Lately it seems like the stock market is more volatile than ever. Whether it’s a crisis in the Middle East, a Chinese asset bubble about to burst, a natural disaster or an environmental catastrophe, the stock market sits on pins and needles waiting for the next event to send it into a tailspin.
After the stock markets crashed in 2008, the Spring of 2009 provided us with one of the best buying opportunities of our life time. While that particular market crash lasted over 6 months and perhaps offered a more obvious time for investors to buy (with bank dividend yields approaching double-digits), other world events have been producing smaller stock market corrections that offer potential bargains for the opportunistic investor.
Time To Buy
Major world events often lead to panic in the stock markets, with a “sky-is-falling” type of fear that produces short term sell-off’s. Opportunistic investors have often been rewarded by purchasing out-of-favour stocks. Buyers who enjoy these market corrections will typically hold a cash reserve or a margin account to take advantage of potential bargains.
An example of a stock specific world event leading to a buying opportunity was the British Petroleum oil disaster in the Gulf Coast last year. BP stock reached a 52 week high of $60.98 on April 15th, 2010. On April 20th, an explosion at the Deepwater Horizon drilling rig caused a massive oil spill that lasted for months. BP obviously took a lot of heat over the incident and their stock was beaten up, falling to a low of $26.75 on June 28th. BP stock has recovered by about 70% since the late June lows.
Time To Sell
In some cases an event can lead to a justified decision to sell. Something may change in the fundamentals of a business you own, or you may not feel comfortable owning a certain asset class any longer. Selling in a panic is not a smart strategy, but if the investment no longer fits with your overall plan it might be a good idea to sell and move on.
When Manulife Financial slashed their dividend in half back in August 2009, dividend investors were shocked to say the least. A staple in many dividend growth investing portfolios prior to the recession, MFC was now a fire-sale in the stock market.
Time To Ignore
With stock specific market corrections investors have an opportunity to evaluate the individual situation and decide to buy, sell or ignore. This proves more difficult with a broad based market correction, where many economic factors are in play.
The recent events in the Middle East and in Japan have led to a small panic in the markets, but for an investor with a long term view this volatility will only be seen as a tiny blip on the radar. Ignoring these types of market corrections is likely the best approach because trying to time the market rarely works out in your favour.
Often the best strategy in most situations is to simply wait. It works for preventing impulse shopping and it will work to prevent you from making a hasty decision without learning all of the facts. Stick with your plan and don’t let the media noise and market volatility trick you into making a mistake.
Back in December I took advantage of a temporary sell-off and purchased some BMO shares after they fell 7% following a large acquisition. But I had some cash reserves and was already hunting for a stock to add to my portfolio.
How do you approach market corrections to individual stocks or to the market in general?
As a young adult I watched insurance company commercials that offered investment programs for “Freedom 55”. Of course, I didn’t pay much attention then – all those smiling, grey-haired people wandering around on the beach – but now that I’m at that retirement age it’s looking pretty good.
How Do You Choose Your Retirement Date?
The problem that many people face is that they don’t know if they have the resources to be able to retire at 55, or even at the standard retirement age of 65. What happened to the time?
Like many people my age I am ready for a life of leisure but I worry that 1) I won’t have enough income to support myself and 2) that I’ll use up all the money I have invested too quickly.
Related: Why Baby Boomers Aren’t Prepared For Retirement
I have never worried about the effects of market fluctuations on my, mainly stock, portfolio as I was always receiving dividends regardless of the share price and total value. The thought of having to deplete my portfolio by selling the shares, though, bothers me. But I also don’t want to keep working until I’m 70!
Money and health are the two biggest concerns when it comes to choosing your retirement age. Not having enough money means extending your working career. Not having good health often puts an end to the amount of work you are able to do.
Statistics show that in 2006 over 300,000 Canadians between the ages of 55 and 64 had an average income of less than $7,000 because of a disability. If you’ve been laid off or “down-sized” and either don’t want to, or are unable to get another job because of age discrimination (it happens) you are forced into retiring.
Understanding Your Retirement Age
If you want to be happy you have to have a sense of control over the whole process. First figure out how much you’ll need to live on. A common guideline is 70% of your current salary, but everyone is different.
People think their costs will immediately go down but many retirees have a list of experiences they want to get on with – travel, new hobbies, etc – at least in the early years that can prove more costly than anticipated and throw your budget out of whack. At least most of your larger expenses – kids, mortgage – should hopefully be gone by this time.
Also, don’t overlook additional expenses you may not have thought of. You will be responsible for remitting your own income tax now, either monthly or quarterly. You may not need as much life insurance, but you may need long-term care insurance. You will have to replace your health care benefits if they were covered by your employer.
Next, figure out how much you’ll receive in monthly income if you retire. Calculate the benefits you know you’re guaranteed to receive such as CPP, OAS and any pension you may receive from your employers (but only if the amount is guaranteed, such as in a Defined Benefit Pension).
Don’t just rely on the figures given in articles and publications. They usually quote the maximum benefits available and that may not apply to you. Go to Human Resources and Skills Development Canada and order your CPP statement of contributions so you can calculate the numbers (also on this site).
Make Your Retirement Plan Unique
Once you come up with a figure you’d actually have to live on, you can cut back where necessary. Impossible, you say? Now you will know how much extra you will need. How much can come from investment income? Can you purchase an annuity?
How long will your capital last if you have to start depleting it? Do you need to save more? Work longer? Work part-time to supplement your income? Do the groundwork now so you won’t be surprised.
Don’t wait until you’re heading out the office door clutching your gold watch to develop some interests you can carry into retirement.
We’ve all heard about the retired husband who follows his wife around, offering “suggestions” and trying to help out but only succeeding in disrupting her routine until she’s ready to throw him out of the house.
Have the foresight to develop a hobby, find a place to volunteer, or whatever makes you smile.
Get a clear sense of what life will be like so you can focus on making good decisions when you need to. If you’ve been saving and planning for some time you may just need to tweak the plan a bit as you get closer to the date.
Retiring boomers aren’t just going to go pack a suitcase and quietly head off to Retirement Village. They are a new breed of retirees – independent, self-directed and determined to create new experiences for themselves for as long as they can – just as they always have been.
Starting your first “real” job can be an exciting time in your life, especially for a new College or University graduate. If you had decent grades and built up a few key connections through networking, chances are you probably received interest from some different organizations and then chose the company that offered you the best overall package.
The red carpet treatment you experienced in the beginning was likely rolled up shortly after you were hired and became entrenched in the culture of the organization.
Some employees find it hard to adjust to the corporate ways that seem so different to what was sold to them in the interview process. It can be frustrating to be lumped in with the rest of the group after being so highly sought-after when you were hired.
Differentiating Yourself From The Group
One of my favourite business books is Jack: Straight from the Gut, about Jack Welch’s rise to the top of General Electric. After one year with GE, Jack got a $1,000 raise, but so did the other three men he shared his office with. Jack believed that he deserved more for his expanded efforts. There had to be a way to stand out.
Welch built up a good relationship with his superiors simply by always going the extra step and delivering more than was asked for. When his boss wanted an analysis of a project, Welch provided it – along with a cost analysis stacking against similar products from competing companies like DuPont.
This was part of his strategy of getting out of the pile by exceeding expectations and offering a new, and hopefully valuable, perspective to his superiors.
Going The Extra Mile
It’s easy to get caught up in the office gossip and politics and just coast your way through your job. But if you’re determined to turn your job into a career you should follow Jack’s lead and try going the extra mile to set yourself apart from your peers.
Don’t be discouraged if your company uses a flawed employee performance management system and just gives standard raises and promotions based on years of service. Great people still matter in any organization, and if you have a constant drive to anticipate and exceed expectations you will escape from the pile move up the corporate ladder.
Sometimes You Just Get Lucky
Timing is everything in life, and sometimes you might just have to be in the right place at the right time. My career path is proof of this. When I worked in the hotel industry I went from bellman to Director of Sales in just under 5 years, and then was named interim General Manager less than 5 years later.
Along the way I was lucky enough to have people take a chance on me to fill various roles. I was lucky to be able to cover for a maternity leave and then I benefited from a timely resignation that gave me the opportunity to be promoted.
But I’m also a believer in making your own luck and I wouldn’t have been considered for these promotions without working hard to stand out and be recognized.
Finding Your Groove
After being passed over for the full time role of General Manager I was left without a clear direction of where my career path was headed. I had options if I stayed in the hotel industry but I would likely have to move, and with a newborn at home that choice wasn’t ideal.
I ended up meeting with a client who was restructuring their business and creating a new position that I considered to be perfect for me. Using the same principles of differentiating myself and anticipating their needs I was able to beat out some tough competition to land the job.
Related: How A Career Change Improved My Life
It’s frustrating to be lumped in with the rest of the group. Getting out of the pile can be a challenge but it is essential for the long term growth of your career. Make your own luck and stand out from the crowd.