When hysteria hits – focus on fundamentals

Lots has happened over the past several months, most noticeably the US election. I can’t recall an election period that has brought so much hysteria from multiple perspectives teetering on the outcome.  Going back over the past couple of years there have been other events that have brought heightened sensitivities – a pandemic, societal lockdowns, the war in Ukraine, the war in the Middle East to name a few. 

It is easy for us to spot the inconsistencies and often misleading context when reading mainstream financial journalism – no doubt this has become more of a trend in all areas of journalism, politics most notably.  Media companies compete for viewership, ad space, and that competition is changing and increasing.

One thing is for sure – we have had our share of frenzy around the world – and it will continue.  If we look over the last several decades, even 100 years, there have been major geopolitical events occurring consistently around the world creating angst and worry.  But one thing remains constant – companies innovate, adapt and evolve.

In the end when we think about investment portfolio what are we investing in?  Shares of successful companies, perhaps debt instruments of successful companies and governments (bonds), real estate and other hard assets, currencies, among other things.  Through all of the turmoil – companies innovate, adapt and evolve.  And that is why markets continue to climb higher, especially in times of uncertainty.

While it is easy to think “this time is different” – whether it be the US election, trade wars, combat wars etc.- as has been said by some of the sage wisdom – this too shall pass.  These events will pass, new events will come along, and investment opportunities will continue to present themselves.

So, what are the fundamentals to focus on?  Your plan, your strategy, your goals, your future cashflow and net worth trend, and using your portfolio as a funding medium for achievement.  Each element of your portfolio should have a specific purpose:

•    Equities – are meant to grow, but bring along volatility with ownership and should be used for long term time horizons (5 years+)

•    Bonds – are meant to  provide an offset to the volatility in stocks, a relatively stable income and relatively smooth return, albeit lower expected return than stocks

•    Cash and equivalents – short term use, on hand for capital needs or opportunities

•    Real estate – used as alternative means to growth wealth

•    Liquid alternatives – a newer investment option in the retail space, meant to provide an offset to the volatility in stocks, negative correlation so to speak

And there are others.  Whether you should have a 100% equity portfolio or 0% equity portfolio has little to do with external events.  It has all to do with your circumstances, goals, plan and strategy.  That is the starting point – review your cashflow trends, reassess your asset allocation, own products that deliver results – and forget what the newscasters are saying about the world.  In the end this formula works – and we’re here to walk along side you throughout your journey.

So… forget the hysteria, focus on the fundamentals.  A regular review/update on your plan and investments is always a good idea.

Until next time,

Rajeev Kudsia, CFP, CIM®, B.Sc.(hons) 

Senior Financial Advisor

Manulife Wealth