Investors: Think long-term during market volatility

Avoid selling high-quality investments at a loss

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OTTAWA – Stock markets have taken a wild ride in recent days, but investment experts say that means opportunity for investors with a long-term focus.

Portfolio manager Adrian Mastracci of KCM Wealth Management says you need to resist the urge to panic or overreact to the sharp moves in the market — up or down.

He cautioned that the market could and probably will go lower in the short-term, but if you are comfortable with the risk and it fits within your plan, there is opportunity.

“It is probably not over yet, but you don’t know,” he said.

“So, if you’re OK with the long-term, if you’re OK with putting up some money now, it’s not that bad a deal to basically buy in.”

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Mastracci said to look for quality companies that have been dragged lower by the overall downturn in the market and don’t invest money that you need and can’t put at risk in the short term.

“If you’re not in this for the long term, then don’t do that,” he said.

The S&P/TSX composite index now stands about 15 per cent lower than where it was a year ago, while the Dow Jones industrial average is off more than 10 per cent from its 2015 high.

But if the recent moves lower by the stock market are more than a correction, the losses may be just the beginning. The drop so far remains just a fraction of the crash during the 2008-09 financial crisis which saw the S&P/TSX composite index plunge more than 40 per cent from its 2008 high before reaching the bottom in 2009.

Amy Dietz-Graham, a portfolio manager and investment adviser with BMO Nesbitt Burns, recommended against making broad sweeping changes to your portfolio during times like now.

“You don’t sell a whole position, you might sell part of it,” she said.

“You work it in over time and you have to have your long-term goals in mind.”

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Dietz-Graham said it all has to be within the context of your financial plan and urged investors not to panic.

“You don’t want to be selling your high-quality investments. If you bought it for a reason because you had a long-term plan in place, there is probably a good reason it is going to do well over the long run,” she said.

After four years without a major correction on the stock market, investors may have been lulled into a false sense of security.

Stephen Lingard, senior vice-president and portfolio manager with Franklin Templeton Solutions, said it has been easy to make money on both the stock and bond markets in recent years, but that’s changed.

“Amid some of this volatility and falling markets, I think there is an opportunity to rotate leadership,” he said, noting that the U.S. market has been the darling in recent years.

“Even though equities have gone up for five or six years, there are still some laggards and there are those that you maybe want to prune, so for us, we are focused on those parts of the market that are offering relative value.”

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