Investors still need tried, true way

It’s more than two years since my first investing article appeared in CARPNews Fifty-Plus. I’m in my sixties and also a member of CARP. Hence, I looked forward to the association because I felt I could help in the investment challenge we all face.

This challenge — to invest our savings so that they meet our widely varying individual objectives (we are each uniquely different) and last longer than we do — has never been more important. With me as your "guide", we set off on a journey of many dimensions. This long-term journey excites me even more today than it did in early 1998.

My inaugural article dealt with risk. I explained why it is never too late to set up individual investment portfolios with all-important positioning — reflected in an appropriate balance between fixed income and equities. The attendant risks can be further reduced by proper diversification. We returned to this essential need again and again.

Two years later, we’ve learned how properly positioned portfolios can withstand those fierce volatility storms that sweep through today’s marketplace with increasing frequency. And also how to watch for the baain opportunities presented by the likes of that scary Asian fallout of September- October 1998, and the high-tech meltdown of this past spring.

Seniors are long-term investors

In investing, like everything else, nothing goes up or down in straight lines forever. By definition, bargains are what others don’t want, but where far-sighted investors see value. They can be all the greater when we keep our perspective in the face of today’s unpredictable volatility and market trauma.

I’ve repeatedly hammered away at the fact that if we and/or our spouse expect to live at least another 10 years, we are long-term investors. The proven best way to maintain and build wealth over the long-term is through well-selected equities and equity products like mutual funds — ideally a combination of both.

Add the need to correctly identify and stay with long-running trends — after all, it’s the trend that’s the investor’s best friend — and you see how it all fits together. This time-honoured approach to successful investing has never been more important than in a turbulent, new-millennium marketplace.

New forces, old principles

Here, huge forces of change — new versus old, high tech versus conventional, growth versus value, risk versus reward –jostle each other as they search out new valuation levels. Investment markets have always over reacted and under reacted before consolidating around new support levels and then driving higher.

There may be much more volatility, a greedier crowd to deal with and additional risk. But it’s not different this time round, and we should be looking to further boost and solidify our portfolios with this knowledge.

When we began our journey, who would have believed that those traditional bellwethers, the Dow Jones Industrial Average and the Toronto Stock Exchange 300 Industrial Index, then at levels of 7,900 and 6,700 respectively, would each have breached the 10,000 barrier? To me, the TSE’s breakthrough really highlighted what a new-look Canada is capable of, even if we need to pull back and catch our breath first.

It’s a whole new world of investing out there and I’m especially excited at what lies ahead for Canadian investors.

Canadian best bets

In this vein, I’m hardpressed to think of anything better representative of today’s Canada than a six-pack of world ranking entities that I’ve highlighted previously. Even if the price has risen from $25,000 last autumn to $32,000 currently, Bombardier, BCE (and its soon-to-be-distributed 30 per cent of Nortel Networks), Canadian Pacific, Suncor Energy, Thomson Corporation and Toronto Dominion Bank, still rank as fine a combination of world-class value as one could wish for.

For those wanting additional income, there are top-class dividend payers like EdperBrascan, Noranda, TransAlta and Suncor Energy preferreds, to mention but a few. Whether it’s dividend yield, growth, total return, high technology, conventional value, resource leverage, cyclical catch-up or small cap potential that you are seeking — or a blend of all of these — a Canadian equity marketplace that has never been cheaper in world currency terms now contains them all.

That consummate long-term value investor Warren Buffett, who will soon turn 70 and who had his worst year ever in 1999 (yes, it happens to the experts too), was recently asked by an exasperated shareholder when he intended to retire. His reply: “Three years after I die.”

Two years into our journey, I urge that we approach investing in the same spirit. We are correctly positioned (and balanced, and diversified). We are set on that steady course I described, and the longer-term prospects for Canadian investors like us have never looked better.