March 2008

Your financial plan and investment portfolio were developed to reach your lifetime goals, which factored in external events such as short term market movements. The Portfolio Review and short term market movements are not useful in setting or evaluating an investment strategy.

Market Movements: Period ending March 31, 2008 (Source: PALTrak)

Advisor's Commentary

The three stock market performance numbers in the chart above mask the actual volatility of this quarter. The stock markets dropped about 4% in the first two weeks of January and then, from mid January to the end of January, they dropped 12% in just two weeks. By March 31 most of this 12% had been recovered.

The hysteria surrounding these last two weeks in January has already become hazy in the minds of investors. This is consistent with previous sharp drops; not many investors remember the hysteria around the drops in the Chinese stock markets just one year ago.

In this first quarter the Canadian dollar dropped 4% against the US dollar, having the effect of improving the numbers of non-Canadian investments. However, the effect was to reduce the size of the drop. The above numbers show that the US market dropped 5.8% in Canadian dollars, but it actually dropped 9.8% when priced in local US dollars.

These stock market drops reflect the growing awareness of problems with sub-prime mortgages and asset backed securities. Access to credit has been reduced, in turn slowing the economy, or at least slowing economic growth. To offset these effects, central banks worldwide have engineered massive increases in money supply and drops in interest rates; however, central bankers are walking a tightrope because too much economic stimulation could trigger an increase in inflation. Investors need to exercise prudence. While there may be a desire to flee the volatility of the stock markets, the real value of bonds and other fixed income (interest bearing) investments can be adversely affected by rising inflation.

The data shows that the volatility in stock markets from 2002 to 2006 was well below normal. While this first quarter of 2008 was more volatile than what we have seen for a number of years, the recent market fluctuations are actually within a normal range. We recognize that times like this can be tough, but we continue to encourage a sensible long-term view to investing and managing wealth.

The information provided is intended for information purposes only and is not, under any circumstance, to be construed as investment advice. Any charts or numerical values have been described for illustrative purposes. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Consult with your financial advisor before acting on investment.

BFSC Market Commentary – In circulation since 1995

Creating and Monitoring Your Portfolio

1. Portfolio Creation.

At Bick Financial Security Corporation, we work as financial planners. Simply put, we endeavour to quantify goals and then develop a financial plan (which can include estate and tax planning) from which we devise the investment strategy and portfolio.

The time frame for investing is critical. Because market movements are unpredictable in the short run, we differentiate between short term and long term goals. Short term goals (under 5 years) are generally met with short term interest bearing investments. Long term goals are met with a diversified portfolio that includes long term equity assets. Almost all clients have long term goals. For instance a husband and wife both 70 years of age have a 22 year joint life expectancy – their personal and estate goals logically need to include long term investing.

2. Portfolio Monitoring.

When we emphasize long term thinking for long term goals, “buy and hold” should not be misinterpreted as “buy and ignore”. The following are the steps we take in monitoring your portfolio:

Daily

• Mutual fund portfolios are managed daily by full time proven professional managers.
• As associates, we are in touch daily with industry contacts, newswires, publications, Internet sources, as well as industry associations and memberships.

Weekly/Monthly

• Bick Financial’s associates meet regularly to share information, education, and experiences, including interviews with money managers.

Quarterly

• A review of portfolio construction and asset classes.
• A comprehensive review of each of the mutual funds and fund managers we work with and place client’s money with. The purpose of this review is to determine our opinion of the quality of management

We do base our views on:

• Long term track record.
• Investment methodology – do they invest or speculate?
• Attribution analysis – is the track record based on luck, or do they have a proven sustainable methodology?
• Discipline – do they stick to their methodology?

We do not base our views on:

• Short term performance – this is a function of market popularity and not on the quality of the fundamental work the manager undertakes.
• Media comments and opinion – we differentiate news from information, and information from wisdom and understanding. The media focuses on what is topical, popular, and unpopular, not on investment fundamentals.

Annually

• Review client portfolios. It is not about recent performance. The review is focused on the suitability of the portfolio in relation to the client’s goals and financial plan.