Global stock markets continue to rally from their March 2020 lows. Stock markets are now richly valued, but that does not mean they cannot continue to climb. Stocks markets can climb higher than they "should", and then fall farther than they "should". A wise long-term investor recognizes that short-term volatility is part of equity ownership and knows that even a short-term 30% drop in the stock market represents only a small blip on a graph of an investor with a 30 to 50 year investment horizon.
Investors need to remember that the Bear is sleeping now, and there is a 100% probability that the Bear will awaken at some point, and stock markets will again convulse downwards by 20-50%. Notwithstanding the March 2020 Bear market, one of the worst ever recorded in terms of speed, TheAnswerIs.ca Model Portfolio is averaging a return of just over 11% per year since inception, clearly illustrating that while an all-equity portfolio is extremely volatile, it also provides attractive longer-term returns.
The next time the Bear awakens, we know an investors best defense is to simply... “hibernate”, collect their dividends, and wait for the Bear to wander back into its cave. TheAnswerIs.ca Model Portfolio includes ETFs in the utilities and real estate sectors, which pay dividends every month, even during a downturn. Collecting dividends during a market downturn is like getting “paid to wait” for a portfolio to eventually recover.