The TSX was pretty much flat from January 1^st until October 1^st and since that time the TSX is down 5%.  That is a huge drop and the pullback is not isolated to the Canadian stock market.  The S&P 500 (the US stock market) although still up 2% year to date, has dropped 5.3% in the month of October.

 

Here is what I am focusing on:

1. The companies we own are still making money (lots of it).  BCE for example reported 2018 second quarter net earnings of $755 million and yet despite that some shareholders are selling which causes the stock price to go down in the short term.  My thought is that if they continue to earn that kind of money and continue to pay the dividend (which will probably increase over time), this is a great investment to continue to hold.  Overtime the stock price will recover as the investors buy back the shares.   
2. We have lots of fixed income that is protecting our portfolios.    Year to date, most of our fixed income assets are flat or slightly positive.  When we compare that to the TSX being down 5% that is a big difference.  In times like these it is nice to know that there is a part of our portfolio that is not impacted by the market drop.  If the market pullback is prolonged we will be buying up great companies at discounted prices when we rebalance the portfolio which would set the stage for big gains when the market recovers.

What action do we need to take now?

 

By allocating a portion of our portfolio to fixed income we have pro-actively planned for short term pullbacks such as these.  No knee jerk reaction is required.

 

Your questions, thoughts and feedback is always welcome.