Investing in uncertain times.

Stick to your investment plan and come out ahead.

Try our 4 interactive tools for understanding the markets:

Market Crises

Find out how markets have recovered from previous corrections.
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Timing the Market

See how market timing can affect your returns.
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Stock Picking

Look at how stock picking can outperform the market.
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Unpredictable Returns

Discover how volatile investment returns can be.
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Timing the market.

Try our 4 interactive tools for understanding the markets:

Market crises:

Hedge funds collapsing, tsunamis, terrorist attacks, wars, interest rate hikes, rising oil prices, sovereign debt crisis – many events contribute to fear of investing in the stock market. MoreLess

In many cases markets have dropped substantially in the wake of a crisis. Yet we’ve also seen markets recover from these events, often quite quickly. Of course, there are no guarantees that what’s happened in the past will always happen in the future. But we can be sure that more crises will strike, and hope that markets will continue to return to their true value over time.

See how

recovered after the

187 share market crash time to recover:
21 months (1.8 years)

In many cases markets have dropped substantially in the wake of a crisis.

This chart shows how long the market took to return to its previous level after the event selected. We started with a notional $10,000 investment just before the event, then use monthly returns of the S&P/TSX Composite index (source:Ibbotson and FMRCo) to show how the Canadian share market fluctuated until returning to the starting calue of $10,000. Remember, indexes are not a representation of a final product - they do not take account of costs or tax and do not reflect the performance of any individual portfolio of stocks.

Timing the market:

It’s impossible to predict in advance just when the best and worst returns will occur in the markets. MoreLess

For example, in August 1998 the S&P/TSX Composite Index declined over 20%. Over the next two years, it was up over 109%! (Source: Datastream)

Anyone trying to time the market to avoid short-term losses could be just as likely to miss gains. Over time, missing just a few days in the market can significantly reduce the overall performance of your investments.

See how missing the

in

would have affected performance:

Cost of missing the 10 best days in Asian (ex-Japan) Shares:
$13,627
Fully invested

Missing just a few days of good performance can significantly reduce your overall return.

This chart shows how a national $10,000 investment would have been affected if the 10 best days were missed. We use daily returns of the MSCI AC Asia ex-Japan index (in CAD terms, unhedged, source: Fact Set and Datastream) for the calculations, from 01 Aug 2002 - 31 Dec 2015).

Remember, indexes are not a representation of a financial product - they do not take account of the costs or tax and do not reflect the performance of any individual portfolio of stocks.

Past performance is not a reliable indicator of future performance. Investing in shares is subject to risk, and there is no guarantee that an individual investor will make a profit by investing in share markets.

Stock picking:

Within a stock market, individual companies can perform very differently from the average. MoreLess

But exactly what is “the market”? The S&P/TSX, the FTSE, the Dow Jones – they are all indexes that average the performance of a very large number of companies. Within a stock market, individual companies can perform very differently from the average.

Portfolio managers aim to choose companies that will perform well in the long term, whatever the short-term performance of the overall stock market.

Compare the top and bottom companies’ performance in the

2009
Top 10
Companies
373.7%
Bottom 10
Companies
-33%
All companies
(average)
74%

A professional manager can help you invest in companies that have the potential to perform well in the long term, despite short term market fluctuations.

This chart shows how much variation there has been in the performance between the top 10 and bottom 10 Asian (ex-Japan) companies over the past 10 years*.

The green line shows the average performance of the 10 best-performing companies each year, and the grey line shows the average performance of the 10 worst performing companies each year. (The blue line shows the average performance of all companies).

We use annual returns of the MSCI AC Asia ex-Japan index (in CAD terms, unhedged, source: Fact Set) for the calculations for each calendar year from 2006 to 2015.

Unpredictable returns:

In investment terms, a “risky” investment is a volatile one – an investment with returns that can vary a lot from year to year. More Less

Of course, if it were possible, we would like to earn the highest possible return with the lowest possible risk! However, in investing, there is generally a trade-off between risk and return. That is, the higher the long-term potential return from an investment, the higher the short-term volatility.

See how predictable

returns have become:

Investment held for any 5 years
Highest return
(Dec 1988 - Dec 1993)
34.8% pa
Lowest return
(Sep 1996 - Sep 2001)
-12.3% pa

Generally the longer you remain invested for, the more predictable your returns become.

This chart shows the minimum and maximum returns for a notional investment in Asian (ex-Japan) shares over the past 28 years, for 10 different holding periods - from 1 year to 10 years.

For each holding period, we have calculated the average annual return achieved for each possible investment (using monthly returns). The blue line on the chart shows the highest average annual return achieved for that holding period, and the green line shows the lowest average annual return for that holding period.

Between January 1988 and December 2015, there were 276 possible 5-year investments (the first one from Jan-1988 to Jan-1993, and the last one from Dec-2010 to Dec-2015). Of those 264 periods, the highest average annual return was 34.8%, achieved over the period Dec-1988 to Dec-1993. The lowest average annual return was -12.3%, over the period Sept-1996 to Sept-2001.

We use monthly returns of the MSCI AC Asia ex-Japan index (in CAD terms, unhedged, source: Fact Set and Datastream) for the calculations, from Jan-1988 to Dec-2015. Remember, indexes are not a representation of a financial product - they do not take account of costs or tax and do not reflect the performance of any individual portfolio of stocks.

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