Holiday Update
We would like to start our final update of 2018 by wishing you a happy holiday season. We hope you have the opportunity to celebrate with your loved ones and take some time to relax.
In addition to our quarterly updates we are also adding monthly email updates. In speaking with many of you over the last quarter we have heard that you would like to hear from us more often. While we intend to keep our quarterly communications dedicated to more detailed market updates, these monthly emails are designed to focus on financial planning as a whole. Feel free to pass on our updates and if you have any questions please reach out!
How are the markets doing right now?
As predicted, market volatility has continued for the duration of 2018 and we fully expect markets to continue to be volatile through 2019. There are many influencing factors such as our current political environment, economic factors, increases to Bank of Canada/Fed Rates and simple business cycle dynamics.
We recognize that although short term volatility can leave investors feeling uneasy, it is important to remember that market corrections are very normal. Fear, moving to cash, and trying to time markets has never consistently built wealth over the long run. Those of you who have worked with us over the years have likely heard us say this more times than you can count however it’s always a good reminder during years like 2018.
What should I be doing in a down market?
In periods of volatility, we always recommend taking a step back and looking at your plan from a ‘big picture’ viewpoint. Psychology plays a big part in your long-term financial success and our role as financial planners often takes the shape of counselors to help our clients avoid harmful emotional decisions and instead take advantage of the opportunities that emerge.
Dollar Cost Averaging
Regular, consistent savings allows you to take advantage of market volatility by making deposits and buying shares when they are effectively “on sale”. Markets are currently down around 10% and can be bought and held for when markets eventually rebound and hit new heights. The concept of dollar cost averaging is not a new one and has a long track record of helping clients take advantage of short-term dips in the markets. If you’re in an income phase of your financial plan, we always recommend periodic redemptions rather than sudden dramatic shifts to cash to achieve the same smoothing effect.
Mortgage and Debt Rates
We are often asked about how to handle debt loads in periods where interest rates are rising. That question is a complicated one, and we often enlist the assistance and insight of experts in the field as to how best to approach managing what is many people’s biggest asset and most significant cash flow commitment. The fact is, many Canadians aren’t aware that their mortgage is not a ‘set and forget’ thing and should be treated like any other part of their plan that gets updated and monitored periodically.
What’s coming up next?
With the start of 2019 comes the beginning of tax planning season. We’ll be in touch with many of you in the first 60 days of the new year to begin allocating assets accordingly, including transfers and deposits to RRSPs to reduce your 2018 tax bill.
