Friday, November 7, 2008

Do We Call This The Obama Bounce?

For anyone unaware, I am a passionate hoopster and the fact that the new US President loves the sport makes it even better. For anyone who did not watch his "Yes We Can" speech, see if you can watch it without also feeling we are watching something more meaningful than the first African-American President.

Now that Barack Obama has added a new chapter to American history books, could he also be presiding over a significant bull market in the US. As I previously mentioned, it's expected we would "bounce" along for awhile as markets continued to react to the global recession we now seem to be locked in to. However, remember this - markets go up before recessions end. When will we emerge from the darkness? Mid 2009 seems to be the consensus, but who can really say. For the younger investors who have never gone through something like this before, take heart in the words of Jonathan Chevreau, who states "this catastrophic meltdown is actually good news for young investors just starting down the road to building portfolios of bargain-priced blue-chip stocks".

Another recent development - as mentioned in a previous post, the pending introduction of the Tax Free Savings Account (TFSA) will alter the way we save money. A certain mutual fund dealer just announced that it will begin offering a high interest savings account similar to the ones from Altamira, Dundee, ING and President's Choice. This will undoubtedly enhance our ability to offer competitive products, and better position funds as we emerge from the "market hell" of recent weeks.

Recently I decided to look at the returns for clients on their investments in a new light. Since saving for retirement is supposed to be a long term proposition, why not look at the returns for clients over the past five or six years. A fascinating fact emerged - clients who were invested properly (according to their profile), remained steadfast in their approach, continued to buy regularly as markets went up and down, while not bailing at the first sign of trouble did fine. I was pleasantly surprised. I called one client to tell him that he had in fact averaged roughly 6.5% since inception on his investments. He though I meant over the past six years, but I meant he had averaged 6.5% each year since inception.

All that being said, January is just around the corner, and at that time, clients will be receiving their next investment statements. Unless things change dramatically over the next seven weeks, the picture on the right represents what I expect many people to see. The question then begs do we change our philosophy when the markets go down, or stay the course and keep the destination in mind. Statistics have consistently shown that investors buy high and sell low when they try to "time the market". This link from CNN, while lengthy, truly explains why most people need to take a patient, long term approach to investing.

As always, please provide comments (below) as to what you think of this blog and where it needs to go in the future.

No comments: