{"id":954,"date":"2024-09-16T09:00:29","date_gmt":"2024-09-16T09:00:29","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/?p=954"},"modified":"2024-11-19T23:15:36","modified_gmt":"2024-11-19T23:15:36","slug":"market-downturns-such-as-these-are-a-good-time-for-a-risk-taking-gut-check","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/market-downturns-such-as-these-are-a-good-time-for-a-risk-taking-gut-check\/","title":{"rendered":"Market downturns such as these are a good time for a risk-taking gut check"},"content":{"rendered":"

Martin Pelletier: Being overly bullish can add a lot of risk to your portfolio<\/p><\/blockquote>\n

It really feels like global equity and\u00a0bond markets<\/a>\u00a0have been taken over by those betting on different macro outcomes, as shown by\u00a0the recent selloff in the U.S. dollar,\u00a0oil prices<\/a>\u00a0and bond yields.<\/p>\n

We\u2019ve noticed two dominant camps out there: one is recommending investors buy the dips, especially in the tech-heavy S&P 500, while the other is quite pessimistic about the global economic outlook and buying long-dated bonds and selling susceptible sectors such as energy, materials and consumer discretionary.<\/p>\n

Since we don\u2019t gamble, we are doing neither by maintaining our position that the\u00a0U.S. economy is chugging along just fine<\/a>, albeit with a slower pace of growth. That said, other economies like Canada\u2019s are likely\u00a0close to being in a recession<\/a>, which is being masked by\u00a0record levels of immigration<\/a>. Most of us feel worse off than before the pandemic because\u00a0cost-of-living prices<\/a>\u00a0remain significantly higher while our incomes just haven\u2019t caught up.<\/p>\n

Overall, we\u2019ve found that permabears tend not to make any money since they fail to see opportunities when they arise. However, being overly bullish can add a lot of risk to your portfolio, especially when it\u2019s more geared towards speculation, so you better get it right on the entry and exit \u2014 something we think is nearly impossible to do.<\/p>\n

Take a look at the oil market and its huge monthly swings as of late. Although it has been very rewarding as an investor in this space over the past few years, it has come with a lot of price variability. As a result, it really isn\u2019t gaining a lot of attention by advisers, but we can\u2019t blame them for not trying to convince their clients to own a segment of the market that speculators love to short.<\/p>\n

On the other side, while those who have stepped into the\u00a0U.S. tech sector<\/a>\u00a0have also experienced large drawdowns, such as what we witnessed a short few weeks ago with the yen carry trade unwind, these corrections are nowhere near the same in frequency as in others such as energy. Those advisers and investors who are deploying a dip-buying strategy in this segment have been handsomely rewarded.<\/p>\n

The problem is that if you are a conservative investor needing to live off your portfolio and you get the timing wrong in going all in on a trade, it could be quite costly to your hard-earned wealth.<\/p>\n

We love illustrations and recently\u00a0came across one<\/a>\u00a0showing that if you retired in 1999 with a $1-million portfolio and went all into the U.S. equity market, which was also very tech heavy at the time, while taking out $50,000 per year to live, that portfolio would be down to only $300,000 today.<\/p>\n

If you did the same with a portfolio that was evenly split between stocks, long-term bonds, cash and gold, you would still have $1 million.<\/p>\n

We\u2019re not saying today is another 1999, although many areas certainly feel that way. We also know that, statistically, the odds are in your favour as a long-term investor in the world\u2019s strongest economy. However, there is always the risk of the fear of missing out (FOMO), chasing yesterday\u2019s returns that may not be there tomorrow.<\/p>\n

We just prefer a risk-managed style that takes a different approach, one that is geared more towards capital preservation during market corrections, upside capture during rallies and minimizing the risk of emotion entering in the investment decision-making process. Having a diversified portfolio that reduces volatility is very helpful in achieving this.<\/p>\n

The truth of the matter is that you never know what lies ahead, so it\u2019s important to do a good old-fashioned gut check every once in a while to see if you are truly comfortable with adding excessive risk into your life and your investment portfolio.<\/p>\n

If not, there can be tremendous value in doing your own thing by making an investment for a better tomorrow for yourself instead of betting on beating everyone else.<\/p>\n

Martin Pelletier, CFA, is a senior portfolio manager at Wellington-Altus Private Counsel Inc., operating as TriVest Wealth Counsel, a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit\/oversight and advanced tax, estate and wealth planning. The opinions expressed are not necessarily those of Wellington-Altus.<\/em><\/p>\n

View Financial Post article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Martin Pelletier: Being overly bullish can add a lot of risk to your portfolio It really feels like global equity and\u00a0bond markets\u00a0have been taken over by those betting on different macro outcomes, as shown by\u00a0the recent selloff in the U.S. dollar,\u00a0oil prices\u00a0and bond yields. We\u2019ve noticed two dominant camps out there: one is recommending investors […]<\/p>\n","protected":false},"author":229,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_oasis_is_in_workflow":0,"_oasis_original":0,"_oasis_task_priority":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-954","post","type-post","status-publish","format-standard","hentry","category-financial-post"],"_links":{"self":[{"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/posts\/954","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/users\/229"}],"replies":[{"embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/comments?post=954"}],"version-history":[{"count":3,"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/posts\/954\/revisions"}],"predecessor-version":[{"id":1035,"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/posts\/954\/revisions\/1035"}],"wp:attachment":[{"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/media?parent=954"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/categories?post=954"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/wp-json\/wp\/v2\/tags?post=954"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}