The recent volatility in the equity markets have many of us frozen in fear. After realizing substantial losses in our RRSP’s, RESP’s, mutual fund and stock portfolios, it has become increasingly difficult for some to continue investing. A number of folks have fled from equity mutual funds to bonds or other fixed income investments (have therefore closed the barn door; after the horses have bolted from the stables…)
Those folks who have done so, have crystallized their losses and stand to take a similar drubbing in bonds as equity investments begin to regain some of their loses and global markets begin to respond to the unprecedented levels of government stimulus.
At times like these, we have to remind ourselves of past periods in history when investors went through similar crisis’s. The one’s who were rewarded, were the ones that kept a long term horizon and reminded themselves why they had invested in the first place…
| Crisis | Drop in S&P 500 | Six months later | One year later |
| Korean War, June 1950 | -15% in 5 weeks | +31% | +36% |
| Sputnik, October 1957 | -10% in 3 weeks | +8% | +30% |
| Steel price rollback, April 1962 | -20% in 8 weeks | +11% | +24% |
| Liquidity crisis, May 1970 | -12% in 4 weeks | +16% | +42% |
| Arab oil embargo, October 1973 | -17% in 9 weeks | -1% | -28% |
| Nixon resignation, August 1974 | -19% in 5 weeks | +30% | +27% |
| Currency crisis, October 1978 | -11% in 3 weeks | +8% | +16% |
| Hunt silver debacle, March 1980 | -12% in 4 weeks | +26% | +29% |
| Interest rate rise, September 1981 | -13% in 4 weeks | +8% | +12% |
| Financial panic, October 1987 | -26% in 3 weeks | +7% | +16% |
| Iraq invades Kuwait, August 1990 | -20% in 12 weeks | +28% | +30% |
| Asian currency depreciation, March 1997 | -10% in 2 weeks | +29% | +36% |
| Russian debt default, May 1998 | -19% in 7 weeks | +40% | +40% |
| September 11th, U.S. Tragedy, September 2001 | -12% in 2 weeks | +19% | -6% |
| War in Iraq, March 2003 | -3% in 2 weeks | +19% | +27% |
If you are a nervous investor, perhaps a segregated Mutual Fund through an Insurer; featuring death benefit and maturity guarantees, might make more sense for you. Let us know and we can arrange to discuss your personal situation.