Volatility both up and down continues to describe the financial markets of 2022…and it may persist until there is a clear sign that the current course of central banks will curb inflation without too much damage to global economies. These are difficult times to be an investor and it is worth revisiting the process and actions required to safely reach the other side…and I hate to miss an opportunity to talk about the process and magic of compound interest!
When markets are moving in any direction, it is the discipline of rebalancing to your investment policy that ensures you sell high and buy low. That policy dictates how much liquidity is required to fund your expenses and how much growth is needed for the future value of those same amounts. We regularly review all portfolios against each investment policy and it serves as the basis of all reinvestment decisions. Ensuring that we trim in strong markets and buy when prices are lower helps us build strong income-producing portfolios. Throughout 2020 and 2021, we continually trimmed equity portfolios and bought into underperforming markets. This can look quite subtle particularly when all asset classes are moving in tandem, or more aggressive when volatility presents opportunities. An added safety net comes in the form of matching fixed income maturities to the needs of each household. We always know where your income is coming from and are never in a position of selling securities at a low price to fund your income.
We continue to overwhelmingly favour strong, established companies with a generous dividend yield and a history of increasing dividends as earnings rise, even in down markets. These companies are constantly monitored to ensure they can continue to support their dividend payments, both now and in the future. This results in a reliable income stream and increasing valuations over time.
As dividends and income are earned in the portfolio, the money is reinvested according to your investment policy, allowing us to take advantage of the current discount on prices and poise your portfolio for an inevitable recovery. Today, that is adding while prices are low and yields are high, benefitting from some of that compounding magic.
Our job is and remains to cut through the conflicting rhetoric in the news and make informed decisions. We understand the discomfort that comes with a highly volatile market. It is important to remember that markets will recover and we will do our best to limit volatility in the meantime. The steady income stream built into your portfolio will continue, and your investment policy will be the guide to the form of dividends that can be used to take advantage of current market conditions.
Please reach out if you would like your personal situation reviewed. We are always happy to hear from you.
Livingston Wealth Management Group