Market Update November 2019

Happy Fall! Or at least what seems to remain of it with the early onslaught of wintry weather. Hopefully, we’ll have a reprieve before January and winter finally sets in.

“Good investment advice is repetitive and boring. There is nothing exciting about it.

— D. Muthukrishnan, CFP

That is a quote from a Financial Advisor in the US that some call “Dr. Nugget” for the nuggets of financial wisdom and clarity that he comes up with. It struck me that this quote of his neatly sums up our overall philosophy to investing. Allow me to describe what that means to us and by extension your investment portfolio.

I often describe our investing style akin to dry, multigrain toast. We apply a consistent steady ‘boring’ approach to investment decisions that receive tweaks when we have identified changes to the form and function of the markets. The number of clichés that can come out of this is extensive – ‘slow and steady wins the race’ and the like (not an exhaustive list of course). Clichés, however, come from common, known truths. The challenge is sticking to it. That is what we consistently endeavour to achieve.

The reason Dr. Nugget’s quote really hits home for us right now is due to the multiple worries in the world today and subsequent questions from our clients. In Canada, the issue creating the most questions recently been the election – clients ask, “how do the results of the election affect our portfolio?”.

The simple answer is the impact is limited if any. The longer answer is always a challenge, as the first thing I do is ask a question back…which part of your portfolio? In the example of the recent federal election, the only portion of the portfolio that might immediately be affected is Canadian equities which average only between 15-25% of a client’s portfolio depending on the risk tolerance of the household.The math works like this…presuming a 20% Canadian stock exposure, holding 20 different companies on an equal basis (all 1% of the total portfolio), the new government could have an impact on some of these companies but not likely all of them.

Though we are quite wary about potential tax changes, particularly to the capital gains inclusion rate, again that will have limited impact on client accounts. Only time will tell what happens with changes to legislation, but this is true with any elected government.

There are always multiple different risks in the investing world, the political risk which we have addressed here, interest rate risk and currency risks, to name a few. In structuring our client portfolios, we take all of these into account, trying to minimize the potential of loss from each. In doing this we limit upside, but limiting loss is the more important ‘boring’ part of investing and investment advice.

Let me end with another valuable nugget from Mr. Muthukrishnan:

“In investing:
Boring is good.
Boring works.
Boring creates exciting wealth.
Be bored.

As always, we are glad to discuss any issues that you are concerned about. Feel free to call us at any time. 

Written by:Ben Lapshinoff
Vice-President, Portfolio Manager