Expect the Unexpected
I have said it before and I am saying it again - expect the unexpected. If you are in Nova Scotia, especially Halifax (Central Zone), to some (including me), the unexpected happened in the last week and a half. We went from months of low daily Covid cases to record numbers. This is scary. The good news is we are testing exponentially more people than last year and the percentage of those who test positive still remains low. However this is like comparing the stock markets when it is down -20% and you only lost -10%.
Relative results are useful to provide comfort but it does not solve the immediate concern. We need to be prepared. With Covid it appears we are - vaccinations have been available to protect those eligible and lockdown measures have been promptly enacted. This preparedness should result in a low percentage of those who test positive and hopefully the vaccinations protect against any death toll.
Stock markets have been setting their own daily records in the last few months. In my opinion we still need to be prepared for alternatives.
We do this in several ways including hiring money management teams who focus on downside protection and diversification. Yes, we want to own investments that participate in the positive performance of the overall market but I would recommend, more importantly, we want the money to be protected.
Below are two examples of money managers we employ - the Value Equity team with Manulife and Mawer.
These examples are not intended to be a solicitation to buy, trade, or add to one of these funds now, but a reminder that a "prepared" investment includes diversification and preservation of capital as an objective.
Here is what they say;
The Value Equity team - Manulife
The team’s approach to building a fund is to think of themselves as being CEOs of a private conglomerate business. Each stock holding can be thought of as a different subsidiary of the conglomerate business. The team seeks to diversify funds by business risk so that revenue and earnings come from multiple diversified and uncorrelated sources; therefore, no one subsidiary can take down the entire conglomerate business. A fund that’s well diversified by business risk means that any individual business event would have limited impact on the entire portfolio.
Mawer Investment Management Ltd.
Mawer is an independent, privately owned company and because investment management is their only business, they are able to focus on their primary objective: to preserve and create wealth for their clients. The firm employs a disciplined, research-driven process and long-term view in the management of portfolios. Value-added returns are achieved through prudent security selection and portfolio mix based on fundamental analysis of securities. The investment management team offers investment expertise across all asset classes. Strong relative returns are achieved through a team process which blends the unique expertise and style of all investment specialists. Portfolios are managed according to the unique investment objectives and risk tolerances of their clients.
Here is how they have performed;
As we see new records set in real estate and stock markets remember a causality of greed is human wisdom.
Let's be wise and prepared.
Take care and be safe,
Matthew Bishop
Financial Advisor