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Pattie-Lovett Reid: Advice for investors navigating markets on edge

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HUNTSVILLE, Ont. -

It's election day in Canada and, to be honest, I don't think the markets are all that fussed about it.

Sure, it stands to reason investors will be watching closely to see the impact on sectors including energy, if there appears to be an aggressive push towards a low-carbon economy, and banking, if new taxes are imposed on banking profits above $1 billion. These two sectors combined represent 40 per cent of the S&P/TSX.

So far, from an election perspective, the markets have taken a wait-and-see approach.

However, it does look to be a rocky trading session as September appears to be living up to its reputation of being the most challenging month of the year for investors.

Concerns are mounting over the regulatory environment and troubled property market in China; there’s a U.S. Federal Reserve meeting this week; colder weather is increasing fears of further increases in the Delta variant; energy prices are high; and inflation remains a wildcard.

Investors are edgy over the growing sense of unease as company profit margins are squeezed, costs are rising and central banks are telegraphing they could be getting closer to pulling back on stimulus measures. Companies being hit are those linked to the global market recovery.

To be fair, the markets have been on fire. Year-to-date, the S&P/TSX is up approximately 17.5 per cent, the Dow more than 14 per cent, and the S&P 500 over 18 per cent. No market trajectory is straight up. Pullbacks are a normal and expected part of investing, yet still ring alarm bells when they happen.

It isn't going to take much for some investors to move to the sidelines.

Before you react, a few considerations:

1) If you have a diversified portfolio with money in cash, bonds and stocks, recognize we have been through periods of volatility before. If you have a reasonable time horizon of at least five years, for many the best course of action is to do nothing.

2) Don't try to time the market. Even the experts have to get it right twice -- going into the market and coming out of the market. Have a plan to rebalance your portfolio throughout the year and stick to the plan. Despite the speculation it is tough to know what will outperform at any given time. Buy good quality investments and think long-term investment verses short-term speculation.

3) Understand your tolerance for risk. Are you are looking for a return "of" your investment or a return "on" your investment? Take the time to really appreciate who you are as an investor. There will always be market challenges, however, the savvy investor will not let emotions dictate your investment decisions.

Bottom line: I'm not saying you have to buy and hold your investments forever. What I do hope is you make informed portfolio decisions based on who you are as an investor, your time horizon and your tolerance for risk. This strategy helps to ensure logic versus emotion drives your decisions.

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