If I were younger, I wouldn’t mind so much.

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During times when markets are down, advisors will say “think about the long term” like it is a mantra. It’s because there are many examples from the past that demonstrate that in short periods of time, markets can deliver poor results, but over longer periods of time, they have delivered favourable results fairly consistently. But I will often hear from clients who are near or in retirement that that was all fine and good when they were 30 or 40, but not anymore. “I don’t have time for this to recover” is a concern they often express.

I’d argue they do. No one saves for years so that he or she can spend it all on the day, or even in the first few years of retirement. In any given year, people will only tap into a small portion of their portfolio to draw income. The vast majority of their savings remain invested and will be there for them for years and sometimes decades. So they are still long term investors.

This is however why we diversify. As you get older, we typically reduce the portion of money that is in stock markets. If you’re near or early in retirement, you may have 50 to 65% of your money in the stock market. That money will go up and down in value and likely achieve a higher rate of return. It’s the other 35 to 50% that is cash, GICs and bonds that you’d draw from when markets are down. It buys you time for the stock portion to recover. You won’t need the stock portion for many years. That’s long term money.

I guess you could say, from an investing point of view, you’re younger than you think you are!

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