Toby Nangle , a prominent U.K.-based portfolio manager for Threadneedle Asset Management Ltd., recently published a useful advice column called Ten tips for making it in finance. Some of these tips, like "learn quickly that every job is a sales job" are most useful for people already working in the industry and others, "pick a good boss," apply anywhere and everywhere.
For investors, the most relevant tip is No. 8, "never ever say that we live in unprecedented times." Mr. Nangle writes, "stuff happens all the time. And the incidence of stuff is no excuse for doing a bad job for your clients… In my 20 years the following stand out: the Asian crisis; the Russian default; LTCM [the failure of hedge fund Long-Term Capital Management]; Brazilian depeg; dot-com boom/bust; the Argentina crisis; 9/11 and the 'War on Terror'; the Brazilian electoral crisis; Worldcom/Enron/Anderson client crisis; the Gulf War; everything related to the global financial crisis; the European sovereign debt crisis; the commodity meltdown/deflation; and the Anglo-Saxon populist electoral wave."
There are 14 market crises listed here that he viewed as "fairly existential for markets" in two decades.
Something difficult will happen to domestic investment portfolios, it's a matter of when, not if. Successful long-term investors will be aware of this, and have a portfolio built to weather the storm – avoiding big overweight allocations in volatile sectors, for instance, or maintaining reasonable valuation levels -- without attempting to predict when it will occur.
-- Scott Barlow is The Globe's in-house market strategist
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Stocks to ponder
Horizons Euro STOXX 50 Index ETF (HXX). The European economy finally seems to have emerging from the doldrums, despite the continuing concerns about Brexit, slow growth in key countries like Italy and the coming German election. The Euro STOXX 50 index, which includes the top blue-chip stocks from the euro zone, started the year at 3,309 and is now at 3,467, for a gain of almost 5 per cent. This ETF, which launched last December, is one way to invest in this index. Gordon Pape explains.
Great Canadian Gaming Corp. This company and Brookfield Business Partners LP have landed a lucrative contract to operate casinos in the Greater Toronto Area that could see the partners spend as much as $1-billion to redevelop and expand the city's gambling facilities. The privatization deal announced on Tuesday by Ontario Lottery and Gaming Corp. would allow the partners to redevelop three sites, including Woodbine Racetrack, and add a potential fourth casino at a new site in the city, all subject to municipal approval. Great Canadian Gaming's stock leaped 18 per cent in Tuesday's trading after the announcement was made. Tim Shufelt explains.
Sierra Wireless. For most of the year, Sierra Wireless Inc. was one of Canada's best investing stories. Up more than 100 per cent, it was the best-performing stock in the S&P/TSX composite for much of 2017. The Vancouver tech company was showing strength in earnings, coupled with its sexy long-term story as a big player in the "Internet of Things," the trend that sees the connection and digitization of all manner of objects. Alas, companies like that can easily get laid low, and that is what happened last week. Sierra Wireless announced third-quarter guidance that was just a hair below expectations, and said it would make a deal to bolster its IoT business that would regrettably dilute its earnings in the short term. But is this harsh justice of the market warranted? David Milstead explores.
The Rundown
Lessons from '07 (and '97): Beware the risks you can't see
People who believe that walking under ladders is bad luck may also want to be wary of investing during years that end with a seven. The recent run of such years displays an unusual knack for nasty surprises – from the financial crisis in 2007, to the Asian debacle in 1997, to Black Monday in 1987. What to make of this odd streak of unlucky sevens? For the most part, absolutely nothing. If you're of a rational turn of mind, it's obvious that the appearance of a certain numeral in the date can't influence events. But the regular rhythm of these market-shaking episodes should remind us that there is a more realistic reason for worry. It's the historical fact that bad things happen and they tend to happen every few years. Ian McGugan elaborates.
David Rosenberg: The Canadian dollar's doom and gloom swings to boom
When the Canadian dollar almost touched 72.46 cents (U.S.) back in early May, we turned very bullish on the currency. A lot of bad news was priced in at that point. Those speculative shorts have swung to net longs. Oil is range-bound but still has not broken down. Canada not only did not enter a recession, but has emerged as the strongest economy in the Group of Seven and growth now is running about a percentage point better than it is in the United States. David Rosenberg outlines his case for the loonie. Read also: Speculators love the Canadian dollar. Is that a bad sign?
Today's billion-dollar mistake in Canadian fixed income
People invest in bonds because they don't want to lose money. But the problem is that many investors are not paying attention to the after-tax returns of their bond investments. Today, there are negative expected after-tax returns on billions of dollars of corporate bonds in Canada. Randy Steuart explains.
The liquidity trap – coming to a market near you?
When a fund is fully invested, and has no cash on hand, it can run into an issue when emotional investors want to cash out. Most investors today continue to pour large sums of money into the market (with large chunks going into passive investments such as ETFs and indexes). This all works well as markets continue to appreciate. What happens when investors start to sell? What transpires if a large percentage of investors head for the door at the same time? Larry Sarbit examines this issue.
Carrick: ETFs for an RESP? The math doesn't work for this investor
Sometimes, the math on ETF investing just doesn't compute. A reader found this recently when he looked at making regular contributions to his daughter's registered education savings plan account at an online brokerage. He wanted to contribute $300 per month and put the money in exchange-traded funds. But his broker's per-trade commission of $9.95 equates to a fee of 3.3 per cent on a $300 investment. That's a "substantial haircut," this reader argues. True, that. So, do you do if you want to build a portfolio through regular contributions and are running up against prohibitive ETF trading commissions? Rob Carrick outlines some possibilities.
Why investors need to be ruthlessly pessimistic about their returns
The need to be ruthlessly pessimistic in your expectations for investment returns cannot be overstated. The latest update of investment return guidelines for financial planners suggests conservative investors should expect annual returns of 3.25 per cent after fees over the long term, which is specified as 10 or more years. Balanced investors should expect 3.92 per cent and aggressive investors 4.75 per cent. Dismiss from your mind any ideas you have about strong investment returns compensating for a lack of saving for retirement. Rob Carrick explains.
Why women (especially) should delay taking CPP
Women have good reason to worry about retirement finances – they tend to live longer than men, have lower pensions and are more likely to become widowed and need long-term care. That means that for women, in particular, delaying the start of taking their Canada Pension Plan (CPP) retirement benefits from 65 until 70 makes a lot of financial sense. Bonnie-Jeanne MacDonald explains.
Others
The week's most oversold and overbought stocks on the TSX
Number Crunchers
How Canadian REITs stack up in terms of safety and value
Seven dividend gems in a lacklustre Canadian index
Ask Globe Investor
Question: I am 67 years old and retired in May. I have about $250,000 in Royal Bank RRSPs (my spouse has $60,000). Based on your recent comments about a readjustment of the market I have concerns about maintaining what I have. During the last recession I took a bath and lost thousands, which took some time to make up. I don't believe that I have the luxury of time now.
Can you please help me with these questions?
1. Can I assume that the Royal has RRSP investments that are not directly related to market performance? My investments are labelled "conservative" but still linked (I believe) to the stock market.
2. Is there any way of obtaining bonds or GICs in an RRSP? Should I transfer my RRSPs (and that of my spouse) into something more stable (e.g. bonds). I would like to keep them under the RRSP umbrella.
3. Would there be any obstacles to reverse this investment action should I decide I want to go back into a market driven investment?
4. Would you suggest that I do this now or will this be a short-term adjustment?
Answer: For starters, you need to clarify what type of RRSPs you have. Since you are with a bank but have stock market exposure I assume you are invested in mutual funds. You may also be able to hold GICs in the same plan but check with the bank.
Given what you want to achieve, you would be best served with self-directed RRSPs, which allow you to invest in any type of eligible security. However, this may require moving your RRSP assets to a brokerage firm.
If you want to stay with the bank, make sure your RRSP can hold both mutual funds and GICs. You could then reduce your risk by shifting some of your assets to a GIC and into bond mutual funds. RBC has several bond funds available. With a self-directed plan, you would also be able to consider bond ETFs.
The key is to decide on your desired asset allocation at this stage. Given your age and your concern about a market decline, you should probably have no more than 50 per cent of your assets exposed to equities, with the rest in GICs and bond funds. You could change direction at any time you wish. Talk to a bank adviser about the best funds for your situation.
As for your fourth question, I don't try to time the markets. It's a fool's game. You need to make a long-term decision about the extent of risk you are willing to take (and the amount of profit potential you are willing to forego) and then take steps to implement it.
– Gordon Pape
Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.
What's up in the days ahead
Watch on Saturday for David Milstead's take on where uranium and potash prices are going, and what that means for Cameco Corp. and Potash Corp. of Saskatchewan. On Monday, Tim Shufelt takes a look at a switch in the leading TSX sectors and Robert McLister examines what online advances will do for mortgages in the near future.
Click here to see the Globe Investor earnings and economic news calendar.
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Compiled by Gillian Livingston