Weathering Market Volatility
You can thrive during the ups and the downs.
When markets are volatile, it's a natural impulse to take a closer look at -
and even reconsider - your investments. However, those are the times to remain committed to your long-term strategy. Equally important is a disciplined approach to diversification and valuations in your portfolio.
To build a successful portfolio, stay disciplined.
On any given day, market ups and downs can seem significant. But look back over time and you'll see a clear, steady upward trend that rewards disciplined investors:
Market action in 2007 provides a great example of why staying disciplined pays off in the long run. Investors who panic-sold after the markets fell locked in their losses and missed out on the eventual recoveries.
Let an expert be your guide.
In those times of decline, it's easy to feel like you have to "do something" - and quickly. And it's a hard feeling to overcome. That's when expert guidance can help.
Professional money managers usually don't change course in response to the events of a single day. They keep their focus on effectively diversifying their funds and meeting long-term objectives.
Make diversification a cornerstone of your strategy.
Different business types, sectors and markets perform differently at different times. That's why it's vital to have a diversified portfolio. Professional management is the most effective way to gain diversified exposure to attractive opportunities at home and abroad.
Furthermore, with expert guidance you're assured of the asset mix that's appropriate for your objectives. That's another key to long-term returns and risk management.
Pay the right price for your investments.
"Buy low, sell high" is a key to successful investing. But so is "buy and hold." Most investors don't know what's "low" and what's "high." When they try to "chase performance" on their own -
often responding emotionally to market volatility - they usually end up losing out on long-term returns (see chart below).
At RBC Asset Management, a disciplined approach to valuations is a key part of the investment process for the funds we manage. This allows us to identify markets that have become expensive so that we can take advantage of those that offer better value.
For example, our models indicate that valuations for the Canadian stock market are much less attractive than for other markets, such as the U.S. and Europe. As a result, our exposure to Canadian equities is currently below the long-term target weighing. Conversely, we are taking advantage of more attractive valuations in the U.S. by increasing our exposure there.
With respect to analyzing individual securities, a strict valuation discipline embedded into our proprietary 3-D scoring system helps us avoid stocks with less favourable prospects or those that are trading at prices that don't accurately reflect their business fundamentals.
We can help keep your investment plan on track.
Talk to an advisor
today about the current environment and how you can build a disciplined
approach to diversification and valuations into your portfolio. We can
help ensure that market volatility doesn't lead to
short-term investment decisions that pull your plan off track.
