It's about knowing your investment expectations 21 · Thursday, December 8, 2011 OAKVILLE BEAVER · www.insideHALTON.com O h the joys and pitfalls of the roller coaster called the stock market. Just when many were expecting the value of stocks to continue sliding, we were surprised with a sudden rally. Last week the TSX surged 5.3 per cent. The gain made back some recent losses, but, more importantly confirmed the main characteristic of the market, which is volatility. History can teach us about the stock market. It does not go down forever nor does it endlessly rise in value. Generally, it just plugs along at its own pace with periods of extreme volatility. Fortunately, the markets have risen over time. That has rewarded long-term investors. Unfortunately, one of the biggest mistakes many investors make is to initially do the right thing by investing for the long term. Then they make short-term, almost random, adjustments to the long-term investing strategy. Successful investing in the stock markets is mostly grounded in Dollars & Sense By Peter Watson expectations. Do not attempt to predict the markets' short-term behaviour. We have 200 years of experience that proves this cannot be done. Please note I said "cannot be done." That doesn't mean investors don't continue to try to predict the markets' short-term movements -- to their own peril. There are several fundamentals that should be included in your expectations of the market. The first is to realize that it is unpredictable. If that is something you cannot accept then you might be better to just avoid the market altogether. If you agree that the market is unpredictable then why would it make k sense to try to beat b the h market with short-term trading? That often results in investment losses. Added to those losses are excess trading costs that include commissions. Frequent trading within nonregistered accounts is also highly tax inefficient. Investing in the stock market requires you to take on some risk. That risk in stocks over a longer time frame has proved successful for investors. Historical data shows the stock market can be one of the best and most lucrative investment choices. Yes, investors have taken on some risk. Fortunately, they were rewarded d d for f that h with h portfolio f l gains. Risk was on their side because of their long-term approach. So, let's agree that over time stock market risk has historically proven to be profitable. Then why do so many try to "outsmart" the market with constant trading when we know that the market is so unpredictable? Maybe it is in our human nature to take on some volatile and risky action. The stock market does fine, however, investors' results have often lagged dramatically. Why is that? The human characteristics of greed and fear work against us. Greed makes us want to capitalize k increases so when h do d we on market feel comfortable investing money? After the market has had a nice run. Fear shows its head when we cash out after the markets have had a sustained decline. That brings us back to the important issue of expectations. Determine what you think the stock market can do for your portfolio over time. Accept the reality there is no logic to the stock market in the short term. Therefore, a successful investment strategy is to invest for the long term and be patient. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. Holiday Gift Cards it's your GOVERNMENT REBATES ARE BACK! RECEIVE UP TO $1,690 IN GOVERNMENT REBATES $700 OFF HI-EFFICIENCY CENTRAL AIR $2000 OFF HI-EFFICIENCY DC MOTOR GAS FURNACE (96% EFF) gif t card it' i 's your SWIMMING ING SKATIN it's your gif t card gif t card $ MATCH PRICE A TEE. . GUAR N DETAILS R O F L CAL 2690 NOW $ WAS $ WAS · Free Installation · 10 Years Factory Warranty 1990 $1990* *Call for details FURNACE DIAGNOSTIC SERVICE reg pric NOW 3990 FITNESS GOLF OVER 120,000 SATISFIED CUSTOMERS 9 Only $4 e $99 *After Rebate LIMITED QUANTITY ACT NOW · Largest independent dealer in Ontario · Over 120,000 satisfied customers · Family owned business for over 20 years WHY AIRE ONE? · 9 showroom locations in Ontario · 150 licensed technicians · 24 hour emergency service · Registered tssa-wsib-hrac-bbb member · Satisfaction guaranteed ON SALE NOW! at City Hall Parks & Recreation Counter, Tansley Woods and Brant Hills Community Centres, Appleby Ice Centre, Burlington Senior's Centre. For more information call 905-332-1996 or visit www.burlington.ca/giftcards 905-849-4998 9 LOCATIONS TO SERVE YOU BETTER *See dealer for details www.aireone.com 1-888-827-2665 A+ Rating On All Wool, Leather & Shearling Coats Acton 49 Eastern Av. 519 - 853 -1031 It s Worth the Drive to Acton It's Mon. -Sun. 10am - 6pm Fri. 10am - 8pm