Investing For the Long Haul

Do you invest in an RRSP or directly in equities or, really, any security? Do you invest for the long term by putting money into one or a few investment vehicles, either all at once or a little at a time? Do you ever sell before rolling over into a retirement annuity?

If you answered yes, yes and no, be very, very afraid. Look at the markets today. These sorts of down days are not at all uncommon and are not worrisome when each is looked at on its own. The problem is why the markets are down today. We are starting to see some serious loss of confidence in the entire financial and monetary system. Hopefully it's a false alarm, but don't bet on it - literally.

Pull up quotes on FRE and FNM. Never heard of them? I'm not surprised. These quasi-government agencies hold trillions (yes, trillions) of dollars of (mostly) high-quality mortgage debt, yet their ability to capitalize that debt is sinking like a stone, in part because fewer people than before believe they can. This affects us as well; pull up a quote on any Canadian bank, and gold.

These financial institutions have been considered some of the safest investments on the planet. High quality property assets (debts) supported though not guaranteed by the US government. It's falling apart. It isn't the end of the world as we know it, though it could get very ugly.

So... what is the quality of your own investment choices? Would you say they're better or worse than the above? Maybe you think broadly invested mutual funds are safe? Look at this. So much for the smart money.

Always be prepared to sell, and know what you're holding and why. You can go to cash for a while until the dust settles. In the long run no investment is a sure thing. Companies do go under on a regular basis, even the biggest of them. No investment is safe. Be flexible and move your money around periodically to avoid weak assets and benefit from strong ones. That's what the truly smart money does.

Disclosure: I own stocks in Canadian banks and gold miners.