46 - Wednesday, May 9, 1990 - North Shore News BuSINESS Be prepared for losses on stock market investments WE ALL make mistakes with our investments. What counts is how you deal with those mistakes. You can't go back and change your mind. But you can learn from the experience and use that knowl- edge to earn a profit on the money you have left. Reader C.D. is dismayed because the $47,000 he invested in an equity mutual fund in June, 1987, is now worth only $43,000. “*Had I followed my own nose and stayed in GICs, I’d have more than $63,000 today — and closer to $65,000 if I add the front-end load commission I paid to buy the fund,” he said. In a letter to the mutual fund company, he wrote: dollars and sense Michael Grenb yy “ fully understand that any fund involving the stock market is subject to fluctuation. When the fund was sold io me, the sales-" woman described it as being ‘small risk.’ She did not suggest the fund was volatile.’’ Noting he wouid have to pay another, back-end load sales commission to sell the mutual fund, the reader asked for my ad- vice. Because stock market invest- ments are subject to fluctuation, you must take a long-term ap- proach (I told him). That means being able to wait as long as 10 years before needing to take out your money. if the market and the stock prices go up in that time, so much the better. But if they don’t, you have to leave your investment alone until it recovers again. When prices drop, you suffer a paper loss. It becomes a real loss only if you have to sell at the lower price. Even allowing a 10-year invest- ment horizon, you take a risk. With a prolonged depression, it couid take more than 10 years for prices to recover, especially if you bought just before the slump. Of course, that’s the negative side of investing in the stock mar- ket. Still, you must deal with this because your first objective is to preserve your capital. On the positive side — and this is what attracts people to the stock PaAnicracTian Lo market — is the chance to earn far more than term deposit/GIC rates. Naturally, salespeople emphasize this bright side, and only the truly professional ones point out the risks you must take. *“sBut what do I do now?" said c.D. First, 1 replied, you must realize the past is history. You now have $43,000 and must choose how best to invest it:. Then I suggested three choices. () Hf you can leave your money in for the long term — again, around 10 years — do so. Based on historical trends and barring a prolonged depression, your money (provided the mutual fund performs competitively) should grow more than it would in term deposits. (If the money is outside an RRSP, the difference will be even greater because divi- dends and capital gains are taxed less than interest.) (2) If you don’t feel comfortable with the risks of investing in the stock market, or you will need to draw on your money within the next few years, sell the fund. Move your money into GICs with staggered maturity dates, as a hedge against changing interest rates. If you stay with the same company, you might be able to do this through a transfer and avoid paying the back-end load sales commission. (3) If you fall somewhere be- tween the two extremes ouitined in the previous two points, consider moving perhaps half your money into guaranteed investments. If the market stays weak, at least half your funds are earning a steady rate of return. If the market does pick up, at feast haif your funds should earn better-than-GIC rates. Naturally, you could vary this percentage: perhaps sell/keep three-quarters of the equity fund, and so on. Announcement Peter Frankham Barry D. Schaefer, Regional Vice- President of Prenor Trust Company of Canada is pleased to announce the ap- pointment of Peter Frankham as manager of the North Vancouver branch. Mr. Frankham brings to this position a solid background in che financial sere + vices industry. Prenor Trust, the Company resulting from che amalgamation of Vanguard Trust of Canada Limited, Atlantic Trust Company of Canada and the operations of CanWese Trust Com- pany of Canada, has assets of $1.2. | hiltion and a branch network stret- ching from Halifax, Nova Scotia w Viccorta, British Columbia. Prenor Trust. a subsidiary of Prenor Financial Led. ot Montreal. offers a cial proatuces and ans. Under the ADADSION pre | ! Tame ot puaalsts Cy Posepvices tes arnt SOND + FANE BEI. Pout Ae Pranenys ave sehedui- at open in ee ont, 69 PRENOR TRUST W Meine r (santa dW thie’ Lustre s Corporation 1452 Lonsdale Avenue | 980-7440 Some advisers suggest using your age as a guideline for the cor- rect mix. For example, if you are 40, put 20 per cent of your money into guaranteed investments and 60 per cent into stocks. At age 75 you could have 75 per cent in guaran- tees and 25 per cent in stocks. You might start with those guidelines, but then modify them according to your personal and fi- nancial situations, and your in- vestment personality. Accept that there is no perfect investment. List the pros and cons of each type, and choose the mix that’s right for you. Review this mix at least once a year and change the proportions as required. aeeae Mike Grenby is a Vancouver- based columnist and independent financial adviser who will answer your questions as space allows in his colunin. Write to him c/o North Shore News, 1139 Lonsdale Ave., North Vancouver V7M 244. BOOK NOW! Our reservation orice is now taking bookings tor the 1989 sumime season. This world famous -widerness resor: with it’s tranauii ‘close to nature”’ setting otters relaxation awav from if. ‘etepncanes and tv. EA LAKES RESORT B.C.'s Woot Unique High Coidny Adventure Please Call Joan cr Bill 499-3848 Or Write: R.R.41, Cawston. BA. -OX ICO NECK PROBLEM? Lions Gate Hospital! is conducting an evaluation of the Neck Education Program. If you are a North Shore resident and have had a Neck Problem within the last two years, we would like to talk to you. A small honorarium is offered. Please call: 984-4222 after 1 pm or 980-6922 for furt..ar infe. ONE YEAR TERM (paid annually) Prease act soon to get this top debenture rate. Terms of up to 5 years are also available right now. These debentures are issued by the Central Guaranty Mortgage Corporation, and offer the same financial benefits as a GIC. CENTRAL GUARANTY TRUST COMPANY CENTRAL GUARANTY MCRTGAG : Member of Canaga Deposit Insurance Cor WEST VANCOUVER Park Royal, South Mall 922-0158 CENTRALTI GUARANTY SORPORATION wunMember of Canaca Depostt me cone orp -cition | CANADA'S THIRD LARGEST TRUST COMPANY