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​Looking ahead: Making investment decisions in uncertain times

Many members have no doubt noticed the increased volatility occurring in the stock markets and with the daily fluctuations in unit values of our Balanced and Equity Funds at CSS. What should we make of this?

First of all, it’s important to remember that stock markets go up and down. 2017 was a good year for CSS members invested in the Plan’s Balanced and Equity Funds. However, the early part of 2018 has shown us that markets are unpredictable and they can drop significantly in short periods of time. So, it’s very important for investors (i.e., CSS members) to expect some bumps in the road so that they are not lured into making short-term, knee-jerk investment decisions when their investment horizon is long.

What is currently going on to create the volatility in stock prices? 

The current volatility is likely being caused by a host of things:

  • The current bull market is quite mature so investors may be trading (i.e., selling) more in anticipation of an end to the bull
  • The trade war rhetoric currently occurring amongst some of the world’s largest governments and economies is causing anxiety amongst investors
  • The risk of global conflict seems to be rising on a daily basis amongst some of the world’s largest militaries
  • Any number of other global and geopolitical events that raise investor anxiety and cause them to sell their holdings

However, trying to determine the source of the volatility is not the question we should be asking ourselves as investors. The more important question to ask is whether our portfolios (our individual CSS retirement investments) are properly positioned for our own personal circumstance and long-term objectives.  

For example, if a member was planning to retire within the next couple of years or so, and they are planning to purchase a traditional monthly pension with their accumulated wealth held at CSS, it may be appropriate to ensure that their account holdings at CSS are transitioned to more conservative investment funds (for example, perhaps more exposure to bonds rather than equities) in the near term to reduce the risk of a drop in stock markets significantly reducing the value of the member’s holdings just prior to retirement.

On the other hand, members with a long investment horizon will need to take on investment risk to generate appropriate long-term rates of return on their investments (including in retirement if not purchasing a traditional monthly pension with their holdings). These members will need to drown out the short-term noise and recognize that any volatility happening in the short-term is just part of the normal investment cycle. Sticking to their long-term investment strategy is what will best serve these members in achieving an appropriate retirement nest egg. 

All that said, we recognize that it is not easy watching your portfolio value decrease from one day to the next. Emotions can be tough to overcome, but they can lead us into making short-term investment decisions that may be harmful in the long term. Members are encouraged to review the investment decision-making information on our website. And, one of the benefits of being a member of CSS is access to our Pension Plan Consultants should you have any questions about your CSS investments or your retirement plans – feel free to contact us.