TheAnswerIs.ca
Model Portfolio
TheAnswerIs.ca Inc. Model Portfolio Performance Update (Q4 2019)
TheAnswerIs.ca Inc. announces a total return for the Model Portfolio from inception October 26, 2016 to December 31, 2019 of 30.35%. The corresponding total return for the Toronto Stock Exchange (TSX), as represented by the ETF XIC, was 25.57%. The Model Portfolio return is higher than the TSX due to broader economic sector diversification.
The annualized return for the TheAnswerIs.ca model portfolio for the 3.18 years since inception was 9.43%.
The trailing 3-month total return for TheAnswerIs.ca model portfolio was 4.21%. The trailing 12-month total return for TheAnswerIs.ca model portfolio was 23.7%.
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.
Since 1900, a period of almost 120 years, there have been 32 stock market downtowns, i.e. Bear Market attacks, Historically, Bear Markets occur about once every 3.5 years, and the last Bear Market in the USA was about 10 years ago.
Although not a specific prediction, all investors should fully expect that at some point over a thirty-to-forty-year investment career, the stock market will drop at least 20% to 50%, and probably on several occasions!
A Bear Market, when it comes, and it ALWAYS comes, should surprise NO ONE!
“Volatility in the up direction is not a problem – it’s the downward volatility that offers discourse.“
– Correm T. Sol
“Stock market meltdowns are like natural disasters – they’re unpredictable and unavoidable.“
– Rob Carrick
For people embarking on an investing career, and or with a minimum of 10 years to invest, a LARGE DROP in the stock market can be a GOOD thing!
Warren Buffett sums this seemingly illogical and contradictory behaviour up beautifully:
“If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during this period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. This reaction makes no sense. Only those who will be net sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.“
Buffet goes on to illustrate this thinking with a very simple example:
“To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”
Wise words that help crystalize the “head space” required to be a successful investor.
Now back to my words, (nobody has quoted me yet, but I remain hopeful 😊):
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 (with a wink to Star Trek).
