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Weariness with Money.


Another day of stock or bond market gyrations elicits a collective sigh.

The ride has been bumpy (since 2007 at least). The noise level has reached that of a traffic jam forcing its way into Stanley Park on a sunny summer Sunday afternoon. Loud. Incessant. Relentless. Exhausting.

Market watchers wonder if it seems like more is happening … and faster.

Well, it is.

“ … as the speed of trading and information has increased, volatility has risen and swings of 4 percent (a day) are now more common.” “The last few years have been the most volatile for all of recorded history,”

(This is not investing. Economic and Company fundamentals do not change up or down by 4% a day).

For the Individual Investor, the natural reaction might be to throw ones hands in the air and take a ‘financial rest’.

It seems so.

65% of employees surveyed in a MetLife Study of Employee Benefits say they worry about financial issues. Yet, a Harris interactive study of 401(k) plans in the U.S. show employee participants remain accidental investors. 45% of participants are completely passive. They never call call-centres nor visit websites to monitor their investments. 69% say they don’t read the investment information provided to them. 93% of participants would be willing to spend 10 minutes per year to help them understand if they are on track for a comfortable retirement. (10 minutes? Why would any investor spend 40-60 hours a week trying to make money and hesitate to take 10 minutes a year managing it)? A J.P. Morgan (2010) survey indicated that 41% of investors acknowledged that they do not know how to diversify their investments, yet only 11% wanted additional information regarding how to do so.

The point is that saving for retirement isn’t even on most Individual Investors radar screen … until distribution time. At termination of employment, when investors begin to withdraw funds, interaction increases to 86%. (Write your own punch-line regarding the remaining 14%. I can’t even venture a guess).

Cleary, both Individuals and Institutions have a lot of work to do regarding investment and retirement education.

So Individual Investors have re-trenched. They are ‘money weary’. But now is not the time to withdraw (and hope things work out). No, now is the time to engage.

Block out the day-to-day noise and re-visit, re-focus, review, re-think and revise financial and investment plans. Prepare. Focus on the basics. The controllables. Asset Allocation. Re-investment of interest and dividends. Dollar-Cost-Averaging. Rebalancing. These alone go a long way to keeping the average investor on track towards their goals.

We’ll look at these again shortly.

Next time?
Risk management.
Doug Cronk CFA is Manager, Investments for a Canadian Pension Plan
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