Amid all the negativity about the economy lately, global stock markets have had a nice run in the past 18 months.
Success like this makes for cocky investors. You can see this in the results of a poll of 1,997 readers of the Carrick on Money e-mail newsletter. Among the participants who have an investment adviser, 28.5 per cent said they were thinking of going DIY. Among DIY investors, just 9.5 per cent said they were thinking of turning their portfolio over to an adviser.
These numbers reflect today’s bull market conditions. Sure, there are advisory clients who are unhappy with the fees paid or services rendered. But it’s hard to accept the idea that almost one in three advised clients are so fed up, they want to go DIY as opposed to finding another adviser.
Here’s an investing rule that needs more attention: You are never as smart as you think you are in peak bull market conditions. Likewise, you’re never as stupid as you feel at the worst of a bear market. There are many elements to investing success – diversifying, holding for the long term, keeping costs low, making regular contributions to your account and making sound stock or fund picks. But market trends have a big influence as well.
Recently, stocks have been great. The 12-month S&P 500 total return to June 30 was 23 per cent, while the S&P/TSX composite made 12 per cent and the MSCI EAFE index made 17 per cent. The cliche is true - a rising tide lifts all boats.
If you’re thinking of going DIY, here are some questions to ask yourself:
-Am I doing it to chase performance? If so, be aware that there are downside risks to stocks if the economy slows or falls into recession. Today’s hot picks could lead the next market downturn.
-Am I doing it because of underperformance? Make sure you compare your portfolio to an appropriate blend of appropriate benchmark stock and bond indexes - you may find you’re doing fine.
-Do I fully understand my portfolio? Your adviser may have built a portfolio that tempers volatility by avoiding both the highest highs and lowest lows for the market.
-Am I reacting to short-term numbers? Underperforming in one 12-month period is not a valid reason to abandon a portfolio, or adviser. Five-year numbers are much weightier, and 10-year numbers are best.
The DIY investing world is made up of two kinds of people - those who gravitated to it out of interest in the markets or a desire to cut fees to the minimum, and those who had an adviser and weren’t happy with the results. If you’re a disgruntled advisory client, get the facts on your portfolio before you flee.
-- Rob Carrick, personal finance columnist
More from Rob Carrick: There’s rot in the economy and it’s costing you better pay and investment returns
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The Rundown
Rosenberg Research: How investors should approach a U.S. election now thrown into turmoil
The U.S. presidential election has been thrown into a state of high uncertainty after last week’s debate, with the biggest question being whether President Joe Biden will stand down and trigger a hurried candidate selection process for the Democratic party. Dylan Smith, senior economist with Rosenberg Research, tells us about what the investment implications may be.
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Ask Globe Investor
Question: While looking at insider trading data on The Globe and Mail website for Baytex Energy Corp., I noticed that some individuals bought the shares at a lower price than was listed on the stock exchange for that day. For example, on May 14 Baytex chair Mark Bly acquired 15,000 shares at $3.42 each and chief executive officer Eric Greager purchased 370 shares at virtually the same price. Yet the stock price ranged from a low of $4.62 to a high of $4.75 on the Toronto Stock Exchange that day. I am curious how that is possible. Did they exercise some rights?
Answer: I don’t blame you for being confused. I was, too, until I went to sedi.ca (the System for Electronic Disclosure by Insiders), which is Canada’s official source for insider trading transactions.
When I found the two transactions you mentioned – it took some trial and error as sedi.ca’s interface is not a model of user-friendliness – I noticed that both purchases were priced in U.S. dollars. This was not specified in The Globe’s insider trading data.
Adjusted for the Canada-U.S. exchange rate on May 14, the price of US$3.42 that Mr. Bly and Mr. Greager paid for their Baytex shares worked out to about $4.65 in Canadian currency, which is within the stock’s trading range on the TSX that day. So this was simply a case of the transaction not being reported in the proper currency on The Globe’s website.
--John Heinzl
What’s up in the days ahead
The S&P/TSX Composite Index is up about 10 per cent over the past 12 months and now close to record highs. But there’s a flashing exception to this bullish enthusiasm: Air Canada, which is in a deep funk. David Berman will shares his thoughts on whether this is a buying opportunity.
U.S. earnings season to test hopes for broader stocks rally
What world markets will be watching next week
Click here to see the Globe Investor earnings and economic news calendar.
More Globe Investor coverage
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Compiled by Darcy Keith of The Globe and Mail