The reality of the unrelenting, depressing economic news globally has shattered investor confidence. This hasn’t been alleviated by the lack of consensus among economists, bureaucrats and money managers on how long the recovery might take. There is evidence that stimulus packages that governments around the world have initiated over the last year, especially in the US, are starting to take hold. This has fostered some real buying and reversed the downward trend in the markets over the last 5-6 weeks. Interest rates are at historical lows and the stimulus is in place to fuel a recovery.

Couple this with trillions of dollars waiting in the wings invested in record low yielding liquid/short-term securities waiting for the magic signal to jump back into the market. With interest rates at historical lows, there is minimal opportunity to find safe havens to grow your money. It is an opportune time for you to invest in high quality fixed income and equity mutual funds*.

But even the most bullish investors admit that equities are likely to be very volatile throughout 2009 and may decline further before a true recovery sets in. This said, it matters little, as the view is that by investing now you will still be ahead as long as you have a long enough timeline (3-5 years minimum) and invest in mutual funds which hold equities of high quality companies. Some of the keys to investing now are:

• Be patient. No one knows when the stock markets will bottom out.
• Be prepared for things to decline further and don’t worry about short term declines,if we are looking a 5 year + time horizon.

Another common strategy is dollar cost averaging which allows you to participate in the market without jumping in with both feet and not be concerned if the fund declines further as you will be able to take advantage of that by making regular purchases.

Markets, as we have heard quoted, are fueled by “fear and greed”. Fear toppled markets in a breathtaking descent never seen in most of our lifetimes. With many of the strongest and soundest companies’ shares selling at premium, greed will follow to refuel the recovery.   It’s been consistently our view that it’s far better for investors to maintain and even increase their exposure to good quality investments which they can hold to achieve future returns.

*Mutual funds are offered through Credential Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured nor guaranteed, their values change frequently and past performance may not be repeated.  ^®Credential is a registered mark owned by Credential Financial Inc. and is used under licence.

May 15, 2009