I hope our February newsletter finds you and your family healthy and happy. Our family had the good fortune of attending our first NHL game together and my daughters could not have been more excited. Ok, I was pretty excited too.
There is no way to sugar coat the fact that January was not kind to all our client portfolios. Two things are working against us now as we talk about our 12 month return. First, of course, this January is negative, second, last January, February, and March were very positive. As we move through this quarter, please bear in mind that the 12 month returns are being affected by dropping some very good months as well as the current volatility. The bond component of our portfolios is working exactly as it should right now, it is providing a shock absorber and stabilizing our portfolios to ensure we do not feel the full extent of the recent down turn. As markets have taken a decline, they have erased some of the very high returns we earned about a year ago. This has meant, although we are down, we are usually only in a small negative over the course of one year. Fortunately, February looks like it may be much more positive.
The TSX is down 10.16% over the last 12 months. However, due to our diversification, we have been able to minimize this correction, so far. The S&P 500 (USA) is down -.99% over the last 12 months but when we convert that back to our Canadian dollar our return becomes positive 8.86% Europe had a gain of 1% this past year. Asian markets have a gain of 2.87% over the last twelve months. These returns are all expressed in Canadian dollars and therefore include our gains from a declining Canadian Dollar. As of the end of January our one year returns on our portfolios were all below long term average. (source: Vanguard Canada)
Our goal is always to give you the Greatest Probability of Success. One way we do this is to help you minimize three types of cost. First, Structural, or the fees you pay, Second, taxes, and Third, behavioral. We know from various studies that the average investor earns far less than the actual investments they own. One of the biggest reasons for this difference in returns is bad investor behaviour. When times get a little tough it is very easy and very comforting to make changes that are not actually in your best interest. Because our interests are aligned with our clients, we can confidently show you what is in YOUR best interest.
Warren