The Martens Report - Life in the Fast Lane


Have you ever been stuck in Toronto traffic? It can be an extremely frustrating experience to deal with gridlock as everyone on the highway battles to get through the pack. One aspect that many people find particularly challenging is when your lane is at a standstill, while the one beside you is moving along well. Does this ever happen to you? Often times, IF we cave to the temptation and move over to the ‘quicker lane', more often than not, it grinds to a halt, leaving us to sit and watch traffic beside us pull ahead. Many of us tend to pick a lane and stick with it, but likely wonder if the drivers who do jockey back and forth experience any real net benefit or does changing lanes constantly end up holding them back in the end? What strikes us is how a traffic jam shares similar attributes to investor behaviour. For the past few months, it seems that investors have been stuck in traffic. It tends to happen from time to time when we experience negative volatility in the markets. You are reviewing your portfolio and it doesn't seem to be moving. For the past 5 or so years we have enjoyed net positive results from the stock market. However, over the past few months there have been declines in world markets, which have resulted in a pull back of the values of mutual funds that are invested in stocks. As you know, this type of pull back is a very normal occurrence. This time around, many feel it has actually been quite healthy as the market has gone so much longer than normal without one of its typical corrections, which helps to reset the valuations on stocks when they become extended. Currently, the lane that would appear to be doing the best is cash and bonds (not because they are currently showing strong returns, but because they are not going down). While it might be tempting to “change lanes” at the moment and move everything into cash, a typical outcome is that the slow lane (i.e. stocks) will start moving again. When you’re sitting in traffic, you cannot predict which lane will start moving and when. The same is true with the stock market. Our advice is to always try and strike a balance within your portfolio so that you will not miss out on whichever assets are in the fast lane at the moment. Cash and bonds have been the better performing asset class over these past few months...but any portfolio without stocks would have missed out on the sizable gains of the past 5 years. If you’re feeling like your portfolio is stuck in traffic, be patient…at some point traffic will start moving again. The way October has finished up, perhaps we already have! Sincerely Andrew & Peter

#financialplanning #investing

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