this strategy, you must be ready to stay invested over the long haul.

An effective Dollar cost averaging (DCA) strategy can win. This involves buying fund units at regular intervals — or when the market dips — and investing the same amount of money each time. Thus, you buy more fund units when the value is lower and fewer when higher. DCA is the wisest investment strategy to utilize during a long-term bear market because you increasingly purchase more fund units at lower prices. If you need to get more familiar with the benefits of that concept, please don’t hesitate to talk to your investment fund representative.

As you realize the risk of investing in producing long-term gain and beating inflation, you can make bear markets work for you if you are patient. This is because a bear market paves the way to the next bull market when rising prices may take your investment funds higher in value. Though volatility had been frequent, Dow Jones had risen substantially through the waves of buying and selling trends.












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