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Market flux calls for cool heads

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With the recent wild fluctuations in the stock market, it’s only natural that those with investments may be feeling a little stressed.

But Susan Bodnarchuk, a certified financial planner at Holmlund Financial here, said there is no need for panic.

“Talk to [your] advisor if [you’re] concerned,” she said of those worried about their financial holdings. “It’s a bad time to sell but a good time to buy.”

Bodnarchuk said she’s received a few calls of concern from clients worried about the impact on their investments, but she advises things will work themselves out eventually.

“We’ve gone through this before. Sometimes it takes a few months, sometimes it takes longer,” she noted, referring to the market’s current state.

“I just can’t stress enough to hold,” she continued, also noting most companies insure their clients’ GICs up to $100,000.

Robert McCullagh is a Financial Advisor in Calgary, serving with Advocis (a Canadian association of financial advisors) and teacher of the certified financial planning designation at the University of Calgary and Mount Royal College. He explained the market may be a little off track at the moment, but over 20 years, what is happening now will mean very little in terms of its effect on people’s investments.

“You need to keep a sense of perspective,” he stressed.

Those who have not started planning for retirement, meanwhile, might want to take a moment to think about investments, as well.

The 2007 General Social Survey report examined retirement planning and expectations of older workers, and made some interesting findings.

It found, for instance, that most people surveyed plan to retire at age 60-65, yet only six in 10 of those near-retirees were certain they would be able to retire when they plan.

One of the most determining factors of retirement generally comes to rest on finances, and the ability to maintain a current lifestyle with the money set aside for the future.

The GSS found two-thirds of near-retirees expect their retirement income to be adequate or even more than adequate to maintain their current standard of living. On the other hand, 19 percent expect their retirement income to be barely adequate while nine percent expect it to be inadequate or very inadequate.

Another three percent simply did not know.

For those who fall into the latter categories, perhaps it is time to speak with someone in the financial planning industry. Bodnarchuk recommends those trying to set up a retirement plan get a referral from a family member or friend for a financial advisor and take the initiative.

For his part, McCullagh offered an easy “how to” when it comes to looking at investments—suggesting some key considerations when it comes to investment decision-making.

The first is your timeline (i.e., how long do you plan to invest your money?) The second considers your net worth and the amount of your assets your investment represents and the third is your income stability. The fourth is your general income (what do you make?) while the fifth is your knowledge level of investing.

Finally comes the purpose or objective: what is your goal at the end when you retire?

McCullagh explained that all of these things affect your volatility level, and thus will determine the kind of risk your finances are able to endure in terms of investing.

Although the federal government does have retiree income supplements in place, such as the Canada Pension Plan and Old Age Security, there is no way of knowing how prepared you are without some planning.

Even if you only can put a little bit of money away every month towards retirement, it is an investment in the future. Bodnarchuk also advised that it’s never too soon to come up with a retirement plan, regardless of your age.

And once you have built up some savings, Bodnarchuk believes variety is the way to go.

“Definitely diversify so you don’t have all your eggs in one basket,” she stressed.

In other words, making a variety of investments (for example, some stocks, GICs, and RRSPs) is a better approach to safeguarding solid retirement assets.

In terms of retirement planning, McCullagh suggested people plan their estate, “have a will, enduring power of attorney and a personal directive.”

Three key elements need to be part of this planning, said McCullagh. These include budget, retirement income-or the money that will fund your retirement and risk strategy which involves planning how you will cope with a critical illness, premature death or the need for long-term care.

He also noted the importance of getting involved in the market with some investments as well as considering lifestyle expenditures, or at least being aware of the type of lifestyle you would like to have.

Regardless of age, income, or occupation, it is important to start planning for retirement now.

And for those who currently hold investments for their future, take McCullagh’s advice: “The time to make changes is not in market extremes.”

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