TheAnswerIs.ca
Model Portfolio
TheAnswerIs.ca Inc. Model Portfolio Performance Update (Q1 2023)
TheAnswerIs.ca Inc. announces a total return for the Model Portfolio from inception October 26, 2016, to March 31, 2023 was 64.04%.
The corresponding total return for the Toronto Stock Exchange (TSX), as represented by the ETF XIC, was 65.51%. The recent Canadian TSX outperformance is largely due to Canada’s heavy weighting in oil & gas, as well as mining stocks.
The annualized return for the TheAnswerIs.ca Model Portfolio for the 6.42 years since inception was 8.00%.
The trailing 3-month total return for TheAnswerIs.ca Model Portfolio was positive 6.62%. The trailing 12-month total return for TheAnswerIs.ca Model Portfolio was negative 4.86%.
Past returns are not indicative of future returns.
It has been a bit of a roller coaster ride lately.
During 2020, at the onset of Covid, global stock markets dropped by about 35%. In 2021, as Covid subsided, and the sugar rush caused by ultra-low interest rates took hold, global stock markets soared, reaching new all-time highs. In 2022, as inflation surged, central banks around the world took the proverbial punch bowl away by raising interest rates, causing stock markets to drop 20%. Year-to-date 2023, global stock markets have clawed back about a third of those 2022 losses, but the short-term direction of the stock market remains as uncertain as ever.
I don’t know if we are on the cusp of a severe recession which would cause the stock market to drop again, or, if inflation has already peaked and will quickly drop back down to 2% without a recession, which may cause the recent the stock market rally to continue.
Nonetheless, the importance of a long-term perspective is clearly illustrated in an interesting article in the Globe & Mail by Norman Rothery. The analysis indicated the chance of making a profitable investment in the TSX Total Return Index over various time periods between January 1956 and September 2020.
If you bought the TSX index at the end of any randomly selected month during the study period, there was a 62% chance the TSX climbed the following month.
IMPORTANTLY, the odds of a happy result increased over longer time periods 😊
If you checked the TSX at the end of the following year, there was a 73% chance the TSX was up. If you checked 2 years after your purchase, the chance of success was 83%, and if you checked after 5 years, your chance of success was 98%! Those are pretty good odds.
Another study by Crestmont Research focused on the US stock market. That study analyzed 104 rolling 20-year time periods since 1919, and 100%, yes 100%, of those time periods show a positive annualized total return. Put another way, if you had bought and held for 20 years, regardless of when you made your initial purchase, you would have made money 100% of the time!
The key to investment success is to make sure any money invested in the stock market can be left untouched for a minimum of 10 years, and preferably much longer. Not selling into a stock market downturn will ensure time for a portfolio to recover and provide potentially attractive long-term average equity returns. Five years before one slows down working, and begins to draw money from their portfolio, one should move a significant portion of their portfolio into Fixed Income.
Invest long-term and prosper.