October 2018 ended in the red…. with the S&P 500 down 6.9% and the TSX lower by 6.5%. Here is a letter to investors:

*As an advice-only planner, I do not sell any financial products or recommend specific securities. Most of my clients are young professionals in growth indexing portfolios

Dear Investor,

We invest in equity markets in the hope that our money will grow at a decent rate of return, helping achieve life goals. The most common long term goal is to have enough saved for retirement.

As discussed in previous meetings, the estimated returns for your long term growth portfolio is roughly 6% based on your asset allocation and projection guidelines. This estimate is not relevant however to short term time frames and subject to fluctuations in the market.

Volatility is the price we pay as equity investors to achieve these long term returns.

Two of the most critical keys of investing are to:

1) Keep your emotions in check

2) Stick to the financial plan

Tune out what the media or “experts” say and keep your focus on the plan and the fact that these investments are for retirement. Retirement is 20 to 30 years from now! I know it can be scary in the short term seeing your portfolio in Red but try to mentally expand your time horizon (adjust your perspective). What happened (or didn’t happen) in October 2018 will not mean much to you when you’re 65. There will be A LOT of ups and downs between now and then but sticking to your investment system is your best bet to achieving your goal. You will lower your chances of reaching your retirement goal if you try to time the market or make emotional decisions.

My recommendation is to continue to keep your portfolio balanced and globally diversified by using index funds while keeping your fees low (0.2%-0.5%). Re-balance once or twice a year or when you add lump sums. Don’t stay in cash, use expensive mutual funds, don’t try to buy your own stocks.

One last note: You are also entering the prime of your career and you’re in the accumulation stage. So when you continue to invest regularly during market dips, you're getting a discount and buying low! I love sales.

Keep calm, and index on!

Your friendly fee-for-service planner,
Nicholas Hui, VAVE Financial Planning