The highs and lows of playing the market

Summer holidays are over, the new school year has begun and it’s time to get back into the swing of things. For some of you, this may mean getting serious about your long-term savings and investment strategies.
If your hard-earned money is invested within market-based products, it can become worrisome to see the market rise and fall every time you watch the six o’clock news.
Investing in the market means you are participating in a network of economic transactions. The “market” is not a physical facility, but rather a digital meeting place of various investments held by individuals, as well as institutional investors (i.e. banks, insurance companies, corporations etc.).
To better understand what it means to invest in the market, focus on the areas I explore below to determine if this approach is the best fit for your savings goals.
Accepting market risk
Understanding market risk means you accept the potential for loss should the market decline. Market returns are not guaranteed.
Generally speaking, you should have other means of savings to act as a safety net in the event your portfolio declines in value due to market fluctuations.
A trusted financial adviser will help you understand the levels of risk involved with various market-based products available. Completing an investor profile questionnaire with your adviser can help determine your level of risk tolerance as a first step to investing in the market.
Living with market volatility
Market fluctuations occur daily and your portfolio will rise and fall in value based on this. If you begin to observe market activity on a daily basis, be prepared for a roller coaster of emotions from optimism to absolute panic.
The key is not to be alarmed. Professional investment consultants around the world advise that regular fluctuations are completely normal and, in fact, should be expected.
In the meantime, meet with your financial adviser regularly to ensure you are invested according to your risk tolerance, savings goals and financial situation.
Taking a long-term approach
Saving money for the long term is an effective strategy if your portfolio is linked to market activity.
History teaches us that markets generally climb over a span of several years. Fluctuations occur daily and returns vary year after year. Allowing your portfolio to sit for the long haul will provide the best chance of potential growth on your investment.
Therefore, it is imperative that your savings goals are long-term based before deciding if this approach is the best fit for you.
In summary, when it comes to investing your money in market-linked products, remember to have a healthy discussion with a financial adviser beforehand.
Explore your market risk tolerance, learn to live with expected volatility and match your investments with long-term savings goals.
Then, sit back and enjoy the ride!

Heather Tarnopolsky is a Sun Life Financial adviser in Greater Sudbury.