A few more weeks to go…
We’re now entering the final stretch of 2020.
Many investors and portfolio managers will soon breathe a big sigh of relief: “Finally!”
No respite
For some, this past year has been like an action movie full of twists, while for others it’s been more like a thriller that has kept them in suspense. Whichever genre of movie best matches your situation, it looks like we’re seeing a happy ending, at least in terms of investments.
2020 or the ABCs of investing
Come to think of it, 2020 could be described as an excellent documentary about investing and its principles. We were able to see many of these principles come to the fore, such as the importance of holding a portfolio that fits your investor profile, and the need to stay the course and not give in to panic or greed. Portfolio diversification has also proven to be very effective in limiting drops in returns, while active management has helped take advantage of market reversals.
An evolving scenario
After a promising start to the year, a complex plot turned everything upside down at the end of February. The onset of COVID-19 and the lockdowns that followed sent stock indices plummeting around the world. From its peak on February 18, 2020, the S&P 500 Index lost more than 27% of its value in Canadian dollars, while the S&P/TSX index fell 37%.
In articles we published at the start of the pandemic in March, we emphasized the importance for an investor to stay the course and not panic. This great principle of investment has once again proven to be true, since the two above-mentioned indices have respectively posted year-to-date returns (at November 27) of 14.6% and 5.1%. Quite a comeback!
The importance of diversifying
Our products also demonstrate the importance of a second major principle: diversification. Our FDP Balanced Portfolio, for example, has had a return of 7.55% since January 2020. Yet the fund’s year-to-date return at the close of the markets on March 23, 2020 was -14.95%, its biggest drop in 42 years of existence.
However, it took only four months (August 6, 2020) to return to positive territory. By comparison, the S&P/TSX did not cross the breakeven point until November 10 (except for one day in late August). The quality of our fund as well as the work and skills of our internal and external managers thus played a key role in this strong performance.
Advice that pays off
In this saga of the health crisis and its many consequences, your advisor has played a key role by, above all, helping you stay focused on your goals and offering you the best strategies to adopt. One of these strategies, systematic savings, is often advocated to enhance and stabilize a portfolio. It also proved to be a winning strategy in 2020.
- An investor who invested $11,000 in our FDP Balanced Portfolio on January 1, 2020 would now have $11,830 in their investment portfolio.
- An investor who instead invested $1,000 per month on the 1st of each month during this year would have accumulated $11,855 in this same fund, for a return of 7.77%.
Stay invested
The past eleven months have also highlighted, in bold type, the danger of market timing. Aware of the dangers of this approach, your advisor is there, ready to help you stay the course. Unfortunately, a few investors could not resist the temptation to exit the markets during the worst of the crisis. And what’s even more unfortunate is that some of them are still on the sidelines and thus missed out on the impressive market rebound that began on March 23.
In the end, your fdp advisor gives you much more than an attractive percentage return. The advice he gives you, whether on tax matters or legal aspects of your wealth, or in connection with your business, does not appear in the calculation of your return, but it’s certainly worth its weight in gold.
And now
The year isn’t over yet, but it seems to be heading for a Hollywood ending, where the protagonists live long and happy lives, and have lots of children. One thing is certain, the recipe for a successful investment film always remains the same: a well-informed investor, supported by an experienced advisor and an outstanding team of managers!
If you have any questions about your investment portfolio, contact your advisor and discuss your concerns openly with him. We can help you.
Stéphane Girard MBA, CIMTM, Fin. Pl.
Investment Specialist, Products Knowledge
The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns net of fees and expenses payable by the fund including changes in security value and reinvestment of all dividends/distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
About Morningstar
The Morningstar Risk Adjusted Return (MRARs), commonly referred to as the Star Rating, relate the risk-adjusted performance of a fund to its peers with the same CIFSC (Canadian Investment Fund Standards Committee) Fund category for the period ended as noted and are subject to change monthly. The ratings are an objective, quantitative measure of a fund’s historical risk-adjusted performance relative to other funds in its category. Only funds with at least a three-year track record are considered. The overall star rating for a fund is a weighted combination calculated from a fund’s 3-, 5- and 10-year returns, as available, measured against the 91-day treasury bill and peer group returns. A fund can only be rated if there are a sufficient number of funds in its peer group to allow comparison for at least three years. To determine a fund’s rating, the fund and its peer are ranked by their MRARs. If a fund scores in the top 10% of its category, it receives five stars (High); if it falls in the next 22.5% , it receives four stars (Above Average); the next 35% earns a fund three stars(Neutral or Average); those in the next 22.5% received two stars (Below Average); and the lowest 10% received one star (Low). For greater detail, see morningstar.ca.
For the period ended on November 30, 2020, the returns of the FDP Balanced Portfolio (Series A) are as follows: 7.18% (1 year – 598 funds), 6.05% (3 years – 553 funds), 6.22% (5 years – 436 funds), 6.31% (10 years – 182 funds) and 7.88% (since inception – March 30, 1978).
© 2020 Morningstar Research Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is not a guarantee of future results. Source: Morningstar Direct and Professionals’ Financial, as at November 30, 2020.
