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Volatility is normal part of stock market ur human nature makes it difficult for us to adjust to and accept the stock market's erratic rollercoaster ride. We have had plenty of experience with volatility lately. Early August was a prime example. In the three trading days following Aug. 3, the S&P TSX was down 8.9 per cent. Then, over the next three trading days that followed, the index was up 7.4 per cent. We all know the markets go up and they go down. But what we might not understand is that the recovery of a loss is an uphill battle. If an investment goes down 50 per cent then how much does it have to recover to return to the original value? Is the answer 50 per cent? No; if a $100 investment plummets to $50 that is a 50 per cent decline. However, for it to climb back up to $100 it has to double, or increase by 100 per cent. The discrepancy is not as pronounced for a smaller magnitude of volatility. For example, a $20 decline for the same $100 investment would be a decline of 20 per cent. A full recovery of that $20 would require an increase of 25 per cent (20 divided by 80). Those are just numbers, but the more interesting aspect is how that affects our emotions since extreme vola- 23 · Thursday, November 3, 2011 OAKVILLE BEAVER · www.insideHALTON.com O Dollars & Sense By Peter Watson tility makes us very uncomfortable. Behavioral studies have shown that the pain an investor feels at a decline of say 10 per cent is far greater than the joy from a positive return of that same amount. Investors may like to win but they really hate to lose. Do you agree with the research? Do you feel more emotional about a loss than an equal-sized gain? The reality of how people deal with losses impacts many investment decisions. Consider the following situation as it has likely happened to you. After an investment has declined 20 or 30 per cent, what did you do? Did you sell it? Did you hold onto it? Did you buy more to lower your average cost? Investors often find it difficult to sell an investment that has declined in value. After the decline the hope is that it will return to its previous value and then some. Sometimes this happens, sometimes it doesn't. There are countless cases of stocks which have taken a beating, and never recovered. Nortel anyone? Some may think it's not really a loss until you sell and `realize' that loss. No, a loss is a loss. Any product is only worth what you can sell it for. Usually there is a pretty good reason why a stock has been crushed. Have the fundamentals of the company changed? Maybe it is just part of a general market decline. Regardless of the reason behind it, an investor needs to have a strategy for handling large declines. Volatility is a fact of life with stock markets. You should expect it and know in advance what you are going to do when it happens. An investment policy statement can serve you very well in times like these. Unfortunately, emotion gets in the way and too many people sell out of fear rather than discipline. Curiously, when investors throw in the towel it is often close to a market rebound. We have terrible timing. We should not even bother trying to pick good buying times. Discipline is the key. If you have your written strategy, volatility should be nothing more than a normal part of the market experience. -- Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI. mypet myvet Dr. Gesa Kohn-Gould Veterinarian & Owner myanimalhospital.ca Our Cat Came Back I t's true! Even Animal Hospitals lose their cats. But thanks to a tiny microchip, Mary Kate, the clinic cat at Askey Animal Hospital, was returned home to us last year. She slipped out during our renovations in May of 2010. We searched everywhere for her but she was nowhere to be found. While we panicked, she happily received food all summer long from a very kind gentleman who thought she was a feral cat. As the temperature dropped the man began to feel concerned that she wouldn't make it through the winter so he brought her to the Burlington policy at most shelters, she was scanned for a microchip. And Bingo! Our cat came back! Microchips are no bigger than a grain of rice and are growing in popularity. In addition to shelters and veterinarians most kennels, breeders, trainers, rescue groups, farms, animal clubs, and pet stores use microchips. The other forms can easily get lost or missed when your pet is brought to a shelter. If your pet turns up at the animal shelter and its nametag has fallen off or the shelter employee overlooks the number tattoo you may never see them again. However a microchip contains no battery. It is activated only when scanned. If you have any questions about microchipping, please call your vet. Newest `Dragon' at Chamber's Chair's Dinner He's conquered the online world, becoming the newest `dragon' on CBC's Dragon's Den in the process, and now members of the Oakville Chamber of Commerce will have the chance to benefit from his wisdom. Bruce Croxon, co-founder of the internationally-recognized online dating site Lavalife, will deliver the keynote address at the Oakville Chamber of Commerce's 57th Annual Chair's Dinner on Tuesday, Nov. 22. The event will take place at the Oakville Conference Centre, located at 2515 Wyecroft Rd., and begin with networking at 5 p.m. followed by the gala dinner at 6 p.m. "We are honoured to host Mr. Croxon," said Wendy Rinella, the new Oakville Chamber of Commerce Chair. "Under his leadership, Lavalife grew to be a category leader with revenue in the millions. He now brings his expertise and guidance to Dragon's Den. The chair's dinner will be one of his first public appearances since becoming a dragon. We are fortunate to be able to bring this opportunity to our members, their guests and interested members of the Oakville business community." The gala event is an inauguration of Rinella who succeeds Mark Brown as the Oakville Chamber of Commerce Chair. "It has been a remarkable year for the Oakville Chamber. Under the leadership of Mark Brown, the chamber's membership levels, revenue and event attendance have increased. In addition, Mark has been instrumental in guiding the chamber's advocacy initiatives," said John Sawyer, chamber president. "The chair's dinner and Mr. Croxon's visit will be a fitting tribute to Mark for the outstanding leadership he has provided to the chamber." Members of the public are invited to attend. Tickets are available by visiting the chamber website at www.oakvillechamber. com or e-mailing nesrene@oakvillechamber. com. Tickets cost $125 for members and $155 for non-members. Tables of eight are available. All prices are subject to HST. myanimalhospital.ca Askey Animal Hospital 24 Hour Emergency Care 3525 Fairview Street, Burlington 905-634-9088 Orchard Animal Hospital 2020 Appleby Line, Burlington 905-634-4526 Speers Road Animal Hospital 1026 Speers Road, Oakville 905-844-6786 Join our Group and upload your pet photo today me & my pet Advertising space courtesy of the Oakville Beaver Advertorial