Has a fund manager, or an investment banker advise you to get out of their investment fund? Of course not! That would cause a run on their stocks and they don’t want that, now do they?
Do you ever hear political leaders or finance ministers tell you that we are in for a depression real soon? Like that’s ever going to happen! No way! Not until it has already happened, then they talk. It’d alarm people and grind the economy to a halt faster than if they feed you candy coated talk. So you get the sweetened version. It helps them save face and protects the economy from a sudden drop. (supposedly)
There are two common ways to lose money in the markets.
#1 Market timing – that's reacting to daily, weekly or even monthly events in he economic world - most people do it wrong most of the time. (That's short sighted investing– one should focus on the 2 to 5 year range)
#2 Staying invested during a serious prolonged systemic failure in the markets.
When markets drop 50% like they did in 2001 and 2002 it takes about 5 years for funds to get back up to a break even point. Zero returns for 5 years in anything but smart investing! Markets dropped over 50% in 2008 But we knew that would happen back in 2007.
Get out when a systemic failure is coming – and we knew for several years that this downturn was coming – it had to happen. You can’t do really stupid lending and wildly drive up house prices by making ridiculously bad loans all across a country as large as USA and not have it fall apart. CNN has been keeping us informed of this crisis for several years now. Nobody that owns a TV should be surprised by recent declines in markets. Some would have us believe that the recent US bail out means we are at the bottom I don’t agree.
In 2007 I protected my clients by advising them to move 60% to 80% of their investments from mutual funds into daily interest accounts. That was because we knew the mortgage crisis and US real estate market fiasco was going to implode sooner or later. We knew that would cause serious economic repercussions during 2008 and 2009. I predicted a 40% to 60% drop. The TSX was between 14,500 and 15,500 when I was moving my client’s money to safe ground. In Sept 2008 it was now about 12,000 so it is about ½ way down. Again I predicted it would drop to about 8,000 during 2008 and 2009 before it levels out and begins a growth period and I see no reason to change my view now. (Actually it could go even lower)
My clients are happy now because they have been earning interest but more importantly they are in a position to begin buying back into the markets and that will make them a lot more money.
If you’re tired of mutual fund salespeople telling you what the fund managers told them to tell you and you want someone with insight to look after your interests instead of their interests then call me. I’d love to help you. Call me to find out what to do now.
Gordon Hughes FCI, ELP, CFP
York Financial Phone me at York Financial 443-7777 or home office 459-2224 or residence 472-7308
Services Inc. email me at ghughes@nb.aibn.com
Check my website www.smartchoicelife.ca
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