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Should I be making changes to my investments because of a volatile stock market?

When markets are strong and continuing to rise, investors tend not to wonder whether they have the right mix of investments to suit their needs. If, however, you are uncomfortable because the value of your investments is fluctuating, you may need to make some changes.

To avoid making rash decisions, it makes sense to determine your investment objectives are before you start investing. Most investors want some combination of growth, income and safety. Growth comes from investing in an asset type called equities, like stocks. Fixed-income assets like bonds provide income. Safety, otherwise known as preservation of your capital, comes from cash assets like GICs or government treasury bills. A well-balanced investment portfolio has some of each of those three asset types. They tend to move up and down at different times, smoothing out the overall volatility of your portfolio. Stocks have historically produced higher returns than fixed-income or cash investments over the long-term. They do the best job of preserving and increasing your buying power by producing returns that beat inflation. Stocks are also very volatile. They can easily lose money over the short-term. That's why they make sense as a long-term investment. Seriously consider seeking professional advice on what investments to buy and sell, and when. Avoid investing in any security if it doesn't suit your objectives, or if you don't fully understand it.