As a senior, adjust your investments if you have recovered your losses

BY FAZAAD BACCHUS

By now everyone should have received their midyear investment statements, whether you have been investing at the bank or have been using financial advisors at brokerage firms, it is that time. Looking back at the first quarter, we can see what a disastrous report it was, as the effects and fears of COVID-19 wreaked havoc on the investment market. It was not uncommon to see unrealized losses between 10% to 15% of portfolios. This was indeed a tough situation to face, especially seniors who are dependent on this income for their continued sustenance. This was an unprecedented time, not only in Canada but in the whole wide world. Everyone was panicking and the markets reacted accordingly.

Fortunately, and I hope it’s the same for you; almost all of my clients have recovered from this market downturn. Between the months of April and June the market rebounded quite well, continuing into July (as at the time of writing). What caused the rebound and will it drop again before the end of the year is a really good question. If we were to get a second wave now that we are moving to stage 3, it could possibly affect the markets again. The markets are affected when there is fear, compounded by lack of productivity and lack of gross domestic output.

No one knows for sure whether there will be a second wave or whether there will be a drop in the markets again, but it is quite possible. The recovery has been quite welcomed but could also be short lived. This is not meant to put fear into your head but alert you to the possibility and the actions required of you. If you are not in a position to suffer unrealized losses, then it might be time to adjust your portfolio to a much lower risk.

One of the ways to do this is to check your risk tolerance, time horizon and how much money you will need at retirement. If you have been investing for a long period, hopefully you have made some gains. Now may be the time to lock away those gains in low risk strategic income investments. It will still earn you some money, but it will considerably lower your risk. It’s like going to the casino, if you go with $100, you know you can lose it or you can win more, so most people lock away the winning and only play with the principal. It might be better for you to lock away your winnings.

If you’re very uncertain and very fearful about the market, you may also move your entire portfolio to a low risk investment or cash, especially for the time being. If the markets go up, you will lose the gains, but you will still sleep well, and if the market falls, you will fall minimally and so you will still sleep well at night.