By: Barry Choi
The word recession has started to float around—some would argue it’s already here – and that has Canadians on edge. Even though our nation has witnessed the decline of oil, continued job losses, and the TSX tumble, it’s not surprising that 97 per cent of Canadians are feeling investment anxiety, according to a new study by BMO InvestorLine.
Okay, to be fair, it’s not just the Canadian economy that’s been making headlines; Greece barely escaped defaulting, and even though China stocks have recovered, does anyone really know what’s going on there?
Investing can definitely be emotional, but if you keep yourself informed, you might be surprised to find how easy it is to get over your anxieties.
Don’t Let Volatility Get To You
Investing can plan mind games on you. Forty seven per cent of those surveyed fear a financial loss, while 33 per cent are worried how market volatility will affect their investments. With the way markets have been performing some investors might be in full panic mode.
“Investing is personal so it’s not surprising to see that a majority of Canadians are not only financially but emotionally involved in their investments,” says Julie Barker-Merz, president at BMO InvestorLine. “Given recent market volatility, fear of financial loss is an understandable concern.”
A good way to get over your investing anxiety is to start by reviewing your financial plan. You want to make sure what you’re currently invested in still suits your profile. If the volatile markets are keeping you up at night, then it might be better for you psychologically to have a more conservative portfolio.
Of course, you need to understand that although fixed-income investments such as bonds and GICs aren’t very risky, you won’t get much of a return especially with interest rates being so low. You need to balance your portfolio with equities like stocks and ETFs to ensure you’re retirement will be properly funded.
Having the right balance between fixed-income and equities in your portfolio is known as asset allocation. Generally speaking the younger you are, the more risk (equities) you should have in your portfolio. As you get older, you want to have safer (fixed-income) investments since you’ll need that money to fund your retirement.
Having a mix that suits your age and investment profile will help balance out any volatility no matter how old you are.
Of those surveyed 90 per cent say they’re confused about investing—yikes! Yes investing can be intimidating, fortunately there’s one simple tip that will put you in the 10 per cent that are much more confident with their money. Read a book!
Here are my top 3 personal finance books for Canadians:
Stop Over-Thinking Your Money! – Written by personal finance expert Preet Banerjee; this book breaks down financial terms in an easy to understand way. You’ll never be intimidated by financial lingo again.
Wealthing Like Rabbits – Author Robert R. Brown does a great job here explaining finances while making pop culture references. Not only will you understand investing, you’ll also be highly entertained.
The Wealthy Barber Returns – The original Wealthy Barber by David Chilton was a must read for baby boomers. He’s back again offering his unique perspective on money for millennials.
It’s really is that simple—take the time to read one book about personal finance and it’ll change your entire outlook on money and investing.
Beware Promised Profits
Thirty eight per cent of those surveyed are looking for an investment that will yield a good return with minimum risk. There’s no such investment that only goes up in value—that includes real estate. If someone is promising you a high return with low risk, beware since it might be a scam.
No one wants to take a loss on their investments, but if you want your portfolio to grow then you need to accept a certain amount of risk. Trust in your financial plan and as long as you have the right asset allocation set up, then what’s happening in the markets right now shouldn’t affect your long-term goals.