As you are probably aware, we have had a significant shift in market sentiment over the last couple weeks. In particular, yesterday saw over an 1,100 point decline in the US markets on the DOW. We thought we would send out a note to help provide some insight to clients who may be questioning what to do in times like these.
Our approach when dealing in these types of uncertainty is to stick to our thesis or focusing on high quality companies, who are increasing their corporate earnings and increasing the dividends they pay to us as shareholders in the pools that we invest in. Many of our asset managers have been hoarding cash for the last several months, by selling or trimming positions in companies they have made significant profits on over the last several years, and accumulating dividends to invest in great companies when prices do get to the levels that they feel are appropriate. This is what I mean when I say we need the RED to make the GREEN. A disciplined approach of buying at lower prices when others are fleeing the markets is what we use our institutional managers for in times like this. It eliminates the risk of making emotional decisions that can affect our clients long-term investment returns.
The combination of computer generated trading, which basically puts in automated sell and buy orders when stocks reach a certain level, has also increased the level of the short-term volatility. This can increase the speed and magnitude of the ups and downs in the market that we have experienced of late. We firmly believe that times like these provide our investors the opportunity to invest at much better prices and increases chances for better returns in the long run. Remember investing is more of a marathon than a sprint to the finish! In recent news we have all heard about the “chasing of returns” in marijuana stocks and crypto currencies (bitcoin) that has given many investors a feeling that investing is more of a sprint than a marathon. I would challenge that this type of investing is not investing at all, rather gambling or speculating at best, on companies without any fundamentals or basis for the valuations they are trading at. Alas, we are seeing some normality returning to the markets as these companies peel off the unrealistic short term returns, in some cases, as fast as they escalated in price.
Please see the link below for a piece we put together some time ago we have called the Down Market Manual. We feel it is important that clients stay focused on the long term and understand that markets, company stocks prices, do go up and down through a normal business cycle. It’s what we do with these buying opportunities that can make a difference in long term portfolio performance. So if you haven’t topped up your RRSP and TFSA yet, this could be a great time to consider doing so!
Thank you for your patience and continued support as we make our way through these turbulent times. Rest assured we are paying attention and looking at these as opportunities to increase the value of your portfolio over the long run.
Please read the Down Market Manual click here