Transcript
Putting market volatility in perspective
Markets go up and they go down—a well known fact about global financial markets. However, experiencing the downside of a market cycle can be difficult and nerve-racking, especially for the first time, so let’s put market volatility into perspective. Understanding what it is and why it happens can be the difference between sticking to your long-term plan and achieving your investment goals or stumbling along the way.
Canadian equities (S&P/TSX Composite Index)
Growth of $1,000 from January 1, 2010 –February 28, 2019
European
sovereign
debt crisis
Chinese
market crash
& Brexit vote
U.S. – China
trade tension
Source: State Street as of
February 28, 2019
1-Month divestment
$2,000… $800
2009… 2018
Year, Dec. 31
$1,797
$1,486
Think long-term
• Markets trend upwards over time
• Focus on achieving your goals
• Avoid focusing on short-term performance
• Timing the markets is difficult
• Stay invested
$1,797 vs. $1,486
Missing the 3 up months that followed bouts of volatility in 2011, 2015-2016 and 2018 (October 2011, March 2016, January 2019) can severely impact long-term results.
Reducing volatility
• Diversification can smooth out performance
• Create a smoother growth path with a portfolio of different investments
Canadian equities (S&P/TSX Composite Index)
Diversified portfolio1
What is volatility?
• Tendency for returns to vary around their average
• Normal occurrence in global stock markets
• Unrealistic to expect markets to go up all the time
Causes of volatility
• Economic conditions
• Geopolitical events
• Policy makers
• Individual stock/sector events
• 24-hour news
Sign of a healthy market
• Markets reacting to the latest information
• Fix pricing anomalies
• Creates investment opportunities
For more information about market volatility, how MD manages it or how it affects your investment portfolio, speak with your MD Advisor.2
1 Portfolio: 20% Canadian equities (S&P/TSX Composite Index), 20% U.S. equities (S&P 500 Index), 10% international equities (MSCI EAFE Index), 50% Canadian bonds ( 25% FTSE TMX Canada Universe Bond Index, 25% FTSE TMX Canadian Short-Term Overall Bond Index).
2 MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec).
The information contained in this document is not intended to offer foreign or domestic taxation, legal, accounting or similar professional advice, nor is it intended to replace the advice of independent tax, accounting or legal professionals. Incorporation guidance is limited to asset allocation and integrating corporate entities into financial plans and wealth strategies. Any tax-related information is applicable to Canadian residents only and is in accordance with current Canadian tax law including judicial and administrative interpretation. The information and strategies presented here may not be suitable for U.S. persons (citizens, residents or green card holders) or non-residents of Canada, or for situations involving such individuals. Employees of the MD Group of Companies are not authorized to make any determination of a client’s U.S. status or tax filing obligations, whether foreign or domestic. The MD ExO® service provides financial products and guidance to clients, delivered through the MD Group of Companies (MD Financial Management Inc., MD Management Limited, MD Private Trust Company, MD Life Insurance Company and MD Insurance Agency Limited). For a detailed list of these companies, visit md.ca. MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies.
