Last month I touched on the benefits of portfolio diversification, namely through the use of stocks and bonds. Today, I want to discuss why low interest rates and positive correlations between traditional asset classes may be the end of the traditional 60/40 portfolio, and why adding alternative investments into your portfolio might be a prudent move.
Diversification is one of the cornerstones of traditional investment advice. The most common saying we hear is “never put all your eggs in one basket” and the phrase holds true. Markets go up and down through economic change, business cycles, and a wide variety of factors which can change investment outcomes. Managing these peaks and valleys is the primary goal of an investment plan. The best possible defense against risks in any investment strategy is diverse and well-balanced financial planning.
It's the middle of April and unfortunately as I write this the COVID-19 pandemic continues to have a drastic impact on our lives. Many Canadians have been laid off or are working from home, whilst foot traffic in retail areas, parks, transit stations, and grocery stores remain minimal. (See charts and graphs below)
Wow... what a crazy month it's been. We've seen people panic-buying toilet paper, record volatility in the markets, and some of the fastest 20% drops in the history of the stock market.
Given the circumstances - I think it may be best to discuss the following topics in this month's newsletter:
- What caused one of the fastest stock market corrections
- What has happened during other extreme stock market events like the one we're seeing
- What may be expected for the remainder of the year
- What to do in this current market environment
Welcome back and Happy New Year!
Hopefully you've had a chance to enjoy some turkey, sweets, and time spent with family and friends over the Christmas break. Since the non-retired folks are back to work and setting new goals for the coming year... I thought why not challenge all of you to make a TFSA investment one of your goals for the year. At the very least, please encourage your children to take advantage of a TFSA.
For many early 20-somethings that are freshly graduated and are now facing credit card and loan bills, the last thing on their mind is investments. Your new job can just about cover rent and groceries but the limitless pocket money of your youth is now a distant memory. Granted, saving for retirement may be a far fetched idea with the mountain of immediate payments piling up; however this does not mean that young Canadians should ditch investing entirely!