Around The World In 100 Words - July 2018 - Week 26

We’re at the mid-point of the year and time to take (ahem) stock of where we are. Well, markets have been a mixed bag and with the exception of the tech-heavy NASDAQ, most indexes are somewhere between plus and minus 2 percent. The rollercoaster ride stocks were on in February and March has been replaced with less hair-rising trading days, as you would expect would arrive with the Summer doldrums.

We find this relative calm surprising, given the state of international affairs, where tariffs are being levied daily and with increasing protectionist rhetoric. Trade impasses will undoubtedly carry over to capital markets at some point, leaving investors wondering what to do.

Most investors have an instinctual aversion to risk of loss, and if they perceive a hazard in the market they are inclined to want to sell. Acting on this however, is why investors get poorer returns then markets do over time. So with the hazard of protectionism front and centre, what should investors do if anything?

My favourite advice comes from a 500 year old recommendation by Jacob Fugger the Rich (I’ve been to his home in Augsburg!) The German financier suggested that you divide your fortune into a rational asset mix of income-growing stocks, income-producing bonds, cash and real estate. The true magic of this diversification is to maintain some balance between the chosen assets in such a way as one trims and takes profits in sectors that have become too large in your portfolio due to appreciation and reinvest into those assets that have fallen to a smaller portion of your portfolio. This re-balancing technique is proven to be positive for long term returns and means that investors are spared the impossible task of predicting where markets are going in the next six months. Simply put, don’t forecast, re-balance.We’re at the mid-point of the year and time to take (ahem) stock of where we are. Well, markets have been a mixed bag and with the exception of the tech-heavy NASDAQ, most indexes are somewhere between plus and minus 2 percent. The rollercoaster ride stocks were on in February and March has been replaced with less hair-rising trading days, as you would expect would arrive with the Summer doldrums.

And that’s where we come in. Our view is that re-balancing to a portfolio comprised of 1/3rd corporate and high yield bonds, and 2/3rds small, medium and large capitalization companies in a diversified fund portfolio is prudent based on the State of the (global) Union at the half way point in 2018. I look forward to speaking with you in regards to this and please reach out to me if I haven’t spoken to you in July.

And Happy Canada Day to all of you!

Martin

519-546-5088