TheAnswerIs.ca
Model Portfolio
TheAnswerIs.ca Inc. Model Portfolio Performance Update (Q2 2022)
TheAnswerIs.ca Inc. announces a total return for the Model Portfolio from inception October 26, 2016, to June 30, 2022 was 52.15%.
The corresponding total return for the Toronto Stock Exchange (TSX), as represented by the ETF XIC, was coincidentally also 52.15%.
The annualized return for the TheAnswerIs.ca Model Portfolio for the 5.68 years since inception was 7.67%.
The trailing 3-month total return for TheAnswerIs.ca Model Portfolio was negative 11.72%. The trailing 12-month total return for TheAnswerIs.ca Model Portfolio was negative 7.01%.
Past returns are not indicative of future returns.
Global stock markets have turned challenging yet again. Market downturns are inevitable, but since educated investors expect them, there is no need to panic. All investors have learned after the 2008 Financial Crisis, and more recently the 2020 Pandemic, that the key to successful investing in the long-term, is not to sell into a market downturn. If anything, if cashflow permits, a wise investor will increase periodic investments after markets have dropped 15% to 20%, or more.
Personally, during times of declining stock markets, I find it helpful to focus on the dividend income my portfolio is generating instead of the total value.
Interestingly, during the recent stock market decline, TheAnswerIs.ca Model Portfolio dividend income has actually gone up! In Q2 2021, TheAnswerIs.ca Model portfolio generated $790.85 in dividends, and in Q2 2022, dividends increased to $1,039.11. Dividends increased even as the market declined.
Now dividends can decline during a recession, and we could well be on the cusp of a recession, but on a percentage basis, dividends typically do not decline as much as the total value of a portfolio. Focusing on portfolio income, and not the portfolio value, helps an investor navigate a stock market storms.
Over time, dividends rise, and those dividend increases drive portfolio capital values higher.
For example, for the year July 1, 2017, to June 30th 2018, the Model Portfolio generated $2,563.20 of dividend income. However, for the most recent year, July 1, 2021, to June 30th 2022, the Model Portfolio generated dividend income of $3,920.32, an increase of 53%.
This dividend increase is similar to the total value increase in the Model Portfolio of 52.15% noted above since inception in October 2016.
So when the stock markets gyrate, wobble and decline, focus on the stability of growing dividend income over time, which will eventually support a portfolios’ higher capital value as the stock market recovers. TheAnswerIs.ca Model Portfolio is designed to collect dividends every single month, whether the market decreases or not. The monthly drip of income helps an investor stay focused on the long-term.
For some helpful reading on how to cope with declining stock markets, please have a look at Risk vs Volitilty - Managing a Bear Market and also Can a Bad Day in Global Stock Markets be a Good Day for you?
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.
