Concept Advisory Services

  • Keep Your Goals in Mind When All Is Not Well

    Posted: April 8, 2008, 9:26 pm by CRB

    As we have closed out the first quarter of 2008, those who have investments should be receiving their quarterly statements in the coming days. The first quarter of the year was not a very good one in terms of performance, and if you have investments in the stock market or equity fund, you’re probably going to see some negative numbers.

    Nobody enjoys losing money, but even if your statement shows that you did during the first three months of the year, don’t panic. You should certainly examine your investments and see how they fared, but make sure you’re doing it in context of your investment objectives. For example, if you’re looking at a unit trust account and you have 2 years until liquidation, the last thing you want to do is make drastic changes based on a couple months of poor performance.

    When you make significant changes to your investments based on what has happened over a relatively short period of time, you’re trying to time the market. It has been proven that it is extremely difficult to consistently make good investment decisions by getting in and out of investments by reacting to current events.

    Also keep in mind that by making a change now, you’re doing so after the damage has been done. In a perfect world, you would make these changes in anticipation of a current trend. Selling an investment now based on what happened in January doesn’t make much sense, does it? The markets could go down further, they could trade sideways, or they could go up in the next quarter. It is anyone’s guess.

    You also want to keep things in perspective when it comes to performance. Remember, you’re quarterly statement just shows a small snapshot of time. If you look back over the past three or four years, you’ll likely see that one bad quarter isn’t as bad as it first seems. There will always be ups and downs, and it is unrealistic to expect to see uninterrupted positive gains. Will your investments go back up? Certainly. It might not happen overnight or even after a few months, but the cycle will reverse just like it has done many times in the past.

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