BMO Financial Group

BMO Financial Group

August 22, 2012 08:30 ET

BMO InvestorLine: In Volatile Markets Investment Gains Require Commitment and Focus

TORONTO, ONTARIO--(Marketwire - Aug. 22, 2012) - Even the most seasoned investors can get caught up in a volatile market environment and lose sight of their financial goals. BMO InvestorLine encourages Canadian investors to adopt a diversified approach to investing during times of economic uncertainty - one that maintains a return on their investments, while hedging against unnecessary risk.

"Market swings - even wide ones - are a normal part of investing," said Cesar Rainusso, Vice President, BMO InvestorLine. "Several factors lead us to conclude that volatility will continue to characterize the financial markets for the foreseeable future, and, while it may be difficult to watch your investments decline in value, Canadians should remain invested and keep a long term view to ultimately reach their investment goals."

While investors may feel uncertain when it comes to their investments during periods of market volatility, according to a recent BMO study, almost half (47 per cent) of Canadian investors believe that volatile markets present good opportunities to invest. Furthermore, respondents considered this current investing environment "the new normal," with almost three-quarters (72 per cent) of the view that market volatility is here to stay.

Look forward, not back

During times of market volatility it is critical that investors not only review their portfolio periodically, but continue to look forward, stay invested and not dwell on how much their portfolio was worth a few years back. Times change and the markets change with them.

"Temper your expectations with common sense and always avoid timing the market - a strategy that rarely works," said Mr. Rainusso. "Before you consider selling, review the reasons why you bought the investment; if nothing about the company has substantially changed, you may want to hang onto your shares a little longer as they may pick up."

For investors thinking about when to buy or sell in a volatile economy, consider the following:

  • Re-examine your portfolio - Examine your portfolio for diversification and market exposure. Keeping your portfolio balanced, with a mix of equities, bonds and cash, can help protect it from fluctuating markets. However, resist the temptation to check your investments too frequently as this may lead to impromptu decisions.

  • Write it down: Compile a list of stocks you would like to buy so it is readily available when you are ready to make a purchasing decision.

  • Stay focused: For long-term investments, take a wait-and-see approach because you will have plenty of time for the market to recover and earn you a return on your original investment.

  • Read the headlines: Stay aware of the current events and industry news that may have the potential to move financial markets. Review your investments to see how the make-up of your portfolio will be able to sustain the possibility of increased volatility.

  • Do not panic: When you buy or sell an investment, ensure that you are making a rational and informed decision, rather than an emotional one.

  • Keep a log: Track each of your investments and note your reasons for buying it, and the conditions that might prompt you to sell.

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