Market volatility and how to get peace of mind through it all

Dawn Luhning |

The coronavirus or COVID-19 has officially done what the markets absolutely hate. It's created uncertainty and volatility and 'turmoil'. In case you didn't know, markets HATE uncertainty.

Last week the markets suffered one of the worst weeks since the financial meltdown in 2008. Monday was an up day across the board and then the Federal Reserve in the US dropped the rate in a surprise move yesterday and the uncertainty still remains. One thing is for sure. The markets always recover. If you're doing your investments on your own, my biggest piece of advice is try not to panic. There are statistics that show that when clients invest on their own merit and don't stick to a plan, and emotionally react to news or media stories they can lose out on returns by trying to time the market. I have an easier way to ease the pain of market volatility and corrections.

Because interest rates are low, if you invest in GICs, you are not getting the best returns even though your principal is guaranteed. If you're wanting to be in the market and investing in mutual funds, you should be invested within your risk tolerance. When you are, these volatility moves are easier to take or expected. But segregated funds can give you some guarantees AND provide you with participation in the market's returns when the market goes up. If you are 50 and older, mutual funds really shouldn't be your only option in your portfolio when looking ahead to retirement. 

Segregated funds are offered by insurance companies and can provide a buffer against market downturns. When the market goes down, and you have funds in a segregated fund contract, the amount you've put into that contract can be guaranteed at an in the future maturity date, and/or at death. When the market increases, you can participate in that market upturn and some segregated fund contracts lock in market gains which then increase the base or your principal that was put into the contract. It sounds complicated but, the bottom line is that a segregated fund contract should be part of your portfolio when you are looking at retirement and into the future. Markets will always go up and down. If you want to participate with the returns of the market, why not guarantee your investments by using segregated funds?

When you invest in segregated funds, you are also able to designate a beneficiary. This is particularly important if you have non-registered assets, such as a savings account. You are not able to designate beneficiaries on non-registered accounts if you are dealing with a bank. This is particularly important because then your investments can pass to the beneficiaries privately and without delays which could be caused by probate.

All insurance companies offer segregated funds and each company has different terms and guarantees. Here is an example of a client case study with Empire Life. Each situation is different and I can recommend the best solution for YOUR situation.

Don't let market volatility get to you. You can avoid that concern. You should never be worried about your investments and what unknown issue has the markets going crazy. If you haven't thought about segregated funds or know about them, let's talk and determine if they fit your situation.

~ Dawn