Just as you
would save for a rainy day, it is important to prepare your investments
for stormy times, even when the weather is good and markets are
One way to
do this is to consider the downside protection of an investment.
When researching where to invest your money this RRSP season,
the experts at Saxon Mutual Funds suggest the following five tips:
1. Remember markets are cyclical. The length of a business
cycle ranges anywhere from six to ten years. If you are investing
for the long term, it is critical to ensure your portfolio is
prepared to handle a downturn in markets.
that some mutual funds provide more downside protection against
capital loss than others – and it should always be an important
consideration when selecting an investment.
a fund's investment style – is it growth or value oriented?
Value investments tend to be less volatile and can provide more
downside protection in addition to upside returns on your capital
If an investment is "hot," it often means that all the good news
is already reflected in the stock price and there is nowhere for the stock to go but down...
a fund's performance over the long term, and make sure to
examine its performance in all market conditions.
chasing trends and "hot" investments. Many high yielding investments
are more volatile and can deliver extreme negative returns in
a downturn. If an investment is "hot," it often means that all the good news
is already reflected in the stock price and there is nowhere for
the stock to go but down.
About the Author...
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