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Remaining focused in today’s market environment...

After 2008's sharp decline and last year's recovery in stock markets, many had hoped that 2010 would see a return to relative normalcy and stability.  The year certainly started on a positive note, as stocks turned in one of the strongest first quarter increases on record.

Then, in rapid succession came:

• The intensification of the budget crisis in Greece in February, with the risk of contagion across Europe
• Concerns that European budget cuts would slow down economies, with spill-over effects globally
• Growing fears about housing bubbles
• The explosion of a BP oil rig and subsequent oil spill in the Gulf of Mexico
• The May 6 "flash crash" in which U.S. markets plummeted in a matter of minutes without explanation

Looking at these events, you may be asking “What’s next?”

When we put investment portfolios together we discuss the importance of long-term thinking. That's because market returns are best measured over decades, not years or months. There will be times when the economy isn't quite so robust. This is one of those times. I'm writing this to remind you to focus on your long-term goals.

In the past few weeks, some clients have asked “how much longer before we make our money back?”  While I can’t answer that in absolute terms, I can share with you what happened after a similar market environment in 1973-1974.   From Jan 1, 1973 – October 3, 1974, the S&P 500 Index experienced a drop of 44%.  Investors had choices: sell and buy a GIC, hold on to their investments, or invest more.  Those who sold and purchased a GIC had to wait 6 years just to break even.  Those who held on to their investment regained their original amount in 2 years.  And those who invested more broke even in 1.33 years.  Continued investment throughout uncertain markets is the best strategy to increase wealth.    (Source: Invesco Trimark “Seizing Opportunities in Adversity”)

Market volatility is not a time to sell off in frustration - it is a great time to buy!  Clients who have stayed the course with their frequent purchase plans have positioned themselves well for the next market rally.  You may be frustrated with the markets and wondering what the next few months have in store, and that's natural. But history has shown that cooler heads prevail over the long run.

If you have any questions or would like to discuss your situation in greater detail, please don't hesitate to call me to book an appointment. I'd be happy to explain your options, discuss risks, reallocation and a suitable mix of assets for you, if necessary, and provide a little extra perspective on the markets.

Have a wonderful summer…be safe and try to stay cool!

Small Business Owner Section

If you are like most other small business owners, you are too busy growing your business to spend time looking after your personal wealth. While self employment has provided you with greater independence and increased earning potential, it has also brought financial risk. Small business owners face a unique set of challenges where the lines are often blurred between business requirements and personal financial goals.

By taking a holistic approach and offering clients integrated personal and business solutions, we can manage those risks so that you can focus on your business.

Click on the Small Business link on the left for access to valuable information and tools for Entrepreneurs.

* Insurance products provided through Dundee Insurance Agency Ltd.