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 The
Money Management Newsletter: Investing
in Mutual Funds
Staying invested when all you're seeing is
lackluster performance
By The Money Mangement Editor
Money Management Newsletter - March 2005
Long-term investment returns are best measured over decades,
not just years. Sometimes when the markets are soaring, it's easy to forget
that there also have been (and will be) times when the economy isn't quite
so robust.
It's often said that a picture is worth a thousand words, so included
below are two charts to illustrate how the stock markets have performed
in the past, and why it's so important to remain invested.
This first chart shows the performance of the S&P/TSX Composite Index
over the last five years. This index follows the fortunes of the largest,
most widely held stocks on the Toronto Stock Exchange, and is a good way
to measure the overall health of the Canadian market. You'll notice that
while this index hasn't quite reached the level it was at in the fall
of 2000, it is currently on an upward trend.
Someone who had panicked (or declined to invest) when the market was
down in late 2002 would have missed out on all of the growth we've experienced
since then….about 3,000 points worth!
The next chart shows how the same index has performed since 1985:
Now think back to all the events that took place during the late 1980s
and early 1990s.
Do you see that short decline in the first quarter of the chart? That
was the infamous "Black Monday" of October 19, 1987, when the
Dow Jones Industrial Average, a US index, dropped 22%. The Canadian market
dropped severely as well. Newspaper headlines and TV reports were full
of doom and gloom, and many investors were desperate to redeem their funds.
There was also the Gulf War and the 1990s recession, but the chart shows
that the overall market has rebounded from these low points.
You may be frustrated with the markets at the moment, and that's natural-but
history has shown that cooler heads prevail over the long term. Having
said that, purchasing a volatile investment at a market peak can cause
a great deal of concern because the investment must recover by a much
greater percentage than it declined to get you back to where you were.
Even if market direction is positive an individual investment can continue
to lose money. It is therefore very important to ensure your investment
allocation suits your needs and tolerance. If you have any questions or
would like to discuss your situation in greater detail, please don't hesitate
to call your Fiscal Agents investment advisor. They'll be happy to explain
your options and provide a little extra perspective on the markets.
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, Fiscal Agents Money Management Newsletter
25 Lakeshore Road, Oakville, On L6K 1C6.
(905) 844-7700
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