The TSX bottomed on March 6th at 7479.96. Yesterday, June 2nd, it closed approx 40% higher at 10,588.79. The TSX is still some 30% below it's June 08 highs of 15,154.77.
In Sept. '00 the TSX hit a high of 11, 423.70, before falling 50% to 5678.28 in Oct. '02.
If one were to have bought the TSX index in Oct 2002, at current levels you would be up approx 10% yr/yr. after approx 8.5 years. Some would say that is a reasonable return.
But what a ride to get there!! Most, it appears, have no stomach for the violent volatility of seeing a portfolio cut in half at any given time.
What are your goals?
Why are you investing in the first place? You have a goal, usually it is a lifestyle goal (sometimes it is a legacy goal) : you want to achieve and maintain a certain lifestyle once you have moved to the next stage of your life.
When do you need the money?
How can you even begin to understand what risk you can take if you do not have a grasp of your cash flow: now, in 5 years, 10 years, 20 years, 30 years....do you have an idea?
How can you invest if you do not understand what risk you can take?
Many advisors will sell you an investment, touting it's merits for potential appreciation. But how does it fit into your cash flow plan, that is really the key. It has to fit into your plan. You have to have a plan.
The markets will go up, the markets will go down. If you need cash flow and the markets are down and you have no liquidity then your plan (if you have one) is not working.
Did you invest new money when the market was down?
If you were too emotionally charged by the on-going media circus of negativity and were unable to participate, then you need 3rd party money managers who understand the necessity to remain emotionally detached and systematically capture the opportunities that are available when the market makes new lows.
What is the next move in capital markets?:
1) The expectations that are being built into current markets are for economic recovery:
- the fear of "depression" has been taken out of expectations
- some improvement in consumer attitudes is being built in
2) Investors are coming back, equity mutual fund sales are improving
- there is still a significant amount of "fear" money parked on the sidelines in money market funds earning close to no return
3) As economic statistics are announced there could be surprises that either do or do not meet expectations, the markets will be vulnerable to those, especially if they are negative, because the markets are expecting better things moving forward.
4) TSX is likely to be bound by a trading range until there is more clarity: 9,000 to 11,500.
- remember the trading range on Oct. 14, 2008 was 9065 to 10,700 , approx. 18%. One day!
5) Early next year, 2010, providing global economic recovery stays on track and rising interest rates (governments funding deficits and inflation) do not choke it off (and there are no unforeseen economic shocks) we may be able to break out of this range to the upside.
How are you positioned?
Are you positioned to take advantage of the opportunities that exist now to positively impact your future goals?
Do you have an idea of your future cash flows?
Do you have a strategic plan?
We can help: www.jstomenson.ca
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