Expectation is one of the key drivers of long term investment success. If we are meeting our expectations, we stay on plan. If we are not, we typically look to make changes in those plans in order to achieve the desired results. Sounds like a reasonable strategy unless your expectations are not realistic. Needless to say, given the current stock and bond market volatility it may be worth re-examining those expectations especially as we are closing out a year where price swings in the markets are up and returns are down.

So what should you expect when it comes to your portfolio? In a recent interview, Canada Pension Plan CEO Mark Machin had some good thoughts for us to ponder when it comes to expectations from our portfolios. Mark is a good guy to turn an ear to as he is responsible for managing the largest pool of investment capital in Canada. He and his team manage a pension fund in the range of $300 billion. Their goal is to generate the best returns possible while managing risk, and to be able to pay pensioners over the next 100 years and beyond. That’s what we do but on a smaller scale - work to achieve an excellent investment return over a long time frame while managing risk so we can pay you out an income over retirement. If we (when I say we I mean you and us) do it well, you should have money left to pass on to the next generation.

 

So what are Mark Machin's words of wisdom at this time? “Ignore all the noise. We anticipate one year in every 10 where we will be down at least 12%. When you see that number, people shouldn’t be afraid by that headline. That’s deliberate risk. It’s designed to take that amount of volatility and grow investments over time”.

 

Deliberate risk is a calculated understanding of effectively managing price fluctuations. When quality companies get cheaper we must be thinking of buying, not selling. Case in point is that your money managers have been actively buying equities over the past few weeks.

 

Tye Bousada, co-founder and lead manager at Edgepoint spoke recently about the current market volatility. “If history is a guide, we will look back at this time with fond memories.”

 

So, after the last several years with pleasing investment returns and historically low levels of volatility, we have one that is less pleasing, at least for now. That is the way the investment markets work and although we may not like it we must embrace it.

 

Our investment managers are empowered and geared to do just that: actively manage your accounts in all market conditions. They love the enhanced price swings as it allows them to buy companies at much cheaper prices. Those prices will lead us to greater investment returns in the future.

 

In terms of our outlook, and that of the analysts we engage, this year is business as usual. We remain positive on the long term prospects for your portfolio and we are well aware of how the current market conditions are needed in order for you to achieve your goals over time.

 

We look forward to helping you achieve your wealth management goals.

 

Don’t hesitate to call or email if you have any questions.

Thank you for your continued business and trust.

 

Allan