Stay calm!

Ignore the noise, stay the course – this is a successful path to financial independence

Ian Tam, CFA 4 March, 2020 | 1:16AM
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Being a well-informed investor is both a blessing and a curse. Fears of the economic impact of the COVID19 have dominated news feeds, markets have been more volatile than usual, and on Tuesday morning, the U.S. Fed cut rates by 50bps in an emergency move to protect the US economy from the fallout of the virus.

It takes an immense amount of discipline to not be shaken, or at the very least deeply concerned about the state of the world economy and how this impacts your investment portfolio. It’s times like these that take an emotional toll that might prompt us de-rail our own investment plans. Here are some key points that might help stay the course:

1. Risk is relative: Short term market volatility should not affect how much risk you take on. If you feel like the change of your portfolio value over the last few days is too much to handle, you are probably taking on too much risk. Use this attention and energy to reconsider your risk budget and act accordingly to ensure that your long-term asset allocation (the mix between stocks, bonds, cash, and other asset classes) is right for you. Remember that the closer you are to retirement, the less risk you can afford to take.

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About Author

Ian Tam, CFA  is Director of Investment Research at Morningstar Canada. 


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