'Playing it Safe' in a Volatile Market

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Advice on Keeping your Investment Ducks in a Row amid Turbulent Waters

While the Globe and Mail reports that stocks this week were pummeled in trading, the paper also reported how one of the country’s top investors is keeping it safe amid an apparent “buyer’s strike”.

Frank Mersch, portfolio manager and co-chief investment officer with Front Street Capita, told the Globe that he is keeping liquid 25 per cent of his funds’ assets for buying opportunities he believes are going to come.

Mersch, who manages roughly $400-million in Canadian hedge and equity mutual funds, predicts that a market bottoming out will occur at the end of this month, or early next. He stated that an S&P/TSX composite index level of 12,000 to 12,500 would mark a good time to buy, and that “battered energy and metals stocks” may be a good option to examine at that time.

Filip Zimerman, a retired diamond wholesaler who built his portfolio by investing in “companies that help people” said on Moneyville.ca to stay in the game regardless of volatility. Still, he is always certain to hold onto a cash reserve because, he said, he likes “to play safe”.

Zimerman started out with RRSP mutual funds, bonds and blue-chip stocks. After some market research, he moved on to shares in utility, agriculture, and high-tech companies with a minimum five-year history, later adding real estate investment trusts and gold stocks to his range.

“You can’t sit with all your cash in the bank because it will lose money,” he said. “Talk about it. Don’t sit on your fence, because things are going to change so you have to change. Have a little courage, but don’t do anything silly.”

Meanwhile, the Money Morning Quarterly Report suggests that while investors may be anxious to get rid of their oil and silver holdings amid these recent swings, staying out of the market means “missing key profit opportunities… waiting out the market shifts isn’t ideal because volatility is set to continue.”

Contributing editor for Money Morning, Shah Gilani, suggests “playing defense” in a down market by investing in big-name, multi-nationals. In a recent interview with FoxBusiness Gilani named Chevron – or large companies in the energy sector in general – Caterpillar and Microsoft as big-name, steady stock options to consider in a market like today’s with which, as the program interviewer stated, “you won’t lose your shirt”.

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