Watch any news report or read any social media feed and you will see stories about inflation and market volatility. Inflation is one of the reasons that investing in equities is important – they can help to provide long-term returns that offset the effects of inflation. Newton Financial helps you stay on track during periods of market volatility and elevated inflation by following a few key investment strategies:
Time diversification through dollar-cost averaging
Volatile markets can provide opportunities. While you may be skeptical, there are many benefits of dollar-cost averaging. Dollar-cost averaging adds time diversification, meaning you buy into the market at different points in time. Regular investing can even allow you to see growth during times of volatility.
It is time in the markets, not timing the markets that works long-term
Investing for the long-term allows you to ride the waves of the investment market. The S&P/TSX Composite Index, for example, has had a compound annual return of approximately 7.8% over the past 25 years. These returns account for the most recent financial crisis and the dot-com bubble. Previous market declines have offered buying opportunities for clients who have funds to invest.
Invest with segregated funds
Segregated funds offer additional benefits beyond those offered by mutual funds and Exchange Traded Funds. Segregated fund guarantees (maturity and death) can protect your money during periods of market stress. A segregated fund guarantee will provide you with the better of the guaranteed amount or the market value at the maturity date or date of death. Segregated fund guarantees can give you the confidence to stay invested during market uncertainty.