Source: TSE 300 Index

Markets Tend to Rally in Early Stages of Economic Recovery
Although 2001 was a sub-par year, investors shouldn't panic or despair over their short-term losses. From 1951 to 2000, the long-term annualized return of the TSE 300 was 12.1%. Throughout this time, the market experienced 12 years of negative returns. In 2001, the TSE 300's return of -12.57% is well below its long-term average.

There are already signs that the economy and the equity markets are on the road to recovery. Economic indicators show that the markets have bottomed out. The massive interest rate cuts by both the Bank of Canada and the US Federal Reserve seem to already be having an affect on stocks. In the fourth quarter of 2001, the TSE 300 responded with a robust 12.9% return.

US Federal Reserve chairman, Alan Greenspan, recently offered up his most optimistic economic assessment in months, joining a chorus of experts who believe that the North American economy is finally on the rebound.

A look back in history shows that markets have recovered their losses over the years and have even appreciated over time. Equity markets have also proven to rally in the early stages of an economic recovery. Waiting on the sidelines in the hopes of timing a recovery may result in missed opportunities.

Time to Move Off The Sidelines
Investors shied away from long-term investments and shifted to safer money market funds in 2001. According to the Investment Funds Institute of Canada (IFIC), money market funds experienced a 44% increase in assets to $63.1 billion since the end of 2000. Clearly, many investors have decided to park their money on the sidelines in fear of short-term losses. By doing so, they may not be able to participate in a market rebound and enjoy long-term gains.

Market declines are a normal part of the equity investing cycle. History has shown that negative periods are often followed by strong market recoveries. For long-term investors, a market slump can actually translate to higher returns in the future. Market downturns can provide investors with buying opportunities that can add to their long-term growth potential.

Keeping You on the Right Track
At a time when there is so much uncertainty in the market place, a long-term investment plan featuring the hallmarks of asset allocation and diversification are more important than ever. These are themes that Russell has continually championed. Russell aims to help investors achieve their long-term financial goals with investment programs such as Sovereign™ or LifePoints® Portfolios. In the end, long-term investors will be rewarded for their patience and discipline.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the money market fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the money market fund will be returned to you.

Date of first publication: February 7, 2002