It’s been a month since our last market update. A lot has changed in the market since then.
The markets are up roughly 25% since their low of March 23rd. Also, the markets aren’t as volatile the last few weeks, compared to much of February and March.
INVESTMENT RETURNS VS. INVESTOR RETURN
Today, I want to talk to you about the difference between InvestMENT returns and InvestOR returns. After all, one would think that the AVERAGE investor should get the AVERAGE return in the market. Evidence shows otherwise.
One of the major reasons for this gap is ‘Investor Behaviour’
When the markets are moving along fine and smoothly, and investors are getting good returns, everyone is happy. But what happens when the markets have a rough spell, like recently?
Some investors think getting out of the market, when its down, it the right thing to do, as if your investment is losing money, maybe it will continue to lose.
Some investors say, “I’ll get out when the market is good, and go back in when the market is bad and everything is on sale.”
Here’s the problem. To do that, you have to be right twice. You have to be right on when the market is at it’s top. And you have to be right again when the market is at it’s bottom.
The problem is NO ONE knows when the top and bottom will occur. We had the markets go up or down as much as 10% in one day this year. Being off by just ONE DAY could cost an investor 10%
It’s TIME IN the market that counts, rather than TIMING the market. Neither advisors nor investors know when markets will rise. We don’t know when they’ll fall. We don’t know when they’ll stay flat. What we do know is that over time, markets payout good returns.
The TSX has paid out 9.3% average returns since 1960, while the Dow Jones has paid out 7.75% (not including dividends) since 1919. That’s a span of 100 years!
Now, I’m not saying investing in the market is for everyone. Some investors find the ups and down in the market too hard to bear.
If that describes you, you should set up a meeting with your advisor to review your risk tolerance. Perhaps guaranteed products, with lower returns, like GICs, Bonds and Annuities, are more suitable for you.
If you have any questions or concerns, or you would like to set up a meeting to review your portfolio, get in contact with us. We cannot meet face to face right now, but we can definitely set up a video meeting or phone call to review your portfolio.
We will provide another update on the markets in May. Until then, take care everyone.
Yours in service,
Gerard Nash, B.Comm., CFP®
Founder
