Adopt a long-term outlook

Choppy markets can lead to buying opportunities.

And, even though market volatility is unpleasant to go through in the short term, you should take advantage of those opportunities, says Colum McKinley, a vice-president of Canadian equities at CIBC Asset Management who manages the Renaissance Canadian Core Value Fund.

To do this, start “accumulating or adding to positions in well-managed companies that have more attractive valuations.” McKinley says he hasn’t changed his investment process in the face of unstable markets, and suggests investors should stick with methods that have worked for them in the past.

Even in the face of volatility, he says, they need to adopt longer-term perspectives. “If you think about the last 10 years,” McKinley says, “the total return of the S&P/TSX [has been] in excess of 8%, and that’s as of the end of September 2014.”

Yet that period includes “the credit crisis in the U.S., the debt crisis in Europe and natural disasters. We’ve seen a lot of problems that have contributed to volatility but, over the long term, the return of the TSX has been quite strong.”

More recently, people have become worried about economic growth rates in European countries and in China. But those worries may cause them to overlook the positive signs coming out of the U.S. economy. After a long draught, Canada’s largest trading partner is posting gains even if many “have continued frustration at the pace of that recovery.”

But that only reinforces the need to hang onto the long view. “It’s important to remember we had a very long, sustained rally in stocks,” says McKinley.” For the U.S. market, in particular, we’ve experienced “the third-longest period of time without a 10% or more correction in stock prices.”

“Stock valuations have moved from being exceptionally cheap to trading at around their long-term averages, [and then], for many stocks in many sectors, to trading at above-average valuations.”

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You can also check out this content on investment strategies from our AdvisorToClient partner Renaissance Investments:

Planner – Time-tested investment strategies for the long term

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.