Myles Zyblock, Chief Investment Strategist of Scotia Global Asset Management – which manages more than $175 billion for millions of investors in Canada and around the world – shares his latest market and investing insights.
This month, Myles provides his take on an investor’s worst enemy and the all-too-frequent stumbles along the path to building wealth over the long term.
Financial market volatility is never easy to stomach, especially as one is living it in real time. The turbulence can fog or telescope our horizon, making it much harder to see an established investment goal that might be 10 years or even longer into the future. This is when decision-making mistakes often arise, some of which might seem inconsequential during a given instance but can cumulate to something meaningful over time. Returns compound, with terminal wealth – the expected value of a portfolio at the end of the investment horizon – being the direct result of that compounding through the years.
The variability in an asset’s price path is among the few consistent experiences an investor will encounter during their journey. We have lived through a U.S. equity market correction of 10% or more eight times in the past decade alone, two of which were close to 20% and another that was just beyond 35%. This is the ninth such episode. Over this same period, the equity market has compounded at 13.2% per year, turning $10,000 into almost $35,000.
Volatility’s existence helps explain why equity investors have harvested returns higher than the risk-free rate over longer periods of time – essentially, without risk, there is little reward. This is the harsh reality of investing. It is also why zero-volatility assets, like GICs, usually deliver lower long-term rates of return.
I would like to remind readers of the importance of staying with a well-defined game plan, one that is consistent with an investor’s risk tolerance and long-term financial goals. Buying and selling is easy – but doing so with impassive discipline and for the reasons laid out in the plan is not easy.
As Benjamin Graham said long ago, “The investor’s chief problem – and even his worst enemy – is likely to be himself.” Let’s prove Mr. Graham wrong.
Myles Zyblock is a recognized North American strategist, regarded for his investment insights that blend finance and psychology to capture major inflection points in financial markets. Myles has over 25 years of experience in guiding and advising on asset allocation for a diverse set of institutional and retail advisors globally. Myles joined the firm in 2013 as the Chief Investment Strategist, working closely with the Investment Team. His experience spans multiple asset classes and geographic regions.