The global stock market has enjoyed a great run up over the last 18 months. However, in the first week of April, in true stock market fashion, we saw a sharp pullback in stock and commodity prices.
It is at these moments (dramatic change in the direction of the market), we are reminded that investors have very short memories. They tend to forget that the stock market has provided tremendous growth over the calendar year. Their long-term investment plans and suitable portfolios suddenly become questionable. It is at these moments where investors insist on deviating from their plan, only to adopt a new plan that originates from errors of market timing, specific stock selection and alternative investment strategies.
At the most recent instalment of our Lunch and Learn series, Senior Financial Planner, Mike Connon, conducted a presentation on “How the Market Works – Investing 101”. In the presentation, Mike “simplified” how investors can make gains in the market. The answer is not sexy nor does it require complex investment strategies – the simple answer on how to make gains in the market is by building a portfolio that consists of stocks and bonds. Investors make money by either being an owner (stocks) or by being a lender (bonds). Alternative investments and complex investment strategies are high-fee substitutes based on the buying or selling of stocks and bonds.
At The McClelland Financial Group, we believe that building a low-fee portfolio, which consists of a suitable allocation of stocks and bonds, is the simplest and most efficient way to participate in global market returns.