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How to make your portfolio work in volatile markets

A trader checks monitors at a bank, in Milan, Italy, Monday, Aug. 8, 2011.

Antonio Calanni/AP Photo/Antonio Calanni

How should investors deal with mass uncertainty in global financial markets? Should you adjust your portfolio or reassess your financial plan?

Personal finance and investing guru Gordon Pape answered your questions in a live chat Tuesday.

Gordon Pape is publisher of the Internet Wealth Builder, Income Investor, Mutual Funds Update, The Canada Report. His website is

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He is author of the book, Tax-Free Savings Accounts: A Guide to TFSAs and How They Can Make You Rich .

Click here for a mobile-friendly version.

11:01 [Comment From Ron]

Mr. Pape, Is this a good time to invest in a fund such as RBC Global High Yield Bond Fund, that invests in high yield and emerging market bonds?

11:02 [Comment From Ken]

Should I be worried as a holder of diversified mutuals in Canada?

11:02 [Comment From Gordon Pape]

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The risk is much higher in this type of bond fund compared to a normal bond fund. That's because the credit-worthiness of the securities it holds is low - and credit strength is a major issue right now.

11:04 [Comment From Gordon Pape]

To Ken - A falling tide lowers all boats and that's what will happen if the markets renew their downward slide. Blue chip, dividend-paying stocks are the best bet but they would be hit too as in 2008-09.

11:04 [Comment From Rob]

34 yr old with about 100k uninvested right now, thinking of putting it all into index etfs today. Thoughts?

11:05 [Comment From Gordon Pape]

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Well, I wouldn't do it. Markets are very volatile right now. This rally might be real or just a "dead cat bounce". I'd wait until things settle down and direction is more clear.

11:06 Chantaie ROB web editor - Mr. Pape, would you see the current volatility as an opportunity to enter the market as an investor? Or should new entries be holding off?

11:07 [Comment From Gordon Pape]

If you remember 2008-09, we had some rallies after the initial sell-off but then the downward slide resumed and continued until March '09. I am not saying the same thing will happen again but it is a possibility

11:07 [Comment From Leonard ]

What should someone with some money to invest look at in today's volatile climate? I just caught up on my TFSA (all in cash right now) and have money to catch up on my RRSP carry forward. Should I wait for further drops? Start buying in slowly (once per month or so)? What sectors and regions should I be looking at?

11:09 [Comment From Gordon Pape]

I like short-term bonds or bond funds such as XSB right now. Also gold - not the stocks but the metal or a fund/ETF that invests in the metal.

11:09 [Comment From Dave]

I work for a BC Crown Corp in an investment dept and we have a very strict code of ethics and restricted from owning bonds & have to report any investments for compliance. I can own mutual funds and equities but require 5 days preclearance to buy or sell any equity which makes individual stocks a pain. What can I invest in? I can can invest in mutual funds but what type?

11:10 [Comment From Gordon Pape]

Short-term bond funds are safe bets in this situation. Phillips, Hager & North in Vancouver has a great one

11:10 [Comment From Brad]

Do you think that some of the current crash can be attributed to the use of automated market tracking programs coupled to the holiday season? Assume a normal distribution of sell points, and unattended programs -- and one has a cascade of effects. Once sold, while the markets fall, all one can do is wait for the bottom. Do you advocate the use of such devices?

11:11 [Comment From Gordon Pape]

No I certainly don't and there were some controls put on them after the crash of 2008-09. I have not seen any suggestions that they were major contributors to what happened yesterday

11:11 [Comment From Jack]

With CIBC and other banks having a near 5% yield and buy ratings, is now a decent time to get in

11:12 [Comment From Gordon Pape]

The yields are attractive but may become even more so if the market slide resumes. If you want to buy, layer in - buy some now and if the price drops, average down

11:13 [Comment From Ram]

What types of mutual funds would be ideal to invest during this volatile economy

11:13 [Comment From Gordon Pape]

Bond funds - short-term and universe. But if governments respond by turning on the printing presses and ramping up inflation, switch to gold

11:14 [Comment From Steve]

I'm 33 with $40,000 in cash which I have to either pay off my student loans or put into the market. Do you think this market downturn represents a good buying opportunity or do you think paying off student loans is wiser?

11:14 [Comment From Gordon Pape]

Pay off the loan. If we are heading into another recession, the less debt you are carrying the better

11:14 [Comment From Flavio]

If one has the ability to borrow, can buying land be a good thing for the time being?

11:15 [Comment From Gordon Pape]

Real estate has held up well in Canada and interest rates should stay low. That said, if there is a recession prices will fall. There may be better values down the road

11:15 [Comment From Jane S]

Would you consider buying a home in Toronto this fall (assuming you have to buy or rent and have a family)?

11:16 [Comment From Gordon Pape]

If you don't have a home sure - but make sure you get a sweet deal. If you have a house already, sell it first

11:16 [Comment From Kyle]

What is your opinion on Thomson Reuters? I have some money in the stock, wondering whether to invest more, sit back, or take it out

11:17 [Comment From Gordon Pape]

It's a great company that has been battered recently. We are currently reviewing it for my Internet Wealth Builder newsletter and will have an update soon. I'd hold off for the time being.

11:17 [Comment From Guest]

How low do you think the CAD is likely to go over the next few months compared to other non-US currencies (GBP in particular)?

11:18 [Comment From Gordon Pape]

Very hard to predict currency fluctuations. Here's the US dollar gaining strength despite the downgrade while the AAA loonie falls. Go figure

11:18 [Comment From Tony]

I have approx $240,000 in my company pension , which we have the option to move around to certain markets (company puts in 6% and I contribute 4% of my salary yearly). Since 2006-7 I have had 100% in the Canadian Equity fund (UBS Can Equity). I have 10 yrs (earliest to retire) or 15 yrs (longest). I am thinking now to move approx 25% to US equity, 25% Emerging markets, 25% in a Balanced Equity, and keep the remaining 25% in a Canadian Equity fund. I welcome your comments. thx...Tony

11:20 [Comment From Gordon Pape]

Whoa - where's the fixed-income segment to cushion your retirement savings against events such as we are seeing now? Suggest you give this a rethink.

11:20 [Comment From Jen]

Mr. Pape, I have cash ($6k) sitting in RESP for my 5 yr old. What would be best fund/ETF/individual equities to deploy them. I am think of moving small amounts on monthly basis for next year, so ETF/Stocks might be expensive. Any recommendation which funds/sector? Thanks

11:21 [Comment From Gordon Pape]

Well, there are 13-14 years before the money will be needed for school. So I suggest you wait for this turmoil to run its course and then pick a good-quality balanced fund such as Fidelity Canadian Balanced

11:21 [Comment From James]

Are mutual funds worth the investment? Would ETF's make more sense now?

11:22 [Comment From Gordon Pape]

Depends on the fund and the ETF. Personally, I would avoid anything market-linked right now. I would choose a fund where the manager has the option to move to cash in rough markets

11:22 [Comment From Sylvie]

Is it a good thing to sell all and buy short term bond mutual funds...

11:23 [Comment From Gordon Pape]

I would never say "sell everything". The world is too unpredictable. I advocate tactical redeployment of assets. In other words, if you are overweight in stocks and underweight in bonds, fix that.

11:24 [Comment From Fred]

Both the US index and the International index seem to have been bumping along for the last 10+ years, with zero return after all that time. Just what exactly is a reasonable investment horizon when investing in stock market index funds? 20 years? 30 years?

11:25 [Comment From Gordon Pape]

Your guess is as good as mine. The long-term trend is up but in the long term none of us will be here. That's why I am not a big fan of index funds.

11:25 [Comment From bob]

what is a good gold or silver ETF to invest in and is it a good time to do so

11:27 [Comment From Gordon Pape]

sorry lost connection for a sec. Most popular gold ETF is GLD, traded on NYSE

11:27 [Comment From Barry]

You've mentioned gold a few times. I know traditionally it's a safe bet, but how much higher can it get? Isn't it already artificially inflated?

11:28 [Comment From Gordon Pape]

Had lunch yesterday with a gold fund manager. He said $10,000 an ounce is feasible if governments decide to inflate out of this mess. He's biased of course but the fact is that demand is way outstripping supply right now

11:28 [Comment From Pete]

Why didn't gold go up more than it did yesterday?

11:29 [Comment From Gordon Pape]

Can't answer that - who knows?

11:29 [Comment From Ben]

Do you think Fed's comments (or lack thereof) will have much sway this afternoon...and will it be "real" or short term reflex?

11:30 [Comment From Gordon Pape]

I hope the Fed will come out with some kind of decisive statement but I cannot for the life of me think of what they might say to calm things, except perhaps that they too will buy Italian and Spanish bonds

11:31 [Comment From Ron W]

Wife has 70k sitting in cash in RRSP, won't need funds for 30+yrs, risk is fine. 80% XIU, 20% bond index etf?

11:31 [Comment From Gordon Pape]

It's not what I would do - as I said earlier, I don't like index funds, especially in these conditions

11:32 [Comment From Guest]

do you advise moving funds from equity mutual funds to bond funds or is it better now to wait it out now.

11:33 [Comment From Gordon Pape]

I always advise having an asset mix that makes you comfortable and that won't send you climbing the wall when meltdowns happen. If you don't have that now, you need to work towards it

11:33 [Comment From john Muston]

is inappropriate to cash out RRSPs and buy back in when the market recovers, given that, this am not withstanding, the markets won't recover any time soon?

11:34 [Comment From Gordon Pape]

Cash out? Like withdraw the money and pay tax? No. You can make adjustments within the portfolio - add some bond funds and perhaps a bullion fund like BMG BullionFund

11:34 [Comment From Maureen ]

I am sitting in bank stocks in my TFSA. Would you recommend to hold or to switch over to short term bonds or gold?

11:35 [Comment From Gordon Pape]

Our banks are solid but if the overall market decline resumes they will be hit. However, the dividends are good so my inclination would be to hold

11:36 [Comment From Dan P ]

I want to get at least 7-8% long term return. Do you think short term bond funds can get me there?

11:37 [Comment From Gordon Pape]

Absolutely not. You would have to invest in equities or equity funds. But ask yourself this - how long will it take to average that return if you lose a big chunk now?

11:38 [Comment From Bryce ]

What is your opionion on purchasing a (non-foreclosure) property in florida rather than investing in the market?

11:38 [Comment From Gordon Pape]

Well, we owned a place for years and loved it. Good values right now too - in fact, ours is on the market if you're interested.

11:39 [Comment From Sasha]

Mr. Pape - what would your suggestions be for a couch-potato portfolio if one can tolerate moderate risk and am 20+ years away from retirement?

11:39 [Comment From Gordon Pape]

I set up such a portfolio for my Mutual Funds/ETFs Update newsletter at the start of 2008 - 40

11:40 [Comment From Gordon Pape]

sorry - 40% bonds, 60% stock funds. It is still under water.

11:40 [Comment From Jason]

Do you like the idea of buying some "HEE" horizon's enhanced energy income ETF during this time of volatility? the ETF is sporting a 15% dividend right now?

11:41 [Comment From Gordon Pape]

Have not looked closely at it but anything with that kind of yield raises caution signals.

11:41 Chantaie ROB web editor - Mr. Pape, Do you think that given how volatile the markets have been of late, it's better for investors to work with an advisor to keep their portfolios robust?

11:42 [Comment From Gordon Pape]

If you have an advisor who is in tune with your thinking and who you trust, certainly

11:42 [Comment From DH]

Mr. Pape, what is your favorite sector going forward in this market?

11:42 [Comment From Gordon Pape]

Bonds and gold

11:42 [Comment From Cathy]

I'm 28, have been working for about 3 years and am saving to buy a house, hopefully in the next two-four years. So far I have about $45,000 saved. I've used all my TFSA room making 2% with Ally bank. The rest is in Ally and another e-savings account making a little less interest. $10,000 is in an RRSP in a Canadian dividend mutual fund. I want to use the RRSP for the first time home-buyer's plan, and now I'm worried I was a fool for having so much in a high-risk fund, which is obviously tanking right now. Should I adjust my portfolio now?

11:44 [Comment From Gordon Pape]

Well, I don't know what fund you mean but if it is a dividend fund it is probably in top-grade stocks such as banks and utilities so the risk is a little lower. In this kind of situation, where the money will be needed reasonably soon, it is always good to keep risk as low as possible, however

11:44 [Comment From Todd]

What investment would work best in a TFSA to get the best possible tax break?

11:45 [Comment From Gordon Pape]

The best tax break would be from interest income but returns right now are so low it won't count for much.

11:45 [Comment From Mark]

What do you think of Mortgage Investment Corporations (MIC's) as a conservative investment?

11:46 [Comment From Gordon Pape]

They are worth looking at but you need to examine the portfolio for credit risk. We have recommended Firm Capital (FC) in my Income Investor newsletter for some time

11:47 [Comment From Ronald R ]

Is there such a thign as a risk free 5% if you have high 6 figures to invest?

11:48 [Comment From Gordon Pape]

Risk-free? No. Even GICs from small companies don't pay anywhere near that

11:48 Chantaie ROB web editor - A few people have asked about gold this morning. Marcel is wondering what is the best way to play gold or silver and Brian C would like to know what price you see it reaching and when you think it will start to decline.

11:50 [Comment From Gordon Pape]

I cannot predict how high gold will go or when it will pull back, if ever. There are too many variables involved. You can invest through mining stocks or precious metals funds but they have not done as well as the commodity itself this year. Right now, a fund or ETF that invests in the actual metal is a good choice, or you can buy gold wafers or (if you are rich) bars at Scotiabank

11:51 [Comment From Guest ]

I have about 10 years to retirement with aprox 350k invested in mutual funds, 44% equity, 28% balanced, 18% cash and the rest in other resource funds. Do you think this is a good mix right now or should I some investments into bond funds?

11:52 [Comment From Gordon Pape]

I think you should have put a much larger percentage in fixed income securities. You should talk to a financial advisor about the right asset mix for your age

11:52 [Comment From George]

What do you know about CareVest as an investment? the long term and short term results seem too good to be true.

11:52 [Comment From Gordon Pape]

Can't comment, don't know it

11:53 [Comment From Gordon Pape]

would add if it seems too good to be trrue probably is

11:53 Chantaie ROB web editor - Mr. Pape. Given the volatile markets what do you think ivestors should be focused on in order to manage risk to their overall porfolios? Switching over to gold or other safe havens or riding out the current downturn?

11:55 [Comment From Gordon Pape]

I am not a big believer in doing nothing unless you were properly prepared going in and have a portfolio that you are very comfortable with. Remember that the crash of 08-09 took many months to unfold. If you are not happy with where you are now, make changes. If you are content, then ride it out

11:56 [Comment From Bonnie P]

I'm new to investing and the recent market makes me want to hide my money under the mattress. What would the safest investment be for me?

11:56 [Comment From Gordon Pape]

Well under the mattress may not be bad for now if you have a good security system. Seriously, a high interest savings account and some short-term bond funds would work for the time being

11:57 [Comment From Guest]

You've mentioned fixed income assets several times in response to questions - what does this asset class include?

11:58 [Comment From Gordon Pape]

Bonds, GICs, debentures. Anything with a fixed interest rate and a maturity date. Bond funds and ETFs technically don't qualify but the securities they hold do

11:59 [Comment From Bobblehead]

Will everything be okay? Or is the sky really falling? I'm in my early thirties and feel as though saving for retirement is going to be impossible.

12:00 [Comment From Gordon Pape]

Well the sky hasn't fallen yet. I think things will be tough for a while, perhaps a couple of years, but we have lived through hard times in the past. You're young and there will be plenty of brighter days ahead

12:00 Chantaie ROB web editor - Those are all the questions we have time for. Thanks for taking the time to answer so many today, Mr Pape. Sorry we didn't have time to get to everyone's questions, there were quite a few. Any last words, Mr. Pape?

12:01 [Comment From Gordon Pape]

Only to thank everyone and to say that staying calm does not necessarily mean doing nothing. It means acting rationally and preparing for what may be a difficult period. By the way, I hope I am wrong about that

12:02 Chantaie ROB web editor - Thanks again. And thank you everyone who participated.

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