What do you see as the biggest impact on investing?
The pandemic has altered us in many ways, however, the principles of investing haven’t changed. Our investment process – which includes our ongoing assessment of the macroeconomic environment and constant analysis of the competitiveness and fundamentals of the companies that we invest in – remains the same.
As a result of the pandemic, governments are increasingly indebted, central banks are more accommodative, interest rates are even lower, while stock valuations are at record highs. With this backdrop, it’s vital to remember that investing broadly across the market isn’t likely to net the same results as it has in prior periods. Being selective, while maintaining a diversified portfolio, will be increasingly important going forward.
The new economy continues to grow at the expense of the traditional brick-and-mortar economy, and COVID-19 has only accelerated this trend.
The competitive landscape of many industries and companies have changed due to the pandemic, in addition to consumer behaviour changes, which has led to clear winners and losers. As we come out on the other side, we’re likely to see a different balance or co-existence between the old and new. It will be crucial to assess and select the companies that have the competitive profile to bounce back or continue to thrive in the recovery, while avoiding those that will likely continue to struggle. As prudent investors, we are also acutely aware of lofty valuations and are careful not to overpay for a company’s growth potential.
Portfolio Solutions, Scotiabank
Vice President & Portfolio Manager
1832 Asset Management L.P.
How do you see 2021 shaping up?
Despite all the uncertainty, we are cautiously optimistic about the future. We believe that the prospects of a COVID-19 vaccine will allow for a global economic recovery in 2021 and beyond. As we slowly transition to a more normalized economy, one thing is obvious: there will be winners and there will be losers. This means that individual security selection will become even more important. We don’t have a crystal ball, so we choose to be conservative with our investments. Therefore, we invest in high-quality companies with real business models, resilient balance sheets and proven management teams. We realize that there will likely be volatility, so we encourage clients to tune out the market noise and focus on the long term. We firmly believe that good investing should be boring; and after such an eventful year, we think you might agree.
What is the best investment advice you’ve ever received or would give?
Investment advice is often a lot like parenting advice – everyone has an opinion on what to do, what not to do, and usually what you’re doing wrong. One of my favourite pieces of advice is based on the premise of “never leave free money on the table.” Despite the old adage that nothing comes for free, many companies offer to match employee contributions to their retirement plans (up to a certain limit). So by contributing up to the threshold into your retirement plan every year, you maximize the amount of “free money” your employer will contribute to your future. Failing to do so leaves that money on the table and means you aren’t getting all the benefits you’re entitled to. I like this piece of advice because it really has nothing to do with investing, or the markets, stock or bonds. It’s just plain, simple logic – no opinions necessary. Similarly, another piece of wisdom I like is to invest early and regularly.
Vice President & Senior Portfolio Manager
1832 Asset Management L.P.