“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
— Warren Buffett
I hope you all had a good summer. Here in London we were spared the unrelenting heat that caused deadly wildfires in Canada and abroad. I’ll never forget one day this summer in which the smoke was so thick that I could hardly see the building across the street. Still, I was able to get away and have some great times at my mom’s cottage on the Trent River, with family and friends.
The markets continue to move in a positive direction, but growth is very slow and erratic as we’re still working through the aftershocks of last year. To put 2022 in perspective, it was only the second year since 1950 in which the stock markets and bond markets both declined (the last time this happened was 1969). In large part this was a result of rising inflation and the consequent raising of interest rates by the Bank of Canada – 10 times over the past year. Inflation is down from its high last year, but not yet beaten, and there’s a slight possibility that interest rates may be raised again in the September meeting.
In times of volatility, you often hear us advising you to take a long-term approach to investing. The following graph gives you an idea of what we mean. The graph looks at the S&P/TSX composite Index since 1977 and illustrates the chances of positive growth over rolling time periods of various lengths. If you
look at any given day, for example, the chances of your portfolio moving in a positive direction is only 53 percent.
If you look at it over a weekly basis, though, your chances are 58 percent. From there it gets better and better over longer time horizons. The chances of positive returns are 74 percent over a year, 98 percent over five years, and 100 percent over ten years or longer.
This graph contains an encouraging message to investors who worry about the daily ups and downs of the market. Those who check their portfolios every day are likely to be in a constant state of anxiety, as the chances of it going up are not much better than a flip of a coin. But over time the trend is invariably
upward.
As we get older many of us think that our time horizons are shrinking, but most of us have more time than we think, The words of Warren Buffet, quoted above, are relevant to all of us, and we should like what we own. If you have any questions about your investment portfolio or the markets, please give us a call.
