Welcome to my blog, Nancy’s Notes. I’m never sure what I am going to write about, so I’ll disclose to you now that if you become a regular reader, there’s no telling what I will be talking about. Hopefully it won’t be all about investing. I won’t get on a soapbox preaching to you. I’ll be writing about things that have happened to me, things that my mad mind are thinking.
Murray S. Davis (a sociologist) wrote that, “A theorist is considered great, not because his theories are true, but because they are interesting.”
I hope that the topics that I write about not only have some truth to them, but that you find them interesting.
Since the beginning of the year 2018, we have been in volatile and confusing markets. We left 2017 with great positive returns, especially from the technology stocks, and the markets in general. Not surprisingly, we kind of expected the party to continue. Unfortunately, to date we have not had the same results. The markets entered into correction territory at the beginning of the year and are still struggling.
As most of my clients know, I was expecting and preparing for market weakness or a correction since the early fall of 2017. I often gave the analogy that the market was like a marathon runner. It, too, needs to take a break after a big run. I had the right idea, just the wrong timing. The market had more stamina than I realized.
I have a new young investor that began with me in the late spring of last year. He is the son of a long time client of mine. He and his new wife opened up TFSAs with me and deposited cash. I suggested investing about 30% of it in solid Canadian blue chip stocks that pay a dividend, 30% in growth companies in both Canada and the US and to hold the remaining 40% in cash. I explained that I was expecting a pullback in the market and that I wanted to keep some cash for when stocks “go on sale”.
Fast forward to late October and he called me to discuss his portfolio. He wanted to invest the rest of the cash in stocks and felt that he was missing out on the big market wave. At this point the TSX had a return of about 4% and the DJIA 17% for the year. The technology NASDAQ index was up a whopping 22%.
My conversation with this new investor went something like this. “You have a low risk profile. You don’t like to lose money, mind you nobody does. I get it that you’re afraid of missing out. You want to make money and you want to make it now. A good investor needs to learn patience. It’s my job to stop you from being an emotional investor and help you become an intelligent investor. I’m telling you not to jump in fully invested in the market when it is reaching new highs. Wait for that stock to go on sale.”
“Ok”, he finally says. “Yes, I don’t want to lose money. I’ll wait……but if you know of a stock that’s going to go up, can you give me a call?!”
My response to him was, “I appreciate your confidence in my abilities, but, remember, I too am human. If I really knew which stocks were only going to go up I’d be on a beach!”
Investing involves a lot of research so you can make an informed, well thought out choices. There is never an assured way of predicting the unknown. Always be accepting that unforeseen events can happen, and be prepared to make a change, or sometimes sit tight, as a result.