Good advice for qec at this time

2008 continues to be a very difficult year for stock markets around the world.

As an investor, you may be concerned about the recent market volatility and how it affects you personally. While I truly understand and appreciate your concerns, I am not recommending any changes at this time.

Over any given 10-year period, you are going to “love us twice, hate us twice and be indifferent to us six times”. What this actually means is that, if history repeats itself, over a 10-year period (on average) the stock market will experience two years of negative returns, two years of extraordinarily high returns, and six years of positive (average) returns.

When we designed your investment mix, it was set up to deal with the inevitable swings of the stock market. We had expected (and still expect) the stock market to decline, on average, two years over a 10-year period; the only unknown is when the downturns will take place. As a result, we need to be prepared for the “worse-case scenario” every single day.

If you sell a diversified portfolio (i.e. move to cash) when the stock market has corrected, you will likely receive less than the long-term intrinsic value of the portfolio. On the other hand, selling investments when the stock market moves up dramatically usually means you receive more than the long-term intrinsic value of the portfolio.

As a result, making changes to your portfolio during periods of market downturns means selling from a position of weakness - this should be avoided. We will tend to recommend changes to your portfolio when the stock market moves upwards, as doing so means you are selling from a position of strength.