A constant theme/rant of mine over the last 12-36 months is ‘reversion to the mean’. Simply put most asset classes have an expected return for the risk taken but most asset classes do not get that return in a consistent manner. While 5 year averages may achieve the target return the daily, weekly, monthly and even annual returns can vary greatly (think last 7 days)
My goal/mission is to protect you from a PERMANENT LOSS OF CAPITAL while achieving your PERSONAL TARGET RETURN (do you know yours?)
Any return expectation over that of a 5 year GIC will have some volatility and higher targeted returns will have higher volatility BUT NOT PERMANENT LOSS OF CAPITAL.
However I STRONGLY BELIEVE that moving outside the realm of stocks and bonds can allow clients to achieve their personal target return and REDUCE VOLATILITY.
There is no perfect investment BUT there are certainly OPTIMAL BLENDS of potential investments to achieve returns with the least amount of risk-volatility.
SUGGESTIONS TO REDUCE VOLATILITY BUT NOT RETURNS
TREZ short term commercial mortgages. This investment has generated consistent quarterly cash flow while having a stable unit price. That is one of the benefits of an investment that does not trade every day. TREZ has monthly liquidity making it more advantageous than a GIC or a direct investment in mortgages. If you want less volatility than normal equity and bond markets allow than an allocation to this is ideal.
NO UNIT PRICE CHANGE OVER THE LAST 10 DAYS (or 10 years for that matter) : )
NATIONWIDE STORAGE is a direct investment in real estate and storage. Some clients have participated in the first 2 deals (November 2016 and then August of 2017). Both of these ‘deals’ focused on purchasing land in the Vancouver area, building a ‘lifestyle’ storage facility and collecting fees. The initial project will be completed in the last quarter of this year with rental agreements already starting. This project will pay a 8.5% annual cash flow with participation in any upside due to a sale (pension plan would be a targeted buyer). The 2nd project is still trying to find and buy optimal land.
NO UNIT PRICE CHANGE OVER LAST 10 DAYS : )
The best and highest return investments often have less liquidity and this is an example. In my view you want to have 5 YEAR TIME FRAME before committing capital...BUT I FIRMLY BELIEVE MOST PEOPLE SHOULD BE COMMITTING CAPITAL. Good cash flows and low volatility are hard to find.
NATIONWIDE STORAGE has a 3rd project coming on line but this one is a bit different. The first 2 raised capital and then went out to purchase land and build. This project already has the land and is about to build a storage unit and technological advanced car wash on the same property. The project will be generating the 8.5% cash flow much quicker than the other projects.
This project will be built in Kamloops at one of the busiest arteries in the area (see attached)
PRIVATE INVESTMENTS LIKE THIS ARE KEY IN REDUCING VOLATILITY BUT NOT RETURNS!
For those of you not already participating in TREZ or NATIONWIDE please arrange a time to discuss how these investment themes can be integrated into your portfolio.
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It is important to ‘sharpen the saw’ and increase our knowledge of how the world is changing.
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‘historical analysis does not reflect future returns’