Q&A: Stock market blues

Question: In view of the latest down swing on the stock market, what is your advice
regarding the individual investor approaching retirement? Hold, sell mutual funds?
What do you see ahead for the TSX and the Dow? Thanks. – J.G.

Gordon Pape answers: My advice is to never attempt to time
the market. Even the pros can’t do it consistently. I have always favoured
a balanced approach to investing. In the case of mutual funds, which you mention,
that means a mix of equity, income, and money market funds in proportions that
are suitable for a person’s age, risk tolerance, and priorities.

We have had a very strong bull market since the latter part of 2002. Sooner
or later it will run out of steam, although no one can predict precisely when
that will be. A prudent investor approaching retirement should be prepared for
that event. In practical terms, this would mean reducing exposure to equity
funds and ensuring that those you continue to hold are conservatively managed
(there are several equity funds that actually made profits during the 2000-2002
bear market). Bond and money market fund positions should be increased so as
to protect capital.