Year to Date Review
What is the big difference between the start of 2018 and the 2017…VOLATILITY!!!
What are the reasons? There are several (and probably some that are unknown)
Rising interest rates (this is repricing downward income oriented equities AND bonds)
The ‘bull’ market is one of the longest ever (but the 2008-2009 period was one of the worst every so this makes sense)
TRUMP…need I say more
Put your own reason in here
As you can see by the chart above the US markets have done much better than the Canadian stock market (as represented by i-shares XIU). The reason for this is the diversification of the U.S. market and its exposure to some of the best technology companies in the world. You do not need to own a dedicated technology fund (but if you can handle the volatility it may be worth it) but it is important to have access to them. CI Global Income and Growth is an excellent example of this with several technology holding in the top 20.
When you include dividends the US market has averaged about 8.5% over the last 10 years and that is very close to the average equity return over time. Sadly Canada is not.
Pardon? I hear several people shouting ‘what about the Canadian banks? They are the best of the best!
Remember, diversification is important.
Trying to take the blinders off and taking a fresh look is important.
What worked 20 years ago, 10 years ago, 5 years ago may not work today.
The GREAT news is that that there is moderate growth in economies all over the world so while we may be back to NORMALIZED volatility the world is growing which should result in growing earnings and by extension growing share prices.
STRATEGIES FOR (ALMOST) EVERYONE TO REDUCE VOLATILITY AND MAINTAIN TARGET RETURNS (please contact me to implement)
In this low interest rate world I suggest (and for the last 2 years) exposure to TREZ Capital Short Term Commercial Mortgages. 20%+ exposure to this will REDUCE VOLATILITY but give returns 2 to 3 times that of GIC’s. (30 day liquidity)
HARD ASSETS (real estate) such as NATIONWIDE STORAGE. These are designed to generate 8% cash flow (tax efficiently) and participate in upside potential upon sale of asset. The newest project is near downtown Kamloops British Columbia. This investment also offers stability of price reducing the volatility of your portfolio.
There is no easy/simple way to reduce volatility WITHOUT giving up average returns but in a world with lower interest rates, fewer defined benefit pension plans, lower saving levels, and increased life expectancy embracing investments like those above is important in building and maintaining your capital.
Quick update regarding portfolio suggestions on Friday. Alta-Gas is down about 4% while Paramount is up 8%. TSX is up .98% over the same time frame.
The views expressed do not necessarily reflect the opinion of Argosy Securities Inc. The information contained herein may not apply to all types of investors. Please consult a professional before making an investment decision.
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‘historical analysis does not reflect future returns’