Rational Advisor

Here’s ten questions to ask yourself before you wish to change, or redeem you rinvestment program. Answer them honestly, becuase they will affect your long term finances.

1. Has the investment changed its management approach?

If it has not and it was chosen with your long term financial objectives, then it may still meeet those investment objectives

2. Are the reasons you had this investment still valid?

Take a moment to revisit your investment objectives. This investment was chiosen because its long term goals were compatible with your long term goals.

3. Has your investment horizon changed?

If you still have several more years to invest, switching or redeeming now may be a short term mistake with long term consequences

4. Has someone you know given you a “hot tip”, or a “better” investment?

Friends and family members mean well when they give investment “tips” but is their advice backed by concrete information? Most people benefit from teh trained expertise and long term outlook that an independent financial advisor can provide in making portfolio decisions.

5. have you weighed risk and return?

You may be in an investment with minimal downside risk and good long term growth, which suits your style. Jumping to a high flyer may look appealing now but could cost you sleep over the years becasue of its volatility.

6. What is your investment alternatives if you switch or redeem now?

Will you be satisfied with a money market fund yielding less than 5% annually?

7. Willswitching investments cause you to be overweighted in a particular sector?

This may increase your portfolio’s risk should a downturn in that area of the market occur.

8. Is the investment for strong perfromance?

Some funds perfrom better under different conditions (e.g. strong vs weak markets).

9. If you switch or redeem, will your portfolio still eb properly diversified?

Having the right asset allocation between fixed income and equity investments and between domestic and international investments, between Value and Growth, between Large Caps and Small caps helps to offset the effects of market volatility over the long term.

10. Will switching or redeeming trigger capital gains and tax consequences?

Some investments held outside a RRSP may trigger a tax bill that reduces or eliminates the advantage of leaving a fund.

You need to review your investment strategy. If you are lamenting the strong perfromance of an area in which you haven’t invested or are itching to make a move, it’s wise to reconfirm investment objectives .

Overhauling a sound inteelectual framework just to satisfy a short term perfromance envy won’t help your long term objectives.

Rational

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