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FIVE ACTIONS CANADIAN INVESTORS SHOULD TAKE IN RESPONSE TO THE U.S. FINANCIAL CRISIS

Press Release Sept 18, 2008

Warren MacKenzie, President of Second Opinion Investor Services Inc (“Second Opinion”) warns investors that this is no time for inaction. “Many investors are acting like a deer in the headlights,” states MacKenzie, “afraid to sell because their investments might bounce back, but afraid to buy in case the market drops further.”

In response to what Alan Greenspan calls ‘the worst economic crisis of the century’, Second Opinion today released “Five Positive Actions to Take during Negative Market Conditions’.

Mr. MacKenzie advises; “Rather than ignore the pain and uncertainty in a bear market investors need to use the opportunity to position their portfolio for the future.”

Five positive steps investors can take include:

  1. Review current holdings and determine how losses have changed the percentage in each asset class
  2. Re-evaluate sector exposure and your financial plan in view of a less certain future
  3. Rebalance the portfolio to reflect the desired long term asset mix (buy low and sell high)
  4. Harvest tax losses to recover capital gains tax previously paid
  5. Look across the valley and remember that bear markets eventually end and the best opportunities will be found by those who have the courage to invest.

“Investors should be aware that almost all financial advisors are now saying the same thing; “Do nothing, don’t sell when the market is down. Hold on because everything will be all right in the long term.” MacKenzie disagrees – because as a minimum this down turn is an excellent opportunity to rebalance the portfolio.

MacKenzie continues. “Investors have a problem getting good information. Even in normal times when investors ask their advisor if they’re in a good portfolio the advisor will always say “yes it’s an excellent portfolio”, but if they ask another advisor the same question the answer will almost certainly be that it’s a poorly designed portfolio and should be moved to the new advisor where it will be managed properly.

MacKenzie explains; “Because we do not sell investments Second Opinion is one of the few places where investors can get independent, unbiased advice on the investment process - advice that is free from conflict of interest”.

About Second Opinion Investor Services Incorporated

Second Opinion is a national financial services corporation that provides unbiased, expert, independent advice on the investing process. Second Opinion does not sell investments and can therefore offer advice that is free from any conflict of interest. Second Opinion’s advisors work solely for their clients, and unlike transaction oriented advisors, they are compensated for advice, not trades.

For more information contact:

Media Contact: Warren MacKenzie

416 640 0550

wmackenzie@secondopinions.ca

 

More details of the five positive steps:

1. Review your current holdings - Most investors don’t know what to do because they have not analyzed what they own today. Now is the time to review current holdings, the current asset mix, and see the impact the downturn has had on sector concentration. Investors need to accept some risk but also need to understand which risks they are taking – and are they taking more risk than necessary? Are the fees and commissions they pay justified by the value they receive?

2. Reevaluate your investment and financial plan – Looking to the future, should your investment plan change? Should you change your asset mix, investment strategy, how your funds are managed, or your advisors? If markets take a long time to recover will it impact your long term financial security? In market weakness investors close to retirement should update their financial plan and consider delaying their retirement date by a few years. Those just retired should reconsider their expense budget.

3. Rebalance – Rebalance your portfolio to reflect your long term asset mix. The current weakness in stocks means that your portfolio might contain less equity and more fixed income and cash than your long term asset mix requires. Rebalancing is a buy low sell high strategy that in the long run should mean improved performance for your overall portfolio.

4. Tax Loss Harvesting - Most investor in taxable accounts will have unrealized capital losses. When triggered, these losses can create tax credits that can be applied against capital gains earned in the last three years. Triggering these losses can turn a loss into an asset. For those who want to remain invested they can use the proceeds to buy an asset that is very similar. As an example, if you owned one large financial services company you could sell what you own and buy another company in the same sector.

5. Look across the valley - Bear markets eventually end and some of the best buying opportunities are found near the end of bear markets – for those with the money and those looking for them.

 

 

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