Hold onto your hats - this is going to be one bumpy ride! - July 2005

You've read the headlines: "How to Beat a Bad Market", "How to Torpedo-proof your portfolio", "Volatility is here to stay", "Curves Ahead: The best investing strategies for 2005". Sounds a little discouraging, yes, but don't jump out of a moving vehicle just yet. The terrain may be a little rough in the investment field these days, but we're going to give you some strategies to crash-proof your vehicle. Of course, nothing is foolproof, but at least you'll have a roll-over bar and some air bags.

First, as "location, location, location" is to buying real-estate, so is "diversification, diversification, diversification" to building a good financial portfolio. This is because different types of investments can perform well at different times. Some have the potential to not only protect your investment, but actually grow it during tough times.

	With the markets as volatile as they are, you want to be sure you invest in products that beat the average inflation rate. Steer clear of floating Canada savings bonds, provincially-issued bearer bonds, and investments with a term of less than two years. Following are some tips to ensure your portfolio is well-diversified:
			Include a mix of laddered GICs, mutual funds, insurance and
			annuities
			Select guaranteed, fixed-income or real estate asset classes
			to balance
			Hold at least 15 to 20 stocks in any given geographical
			market
			Diversify across different industries
			Choose stocks that are selling for the best rate at the time
			Plan to invest for the long-term (at least five years)
			Don't make drastic portfolio changes based on current market
			conditions
			At least once a year, review your financial goals, asset
			allocation and risk tolerance level

If your portfolio meets most of these guidelines, rest assured you're maximizing your return for your risk level.

In choosing investments that weather inflation, fixed income investments like bonds and money market investments can help. Of course, the market value of fixed-income investments can fluctuate in response to changes in interest and inflation rates, and are not guaranteed.

Guaranteed investments like long-term GICs usually provide greater stability than bond funds and higher long-term yields than money market funds. Granted, they offer only marginal growth over inflation, but balancing your GIC portfolio with a diversified, balanced mutual fund can increase your return dramatically without substantially increasing your risk.

You can also look to include some alternative asset classes such as real estate or income trusts, which can help protect your portfolio from extreme market volatility and inflation.

To add more safety features to your portfolio, call your Rice Financial advisor today.