The Pull of the Markets
If you pay attention to the markets, then you may be feeling “the pull of the markets” right now. I know I am. As much as I pride myself on being “quantitative” and “rules-based” when it comes to investing, it’s hard not to feel like you are missing the boat by not “making a move” and getting into the market at any price these days (since stocks seem to go higher every day).
In my view, at times like this it's vitally important to take a step back and try to view things from a different perspective. Try to remember that just about one year ago markets were dropping fast, hitting a short-term low on December 24th. The S&P/TSX Index, which hit a new all-time high of $17,114 a few weeks ago (and is trading at 17,054 today) closed at 13,780 on December 24th, 2018. (The shares are up more than 24% from the low!). If you are not in the market right now, I am positive you do not need to rush to buy in today near an all-time high.
Perhaps more importantly these markets give you a golden opportunity to reassess risk from a “big picture” perspective. How much risk should you have in your portfolio? How much risk do you need in your portfolio? How much risk are you comfortable with in your portfolio? This all depends on your unique goals and personal financial plan.
If you don’t have a plan, get one!
If you don’t have a rule book for how much risk you are willing to take and how to manage it, write one!
If you feel like you are missing out, consider the words of my mentor, Ed Yablonski. Whenever someone sold a stock at a profit, or felt they were missing out on gains Ed would remind them “it’s not like you don’t have any stocks.” In the context of my practice, all of my clients have some Equities already (except one!), and we arrived at this asset mix as a result of discussions and in many cases planning. They are participating in the market and there is no need to rush to add more at this point.
If you have savings and do not have any Equities in your portfolio then that is the result of decisions you made over the years. At times like these you should think back and remind yourself why you shied away from the market in the first place. I can assure you that trading near an all-time is not the right time to re-think your Equity weighting.
If you feel like you are missing out, start with a plan. Make sure you can afford to take the risk and/or need to take the risk and then create a game-plan for how to get invested. My approach is to look to buy high quality companies at fair prices (spoiler alert: multi-year highs are probably not the best price), and then create a plan for rebalancing regularly to keep the risk limited to the level that is right for you and required by the plan. If you need a game-plan or would simply like a no-obligation second opinion, please feel free to call me at 416.231.6528 or email me directly at jeff.ker@rbc.com.
