Investors beware, this year will have many challenges, writes Peter Watson.
The year is off to a rocky start. We have many challenges, and it is recommended that investors proceed with caution.
President Donald is demanding trading partners, including Canada, pay a costly tariff to sell goods in the United States. Also, he has consistently said Canada should become the 51st state of the United States.
All this communication has been packaged into an environment of chaos, untruths and changing messages. That is his favorite way of negotiating.
Investors have many things to consider.
One. Beware of recency bias. There will be days when the news is particularly bleak, and stock markets react with a sudden loss in value. Do not suddenly predict that a recent stock market decline is something that will automatically continue.
We have decades of history that shows us stocks are volatile both increasing in value and then a sudden loss. That is normal. If you invest in stocks because it makes sense for your circumstances and objectives, be reminded they are a volatile investment.
Two. When people are nervous, as many are now, the volatility of stock values tends to be more prevalent. Investors would prefer a smoother consistent return but, repeating myself, that is not available when owning stocks.
Three. Just because this year likely will have more dramatic events and stock market swings does not mean you should abandon your long-term financial plan. This might be a prudent time to have an extra meeting with your financial planner to review your situation.
And finally on a personal front, many people are emotionally upset by the US aggressive, punitive, offensive, rhetoric. There will be many challenges this year, both investment and personal.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com
