By Sheryl Smolkin
Even on a vacation cruise in South America for the last several weeks it was difficult to avoid media reports about the plunging stock markets in both the U.S. and Canada and the drop in value of the Canadian dollar.
On the Financial Independence Hub, Ermos Erotocritou, a Regional Director with investors Group Financial Services Inc. reminds readers that it’s reasonable to monitor day-to-day events, but it’s imperative to keep in mind that daily, weekly, monthly, even quarterly market movements are often little more than noise for an investment portfolio that likely has a time horizon of many years. That’s why it’s so important to practice patience and discipline by remaining in the market, as opposed to abandoning it or believing that is the best way to preserve wealth.
Dan from Our Big Fat Wallet shares Lessons from a Financial Downturn from the perspective of an Alberta resident. First of all, he says “cash is king” because the more cash you have, the more flexibility it gives you. He also notes that with stock prices and housing prices falling in some areas, the emergency fund has suddenly taken on more importance. And finally, he acknowledges that investing is emotional but suggests that investors who are able to separate their emotions from investing have the potential to make impressive returns in a downturn.
In the Toronto Star, Gordon Pape also agrees that “cash is king” in times like these. He says it’s fine to be all-in when markets are positive, even if the growth isn’t robust. But in times of great uncertainty and high volatility such as we are currently experiencing, he likes to have some cash in reserve to cushion any stock losses and to deploy as buying opportunities appear.
It’s an economic downturn — not the Apocalypse, Alan Freeman reminds readers of iPolitics. He says, “This isn’t 2008, when we were facing the very real threat of the global financial system collapsing entirely. This is just an old-fashioned economic downturn — even if it will be quite painful for some in the short term.” Freeman comments that because Canadians depend on resources for a big chunk of our economic activity, we shouldn’t be surprised that we’re at the mercy of commodity prices. “Oil and metal prices that soar to unsustainable levels inevitably crash; they’ll recover this time around, as they have in the past, though perhaps not for a few years,” he concludes.
And finally, many people who do not have investments may be less worried about the stock market slide than the plummeting value of the Canadian dollar. In a Canadian Press article published in the National Post, Aleksandra Sagan reports that for every U.S. cent the dollar drops, food like fruits and vegetables that are imported will likely increase one percent or more in cost. While the increased costs have dealt a blow to everyone’s wallet, they have had a more pronounced effect on Canadians living on a tight budget or in remote regions, where fresh fruit and vegetables are more expensive than in more urban areas.
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