Martin Pelletier: When reviewing your portfolio, don’t get stuck on what’s happening right now, but rather take a look at the effects of the past year
Therefore, rather than getting stuck on what’s happening right now, we advise clients to review their financial plans and portfolio designs, and look at how they have been affected by markets over the previous year.
For example, let’s say your $100,000 portfolio gains 10 per cent in year one and loses 10 per cent in year two . In simple math terms your average return is zero per cent, but in fact you actually lost one per cent or $1,000. This volatility drag will increase with the magnitude of the ups and downs in your portfolio — in the aforementioned example, a 15 per cent gain/loss would have resulted in a $2,250 loss despite the same zero per cent average return.
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