An MBA from McMasters DeGroote School of Business prepares graduates to meet challenges and seize opportunities graduates who are market ready. As Canadas premiere Co-op MBA school our students gain real world experience and develop a sense of innovation and creativity that allows them to bring a fresh perspective that is desired by employers. LEARN MORE AT http://bit.ly/mba4aday DeGroote MBA FALL OPEN HOUSE Come experience the DeGroote MBA fi rst-hand during our MBA for a day event Saturday, November 27, 2010 9:00 a.m. 2:00 p.m. DeGroote School of Business, Ron Joyce Centre, 4350 South Service Rd., Burlington, ON L7L 5R8 Register for our Fall Open House through the DeGroote MBA Insider at: http://bit.ly/mba4aday BECOME A MARKET READY GRADUATE AT McMASTER BusinessOakville Beaver Investing in stocks can be profitable, but it can also put you in the poor house. And you have a fair degree of influ- ence over the outcome. The two main investment options are fixed income (bonds) or equities (stocks). Bonds are more stable, but the yield is low, especially now. Stocks are volatile, but have had much better returns his- torically. Do you invest in bonds or stocks? To provide an answer to this we will look at research done back in the mid-1980s and currently. The conclusion from both time periods is sim- ilar. Professors Hatch and White from the University of Western Ontario asked the question of whether it was better to invest in bonds or equity. When they examined the annual returns from 1950 to 1983, the returns were split evenly with bonds being more profitable half of the time and the other half of the years favoured stocks. When they extended the holding period to three years, stocks shone brighter and with a five-year holding period, stocks continued to be increas- ingly more profitable. The longest holding period in the study was 10 years. There was not a single 10-year period that stocks did not out- perform bonds. The longer the holding period is, the greater the likeli- hood of stocks outperforming bonds. But Buyer Beware. Stocks are volatile. It is the investors reaction to this volatility that has been the greatest impediment to their success. Consider the historic results of The Toronto Stock Exchange to see past returns with the reality of volatility. Over the last 50 years, the S&P TSX Composite Index has declined in just under three out of every 10 years. What investor wants to lose money 30 per cent of the time? However investors do not just invest for one year periods. They invest most often for the long term. So the important question is - how did the stock market do over a longer period? The average increase in value of the S&P TSX Composite Index over the last 25 and 50 years is 9.3 per cent and 9.7 per cent respectively. As an investor you care about your own investment returns. Its wonderful that the market did well. The real ques- tion is how did you do? As it turns out your invest- ment returns have likely been disappointing. Stock markets do well, but individual investors do not. Over the 20 years ending in 2008, the S&P 500 Index aver- age was 8.4 per cent. The aver- age individual investor earned 1.9 per cent. Successful investing requires more discipline and less emotion. There is a valu- able tool that can help provide that. We recommend that investors have an Investment Policy Statement a written statement outlining all of your investment objectives and pro- viding an investment strategy that should assist you at achieving those objectives. We will talk about how you can profit from using an Investment Policy Statement in this column next Thursday. Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. In 1991 Peter founded Peter Watson Investments in Oakville and now is with Industrial Alliance Securities Inc. Peter can be reached at (905) 842-2100. Understanding stock market key to financial success Dollars & Sense By Peter Watson BOOKKEEPING and Financial Services Accurate & Reliable Professional Bookkeeping Services, on or off site QuickBooks Pro set-up & data clean-up optimized for your business Business Plans & Financing Assistance Selling Your Business Intermediary Services (647) 230-8749 info@baselinebusiness.ca w w w . o a kv ill eb ea ve r.c o m O A KV IL LE B EA V ER Th ur sd ay , N ov em be r 1 8, 2 01 0 2 4