Marche Monthly #84

PORTFOLIO MATTERS

As always, I am your primary point of contact for all matters relating to your investment portfolio and overall planning. As I said in last month’s Marche Monthly, my role and time commitment to managing your wealth is unchanged. I remain the person directing, and ultimately responsible for, making investment decisions, and maintaining the disciplined investment management set out in your financial plan, which we custom-designed for you. Our investing philosophy (detailed below) has not changed, and will not change.

.The recent addition to our team of Matthew Wilcox is part of our commitment to serving your family for decades to come. Working alongside me, Matthew is a wealth advisor and Chartered Professional Accountant (CPA), and is preparing to write the final examination toward earning the Chartered Financial Analyst (CFA) designation, widely regarded as one of the most prestigious and difficult-to-achieve credentials in wealth management.

.ADMINISTRATIVE MATTERS

A reminder that we have a dedicated team email address and phone number for our clients to use in contacting us on all administrative matters. For example:

• Help with using the online portal

• Requesting money

• Transferring to and from accounts

• Opening new accounts

• Custom reports

• Tax documents

Here is our team email address and phone number:

marchewealth@wellington-altus.ca

1 416 446 5466

.Related, I am very pleased to tell you that Paula Mulligan has joined our team to lead all administrative matters. Paula has almost 34 years of experience supporting wealth managers, first at Scotia McLeod, and then alongside us at RBC.

.Paula will be the primary team member managing the team email address and phone number, although we all have access to them. This is to ensure faster, more consistent service, so we can always respond promptly to any administrative requests.

.At the same time, it is important to note that you can always reach us directly on any matter at our personal email addresses, which are shown at the bottom of this blog post.

TRANSITION UPDATE

Our move to Wellington-Altus puts us in a position to continue to improve results for our clients, and in keeping with our promise to them: Your life, uncomplicated. I am very pleased to confirm that the great majority of our clients have decided to come with us as Marche Wealth Management moves under the banner of Wellington-Altus Private Wealth.

.Thank you again for your trust and confidence in us.

.We made this move to ensure we have the platform to continue serving your family and future generations for decades to come. With more than $50-billion in assets under administration, Wellington-Altus has been recognized as Canada’s top-rated investment dealer by Investment Executive in the Brokerage Report Card for seven consecutive years.

.For more details on how this change benefits you, please see last month’s edition of Marche Monthly, here.

VOLATILITY IS OUR FRIEND

Volatility in the market over the past couple of months has resulted in our clients’ portfolios being 3-4 per cent down from their recent peak. I want to emphasize that:

• Volatility is a normal, healthy aspect of market behaviour

• Volatility causes some companies to be underpriced, by which I mean trading below what we consider to be their intrinsic value

• Volatility therefore presents us with opportunities to buy high-quality companies (those which meet our stringent investment philosophy, below) at a discount, something for which we are highly prepared, given that we are sitting on more cash than we have had for several years

• We are reviewing the markets constantly, looking for appropriate opportunities to deploy this cash

I am not concerned about the reduction in share price of any of the companies in our portfolios. The recent downturn in the market has not changed the quality of the businesses we own. Prominent in our portfolios are dividend-paying Canadian banks, utilities, insurance companies and other businesses which meet our investment philosophy and which we therefore want to hold for many years.

.If such weakness—which is being driven by high interest rates, inflation, the impending U.S. midterms and other factors—continues, we will add to our holdings of companies such as these. In this way, volatility is our friend.

A REMINDER

Our clients do not own the market. Instead, they own portfolios professionally managed by our team and customized to each client’s specific goals as expressed in the investment policy statement and comprehensive financial plan we created for them, and that guides everything we do.

The above-noted 3-4 per cent decline in our clients’ portfolios from their recent peak stands in contrast to the S&P 500, which we consider to be the authoritative indicator of how the markets are doing overall. The average S&P 500 stock is in a bear phase, down more than 20 per cent from the highs. The median stock is down 17 per cent. More than 200 companies, or over 40 per cent of the index, are down more than 20 per cent.

THE U.S. MIDTERMS

We do not care about what happens in the midterms from an investing point of view, because we know that no matter who wins, we believe the companies we own will continue to do well. The midterms historically have created volatility in the market, something we are experiencing now. It is the uncertainty that creates the volatility; once the elections are over—no matter who wins—the markets usually respond well.

CAN THE UNITED STATES GROW OUT OF DEBT?

We will find out. By spending taxpayer money on infrastructure and artificial intelligence, Trump is trying to grow the United States out of debt. One of his challenges is that the Chair of the U.S. Federal Reserve, Kevin Warsh, is raising interest rates, which is the opposite of what Trump wants.

.It is actually not difficult to imagine what would further increase certainty after the midterms: Interest rates going down, the war with Iran ending, and the price of oil dropping sustainably below $100. Together, these may have a positive impact on stock prices.

.But: The bottom line is that no matter what happens, we are strongly positioned to take advantage of volatility, whether it is caused by the midterms, inflation, interest rates or some other factor.

.If you would like to discuss the strategies we employ to take advantage of volatility, please do not hesitate to contact me.

OUR INVESTING PHILOSOPHY

Here is a statement of our investing philosophy, which we have followed for many years and will continue to follow:

.Our philosophy, founded on the principles of Warren Buffett and Berkshire Hathaway, is to manage concentrated portfolios composed of quality businesses we want to own for many years. We believe this approach will maximize long-term performance, improve after-tax returns and keep costs to a minimum. We focus on owning companies which:

.-Have a track record of creating shareholder value

-Have management that treats shareholders as partners

-Are trading below intrinsic value, which gives us a margin of safety

-Pay dividends and are primarily in regulated industries

-Have a simple, easy-to-understand business model

.Our portfolios are not the market, but instead are customized to each client. Above all, we focus on preservation of capital.

YEAR-END TAX PLANNING

As year-end approaches, we are looking at our clients’ portfolios and considering the opportunities we have to engage in tax-loss selling.

.Tax-loss selling is the strategy of selling investments, before year-end, that have dropped below the price we paid—so the loss cancels out capital gains and lowers your tax bill. Any unused loss can be applied to the past three years’ gains or carried forward indefinitely.

.As always, we are looking relentlessly for every way to minimize your taxes. If you or your accountant would like to discuss tax-loss selling in detail, please let me know.

TAX-EFFICIENT PHILANTHROPY

At this time of year, we look at opportunities for our clients who want to donate to a charitable organization shares that have gone up in value. Doing that, instead of selling the shares and donating the cash, results in the donor paying no tax on the capital gain and still getting the full donation receipt.

.As this article explains, it is a tax-efficient form of philanthropy.

.Here is a table that shows a scenario in which the shares are donated personally.

.Giving the shares through your own company adds an extra benefit: The ability to take some money out of the company tax-free.

All of this information is in the article.

.If you would like to discuss any of these tax-saving strategies, please do not hesitate to contact me.

.Happy fall!

.—

We don’t speak jargon. We’re all about uncomplicating your life, so we speak plain English. If there is someone you care about—someone who would appreciate this simple and straightforward approach—please feel free to share this message with them or put us in touch.

.Want to discuss any aspect of this month’s blog, or any other issue on your mind? Have a story idea? I am always happy to receive your call or email.

Tyler Marche, MBA, CIM, FCSI®, FMA

Your life, uncomplicated

tyler.marche@wellington-altus.ca

t.416.446.5432

www.marche-wealth.ca

WHO WE ARE

–Please note our new contact information–

Tyler Marche, MBA, CIM, FCSI®, FMA | Senior Wealth Advisor & Senior Portfolio Manager

t.416.446.5432

c.416.804.0550

tyler.marche@wellington-altus.ca

Matthew Wilcox, CPA | Investment Advisor