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THE CITIZEN, WEDNESDAY, JANUARY 10, 2001. PAGE 17.
The four principles of investing
FROM WALTON
Baptism held
at Duff's
On behalf of the Walton communi-
ty I would like to extend our sympa-
thies to Maryann Grobbink and fam-
ily upon the death of her mother this
past weekend.
I know of two young men in town
who have been quite in demand this
past week shovelling snow off roofs.
Rick Oliver and Jason Thompson
have started a little snow-shovelling
business this winter.
Both are strong, hard workers and
are willing to tackle any roof or
driveway.
It was a nice mild day to celebrate
two baptisms at Duff's United
Church on Jan. 7. Joan Tuchlinksy
welcomed everyone and opened the
service with the responsive call to
worship. The choir sang a wonderful
toe-tapper called Is This Not the
Land of Beula. In fact the song was
so vibrant that a ton of snow came
sliding off the church roof.
Joan announced the WUCC meet-
ing will be Wednesday, Jan. 10 start-
ing at 7 p.m. Sue Rean, a councillor
with the psychiatric services in
Seaforth, will be talking about
depression.
Joan then called Clerk of Session
Leona McDonald up to the front of
the church and Leona in turn invited
parents Ron and Nicole Stevenson to
bring their son Brett Allan forward
as well as Chris and Cindy Poland
and their baby Lorren Haliece to be
baptized. Ron and Nicole's daughter
Ashley aided in the service by help-
ing Joan pour the water into the font.
The community extends its sym-
pathy to Gary and Beth Earl and
family on the recent passing of
Gary's mother, Ruth Earl of
Atwood.
Sincere sympathy is also extended
to Barb and Lyle Martin on the loss
of Barb's grandfather, Wesley
Metzger, 102, of Elmira.
Congratulations to first-time
grandparents, Gord and Dale Finch.
Caitlyn Lisette Grubb is the daughter
of John and Tracy Grubb of
Teewater.
By Shawn Flick
Investment Advisor, Nesbitt Burns
Over time, investors have come to recognize that the one constant in the financial markets is
change. Whereas triple digit swings used to be'the exception, today's markets experience mul-
tiple percentage point swings on a daily basis. With this in mind, this article presents four prin-
ciples of investing that will help the average investor weather the volatility.
1. Select The Appropriate Asset Mix
It is impossible to eliminate risk. Unfortunately, an investment with little or no risk also has
a relatively low return, while an investment with a high return likely has a higher degree of risk, By combining
equities with the two other classes of financial assets; namely bonds and cash, you can manage this risk instead of
eliminating it. All three asset classes react differently to the same economic variables thereby smoothing the short-
term fluctuations associated with holding any one of them individually. To this end, there are generally three types
of investor:
Benchmark Asset Mixes As % Of Portfolio
Cash Bonds Stocks
Income Investor 10 70 20
Balanced Investor 10 40 50
Growth Investor 10 20 70
2. Diversify Within Asset Classes
Now that you have chosen your asset mix, you must decide on the specific securities that will fill each class. Is it
wise to put all of the funds designated for equities into a single stock? There are many isolated events that can have
a negative impact on a company's stock price. Such events include earnings disappointments, natural disasters,
political instability, increased competition, etc. While the list of company-specific risks is virtually endless, you can
control the impact of company-specific risk by adding a sufficient number of securities to your portfolio. This is
known as diversification and has the effect of diluting the potential negative impact of any individual company.
3. Do Not Attempt To Time The Market
Some investors look at the financial markets and opt to move out of entire asset classes that they believe are over,
valued.-This is known as market timing. Market timing may sound appealing (wouldn't it be wonderful to be able
to sell the day before a dip in the market?), however very few investors are able to pick the perfect moment to get
in or out of the market.
There is also a cost attached to being less than perfect. While there is a good possibility that the market timer may
indeed miss some of the market downturns, it is also possible that the investor will be sitting in cash when the mar-
ket takes off. Market timing can also produce unwanted tax consequences, such as the realization of taxable capi-
tal gains that could have been avoided if the security had been held.
4. Maintain a Long-Term Focus and Have Realistic Return Assumptions
Once you have developed your plan, have the confidence to stick with it. Understand and accept that there will
be periods of turbulence along the way; "stay the course" and try to maintain focus on your long-term goals. You
don't need to track the value of your securities on a daily basis and you don't need to spend eight hours a day watch-
ing CNBC. Analyst opinion will change with the wind .and two "experts" with equally impressive arguments will
have opposite viewpoints on the same issue. Listening to all the "noise" can make you a nervous wreck.
Simil arly, temper your expectations of performance. The late 90's saw stellar returns in the world's markets. Do,
not expect those returns to continue indefinitely; it is far more likely that returns will regress to their long-run aver-
ages.
Overall, whatever the future brings, your portfolio can and should be structured to manage the unpredictable
nature of financial markets. Is your portfolio well positioned for the coming year and beyond?
Shawn Flick is an Investment Advisor with Nesbitt Burns in London, Ontario. If you have any questions regarding
this article or any other financial matter he can be contacted at (519) 646-2330 or (800) 265-4195.
This column is supported by advertising
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