Earlier this year I was asked: Why not try to guess the vaccine winners, and buy those stocks? Why not buy the toilet paper manufacturers, and the companies that make wipes and masks and hand sanitizer?

 

My answer: because that is guesswork, not a sustainable strategy.

 

I was also asked: Why not go to cash until we get a vaccine? My answer was the same: because going to cash is not strategy, but speculation.

 

In February and March, with the market plummeting, there were many people who wanted to go to cash, and then get back into the market when a vaccine was found. Here we are in December, and it looks like several vaccines have indeed been discovered. Here is what would have happened – what certainly did happen to many people – if they had taken that approach:

 

They would have missed out, in a matter of months, on more growth than the TSX/Canadian stock markets delivered in the last decade. Because as of early December, the market is up 55% from its low point, when many people wanted to, and did, sell (but when we were buying selectively, at deeply discounted prices).

 

Our clients’ portfolios are customized. No two are the same. On average, however, with a less than a month left in in the year, they have achieved double digit returns – and who would have guessed that?

 

The answer, as our clients know, is no one. Because the market can’t be timed. And because the market can’t be timed, here is the most important lesson of 2020.

 

Stay invested.

 

This year has taught us a lot of things because it was so tumultuous. But amid all the volatility, in the markets and in our society at large, one lesson stayed absolutely the same: stay invested.

 

It is our wealth management strategy that matters, not the noise. Our clients have a custom-made strategy, which is driven by a custom-made financial plan that embodies our understanding of what is most important to them. All of which lives in the context of our long-time portfolio strategy: own predominantly high-quality, dividend-paying companies in regulated industries. Companies with strong balance sheets and business models we understand.

 

That’s how we design diversified portfolios that weather the volatility of the world in which we live – even the world of 2020. Not by following our emotions, but by sticking with our process.

 

Buying stocks on the chance they might get hot is not part of our process. Pfizer, one of the year’s most talked-about companies, is a case is point. Many people bought Pfizer stock upon the announcement that they had a viable vaccine. Year to date, Pfizer is up 9%, and 7% of that 9% is approximately in the last month. Meanwhile, our average portfolio is up double digits on the year. And consider this: when I started my career in 2000, Pfizer was at $45. Here in December 2020, it is…$40, a very negative return on investment.

 

We have never owned Pfizer. There are things about the company that fit our criteria, but it has never lined up completely with our strategy. On the other hand, we have owned Johnson & Johnson for over a decade. I understand their business model better and observe it to be more stable and predictable. In December 2010 it was selling at $62, and this month it is at $150. Johnson & Johnson have also increased their annual dividend, every year, for 58 years in a row. (And they happen to have a strong vaccine candidate now in Health Canada approvals. It is single dose, and does not need to be stored at sub-zero temperatures, so it is easier to distribute and administer.)

 

Another company that clearly fits our criteria is Brookfield Renewable. They are in a regulated industry, have a strong balance sheet, a good dividend that is consistently growing, and – given that we all need energy and that renewable is the wave of the future – stable, recurring revenue. All of our equity portfolios own it, and this year it has given us a total return of 65%, no bets on the vaccine race required.

 

Considering the size of the deficits run by governments to fund a recover, taxes are not going down any time soon.  So it is more important than ever to make sure you have the proper planning and strategies in place, to maximize your wealth after tax.  To do this, we look for ways to leverage the use of life insurance, prescribed rate loans, trusts and other approaches; in fact, these are things we are continually doing.  In addition, as part of our year-end process, over the next month or so we will be reviewing potential strategies including RRSP and TFSA contributions, along with other tax shelter plans.

 

Never waste a good crisis (April)

 

On behalf of the entire team here at Marche Wealth Management, I wish you and your loved ones a very happy holiday season, despite how different it might be. Our mission is to uncomplicate your life by helping you navigate not just the markets, but also your personal life events. It is a mission we take very seriously. If you have friends, colleagues and family members who would appreciate our approach, we would be honoured to hear from you or them.

 

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Tyler Marche, MBA, CFP, FCSI

Your life, uncomplicated

 

tyler.marche@rbc.com

1-416-974-4810

www.tylermarche.com