TheAnswerIs.ca Inc. Model Portfolio Performance Update (Q3 2019)
TheAnswerIs.ca Inc. announces a total return for the model portfolio from inception October 26, 2016 to September 30, 2019 of 27.82%.
The corresponding total return for the Toronto Stock Exchange (TSX), as represented by the ETF XIC, was 22.46%.
The annualized return for the TheAnswerIs.ca model portfolio for the 2.93 years since inception was 8.74%.
The trailing 3-month total return for TheAnswerIs.ca model portfolio was 2.48%. The trailing 12-month total return for TheAnswerIs.ca model portfolio was 6.95%.
Past returns are not indicative of future returns.
Global stock markets are at or very near their all-time highs. From here, stock markets may climb higher or they might correct downwards, I really don’t know. Truth is, no one knows where the stock market is going in the short term, but in the long term, (i.e. greater than 10 years), the stock market is likely to be higher than it is today.
Given the recent volatility, both upward and downward, we must always be mentally prepared for a Bear Market attack, i.e. a stock market decline of 20%-50%, or more.
Since 1900, a period of almost 120 years, there have been 32 stock market Bear Market attacks, Historically, Bear Markets occur about once every 3.5 years, and the last Bear Market in the USA was almost 10 years ago.
A Bear Market, when it comes, and it ALWAYS comes, should surprise NO ONE!
The key to investing 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.
The AnswerIs.ca model portfolio is rebalanced once per year in October.
Over the course of the year the model portfolio accumulates cash from the ETF dividends / distributions. Further, some ETFs performed better than others. As a result, the model portfolio needs to be rebalanced.
To rebalance the model means buying more of the ETFs that have not performed well and selling some ETF’s that have performed well. It may seem counter intuitive to sell a portion of the “winners”, and buy more of the “losers”, but in effect, this process ensures selling at high ETF prices and buying at low ETF prices.
Overall, TheAnswerIs.ca model portfolio was up 6.95% last year. The ETF that we sold in October 2018 (because it had performed comparatively well), increased by only 5.7% over the past year. The ETFs we bought last year (because they had performed comparatively poorly), subsequently increased by an average of 11.8% over the past year. A pretty good example of the benefits of selling a portion of the ETFs that have outperformed and buying more of the ETFs that have underperformed.