Quarterly Client Newsletter
Market Insight: Fierce Battles and Stormy Seas Require a Steady Hand at the Helm and Iron Discipline!
By: David Barker, Head Trader, July 2008
We would all do well to take lessons from tenants of the Royal Navy of yore in markets such as these.
In today’s world of mass media and special focus upon financial market gyrations, it is easy to lose sight of those longer term goals when investing for the future. The most recent activity within the global equity, bond and commodity markets has been confusing and volatile, for certain. If too much attention is paid to the pundits and spin artists who make a living out of heightening attention to short term events, we run the risk of reacting/over reacting to events on an emotional basis.
Good investing strategy expects and demands that the helmsman have the fortitude and stamina to steer a true course through the storm.
The sub-prime debacle that developed in the US last year, but had its seeds sown well before hand, has developed into a full blown credit crisis globally. The fallout in part has been a marking down of financial asset prices, to include equities, corporate bonds and the US dollar itself in favor of tangible assets in the form of commodities. Inflationary pressure rears its ugly head threatening to erode purchasing power for the average consumer.
Against this back drop, it is easy and arguably forgivable to allow panic to set in and force surrender. This however would be to ignore the nature of financial crises in that they, like the hurricane or a temporary set back in battle, do pass. Successful investing for the long term is no different.
On October 21, 1805, just prior to the onset of the Battle of Trafalgar, Admiral Lord Nelson had his signal man hoist the most famous naval communication in history. “England expects that every man will do his duty”. In this simple phrase is captured the very essence of what is required when investing in a world fraught with volatility; an ability to see beyond the current and an iron discipline (with apologies to Lord Nelson).
Budgets: How to Take Control of Your Spending Before it Takes Control of You
By: Laurenne Piercy, Investment Advisor, July 2008
Without a clear understanding of how much we earn and spend, how can we know how much we can safely set aside each month to save and invest towards our short and long term financial goals? A budget provides a spending plan that helps you save for the things that are important to you: getting out of debt, a new computer, a vacation, a new bike, car or house, a college education, a comfortable retirement, or whatever your particular goals and dreams happen to be. In addition, it is always advisable to have at least 3 months of living expenses set aside in case of an emergency.
Have you ever attempted to prepare a personal budget and follow one through and have given up due to frustration and discouragement? One of the top reasons why so many people fail at budgeting is their attitude. Many people think of budgeting as a penny-pinching sacrifice while they should be thinking of it as a way to achieve some of their financial goals and dreams.
Why budget and why does budgeting matter? Money is a tool that enables us to reach our goals in life. Until you know where your money is going, you can’t make conscious decisions about how to use that tool effectively to help you reach your goals. Try and take control of your spending now so that you don’t find yourself in a situation where there are very few options available. A budget worksheet is a great tool to show us just this.
Many of us may be shocked at where our money goes, especially if we use our credit and debit cards often and make frequent cash withdrawals from the ATM machine. Before the widespread use of credit cards, bank cards and ATM machines, people lived more within their means i.e. they only spent what cash they had available. Now spending money is far too easy and people are spending money that they may not have to spend. You never really see the true picture until your bank statement or credit card bill comes at the end of the month and by then it is too late. Studies show that most people are much less likely to buy, or less willing to spend as much, when paying with cash as opposed to credit cards. One of the best ways to see how much you are spending is to leave the credit card and bank card at home and live off of cash in your wallet. Don’t forget to write down all our cash expenditures. This is one of the only ways to truly see where your money is being spent.
We have prepared a budget worksheet for you to use and have a few tips for completing the same, namely: (1) go through your bills for at least the last three months and list the monthly average on the worksheet; (2) look in your cheque book or your bank debit card and credit card statements for all expenditures to list; and (3) as you spend cash, jot down all these expenditures in a little notebook and total these amounts into categories at the end of the month. Once you have a better grasp on your spending, you can look for ways to reduce many of your small expenses. If you stick with a realistic, effective budget long enough, the rewards will keep you motivated to keep on track.
If you come up short and your expenses are greater than your income, try not to be discouraged as there are many ways to cut back on expenses. If you have more income than expenses, be sure to transfer most of that to a savings or investment account at the end of each month. Extra cash in a bank account has a way of getting spent and disappearing very quickly.
Cutting costs is a challenge that can be very rewarding, especially as you see your savings and investments grow. A budget lets you control your money instead of your money controlling you.
There’s no time like the present to sit down, fill out a budget worksheet and see where you’re at.
If you have questions about your LOM account or wish to come in and speak to an Investment Advisor, please do not hesitate to contact Laurenne Piercy at 441-294-7032. If you want to attend one of our lunch time investment savings plan seminars, please sign up here.
If you work for a company that doesn’t have a direct deduction investment savings plan for employees, talk to your employer to see if one can be established or give us a call to obtain an information package to share with your employer. In addition, please tell a friend, family member or associate about the investment savings plan if you think they may be interested in the same.
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