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February 1, 2023

3 Things to Remember When Markets Turn Sour

Stock and bond markets took investors for a ride in 2022 – mostly in the wrong direction. Some of the world’s major indexes reported their worst annual losses since 2008, a year so bad they made movies about it.

We did a little better here in Canada. But many Canadians invest globally, so they don’t have their eggs all in one basket. As a result, we also experienced the broader market downturn.

The thing is, these are short-term losses – which means they probably don’t matter. If you’re not retiring in the next year or two, a drop in the value of your investment portfolio over a few months isn’t worth losing sleep over.

Long story short, if you don’t cash out of an investment when it’s down, you don’t actually lose anything.

So stop thinking about losses that haven’t come true yet. When markets turn sour, successful investors see opportunities to buy. To them, it’s like stocks and bonds are on sale.

Thing 1: Your portfolio will recover

Markets go up and down all the time. Over the long term, though, they have risen more or less consistently. Since 2002, Canada’s main stock index has been the S&P/TSX Composite Index. It’s made up of 250 Canadian companies considered representative of our economy. Investors who have confidence in the Canadian economy will very often buy this index.

Think long-term: S&P/TSX Composite Index growth over 20 years


If you had, say, invested $5,000 in the S&P/TSX Composite Index on January 2, 2003, it would have been worth $14,734.02 two decades later.

To be clear, there’s no way to know what the next 20 years will bring. What we do know is that throughout history, stock and bond markets have grown in value over the long term.

Thing 2: What happened in 2022 won’t keep happening

One of the most important stories in 2022 was rising inflation rates. We all felt this – at the grocery store, gas station, and just about everywhere else we spend money. The Bank of Canada and other central banks around the world raised interest rates to lower inflation. (A move that has been successful in the past.)

Raising interest rates makes it more expensive for companies and consumers to borrow money, so it slows down economic growth. That, in turn, makes it difficult for companies to raise prices.

Higher interest rates are also bad for stock and bond markets. So a lot of what we experienced in 2022 was triggered by multiple rate increases, which – good news – won’t go on forever.

In fact, the tide here in Canada has already begun to turn. Our annual inflation rate was 8.1% in June 2022, according to Statistics Canada. By December, it had fallen to 6.3%.

Thing 3: Pay yourself first

Ever heard of dollar-cost averaging? Besides being an unnecessarily complicated term, it is one of the simplest, most effective ways to make sure your financial dreams come true.

Let’s say that after covering all your necessities, you can afford to save $250 a month. Think about this carefully – you want that number to be as big as possible without putting yourself into debt. (And of course, you can change that number whenever you want.)

Arrange with your financial services provider to withdraw that amount from your account each month, and invest it into whatever investment portfolio you’ve built. This will happen automatically. It is a set-it-and-forget-it system. (Which means you’re now officially a disciplined saver.)

Here’s where dollar-cost averaging works its magic. When the investments in your portfolio are down, your next $250 buys you a little bit more. When they’re up, it buys you a little less. By focusing on the dollar amount versus the investments or the timing, you’re buying more when prices are low, and less when they’re high.

If prices drop dramatically, you’ll be taking advantage of a sale that’ll benefit you and your family for the rest of your lives.

So don’t be discouraged by financial market alarm bells. They only matter if you react to them.

Much better to connect with a Serenia Life advisor and talk about how to make your financial dreams come true. Fill out this form to get started!

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A recent study has projected that close to 100,000 Canadians will be living with #dementia by 2030. On #WorldAlzheimersDay, we encourage members impacted by this disease to consider supporting @alzheimercanada via our Action Team benefit (value: $250). Apply to take action on our website! (link in bio)  #takeaction #actionteams #worldalzheimersday2023