Insights: Cycle of investor emotions, sentiment, holding periods + the mother of wi-fi
Good reads:
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·????????Weekly Investment Strategy
·????????Tips for sharing the family cottage
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Best quote of the week:
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“The most common cause of low prices is pessimism—sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.” – Warren Buffett
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Best visuals of the week:
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When markets are volatile, it’s good to keep in mind the role of investor psychology in portfolio management. In my experience, emotion can bring the most damage to a portfolio. Those who are able to control their emotions and tune out the noise, end up being the most successful over the long run.
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Below is a graphic that I shared back in March 2020. It shows the range of emotions that the average investor went through over the course of that particular market cycle.
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The cycle of investor emotions is very consistent with every market downturn though, and it doesn’t matter what caused the volatility.
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Recognizing this and harnessing those emotions is the key to successfully navigating things.
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Right now, it’s likely we are currently somewhere in the capitulation stage. This is a good thing.?While the bottoming process can often take some time, it eventually happens and the markets rebound.?Remember, it’s never a question of IF markets are going to rebound, it’s a question of when.
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Another point I wanted to highlight is that more often than not, when it feels the worst, is actually when the most opportunity is out there.
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Case in point, below is a great chart showing exactly that theory. Typically when investor sentiment is at its worst (red highlighted dates), is often a key turning point for the markets (orange line).
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To close, here is an excerpt from a recent Raymond James research report that provides one final thought:
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Remain selective and stay invested! It is very difficult to achieve one’s goals sitting in cash with inflation running at well above 2%. With this in mind, we suggest investors use periods of volatility to add to high-quality securities with solid franchises, which investors would be comfortable holding even if the markets remained closed for the next 10 years. And remember that “the money is made in investing by owning good companies for long periods of time.” – Warren Buffett.
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In case you missed it:
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I joined Jenna Dagenhart and Asset TV Canada to chat about the markets à how seasonality can factor into things, outlook for the second half of the year, and 3 keys ways that investors can manage volatility. Watch it here:
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I’d love to hear from you!
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Do you have a question about the markets??Or perhaps you’d like to know more about a particular financial planning topic??Maybe you’ve got a question about your own personal situation?
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Let me know your question and I’ll include it as a topic in an upcoming newsletter: [email protected]
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Beyond the markets:
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Some fun and interesting tidbits to share on a Friday:
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·????????Hollywood starlet Hedy Lamarr is often called the “mother of Wi-Fi.” She helped invent a version of the frequency-hopping system that led to the creation of GPS, Bluetooth, and wireless internet.
·????????Crayola came from the words for “oily chalk.”
·????????Humans beings are the only animals confirmed to cry tears in response to emotions.
·????????One of the world's largest stockpiles of nuclear weapons is located at a U.S. Navy base near Seattle, which is partially defended by trained dolphins.
·????????Citizens of the Soviet Union began celebrating the defeat of Germany in World War II as soon as it was announced. Less than 24 hours later, the entire country was out of vodka.
·????????Bacon was used to make explosives during World War II.
·????????Goosebumps are actually caused by a muscle. It is called the arrector pili muscle.
·????????The Eiffel Tower leans slightly toward the shade on sunny days.
·????????Mr. Rogers always mentioned out loud that he was feeding his fish because a young blind viewer once asked him to do so. She wanted to know the fish were OK.
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Source: Mental Floss
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Thanks for reading and wishing everyone a great weekend!?
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Cheers,
Kim
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Kim Inglis, BCom, CIM, PFP, FCSI, CAFA
Portfolio Manager
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T: 416.777.6417 (Toronto)
T: 604.654.1160 (Vancouver)
T: 250.979.1803 (Kelowna)
TF: 1.877.363.1024
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The opinions expressed in this newsletter are those of the Financial Advisor Kim Inglis, BCom, CIM, PFP, FCSI, CAFA and not necessarily those of Raymond James Ltd. (“RJL”) or Raymond James (USA) Ltd. (“RJLU”).?Statistics, factual data and other information presented are from sources, believed to be reliable but accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James Ltd. and Raymond James (USA) Ltd. is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James Ltd. and Raymond James (USA) Ltd. financial advisors may only transact business in provinces and/or states where they are registered. Follow-up and individualized responses involving either the effecting of or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in provinces or states where the financial advisor is not registered. Raymond James Ltd. is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund. Raymond James (USA) Ltd., member FINRA/SIPC. This provides links to other Internet sites for the convenience of users. Raymond James Ltd. is not responsible for the availability or content of these external sites, nor does Raymond James Ltd endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same privacy policy which Raymond James Ltd adheres to.