Surviving a Grizzly Attack Portfolio strategies for a bear market W Michael S. Magreehan is an in- vestment advisor with Lysnes / Magreehan Wealth Management at Canaccord Capital in Waterloo, Ontario.Mike welcomes your com- ments and questions at 1-800- 495-8071 or mike_magreehan@ canaccord.com. hen faced with a turbulent stock market, investors run to and fro, eagerly searching for safe investment vehicles, with a willingness to sacrifice returns for safety of principal. At fi rst glance, government bonds and money market instruments may seem like an ideal safe haven; however, with interest rates at historic lows, this is hardly a long-term solution. Recent stock market rallies, amidst a sagging economic backdrop, have many econo- mists and media pundits debating the outlook. It may be tempting to chase lofty returns, but it is too early to celebrate. My October 2008 article in Canadian Chiropractor – titled “Keeping a Cool Head” – discussed the importance of keeping your emotions grounded, and the benefit of eliminating hindsight from your investment decisions. Now is the time to take this idea one step further, and focus on an effective strategy for surviving a bear market attack. CASH FLOW IS KEY A long-held belief is that dividends are a key ingredient in an investment portfolio. Not only are dividend yields higher than bond and money market rates, but dividends also offer superior tax advantages. A blue-chip dividend strategy is by no means glamorous, but during volatile times, it is one that literally pays you dividends. Dividend-paying companies are often large-cap, mature businesses generating strong earnings. Their stable and growing dividend payouts offer your portfolio a cash-cushion in the event of any potential declines in stock price. Cash-fl ow is key. Picture your chiropractic business starved of cash flow. How would you pay your staff salaries, overhead expenses and taxes, and ever hope to fund a growth opportunity? Your investment portfolio, much like your business, requires cash flow. And the more, the merrier. 32 • CANADIAN CHIROPRACTOR | SEPTEMBER 2009 www.canadianchiropractor.ca Mike Magreehan, BBA (Hon), CFP feature
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