Every Relationship Has its Ups and Downs
Due to the turbulent stock markets seen this month, we wanted to discuss volatility as the main topic for this month’s issue of The Martens Report. We’d like to start by letting everyone know the vast majority of the mutual funds we tend to recommend are still positive since the beginning of the year, particularly in the global equity & global balanced space. We’re sure many will be happy knowing this. We strongly believe that by sticking to their process, the management teams of these funds have been prepared for a dip in the markets like the one we have seen in August. This was also expressed in the July issue of the Martens report ‘Observing Your Cash.’ Moving forward to today, they are still sticking with their process and buying into the downturn at much more attractive valuations than a month ago. An interesting piece of information that has been highlighted during this downturn is that the S&P 500 (in the USA) has experienced, on average, an intra-year drop of 14.2% over the past 35-40 years and yet still has had many positive longer-term outcomes. Let's face it, most investors haven’t experienced much downside in the past three years, but looking back a little further, we saw a near 15% sell-off in 2010 and close to 18% sell-off in 2011 that, while incredibly uncomfortable, did not mark the beginning of the end of the current bull market. In conclusion, here is a link to an article recently published by the management team at EdgePoint Wealth Inc., intended to help educate investors more about volatility and why it's not risk in their books. Their message: volatility is the friend of the investor who knows the value of a business and the enemy of the investor who doesn't. Many of our preferred management teams share the same sentiment as the EdgePoint team. Instead of being fearful, they are excited and we hope you can be too, even if markets can be tough to stomach at times.
Andrew & Peter