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Making sense of the markets this week: July 3


Speaking of Dale, this week he wrote an interesting article for Seeking Alpha, titled “If I could only own 10 stocks.” Six are Canadian, the other four are American. Since he’s in semi-retirement, his picks may appeal to income-seeking retirees, perhaps supplemented by broad-based exchange-traded funds (ETFs) like the ones Dale helps pick for the MoneySense ETF All-stars, of which he is a panellist. 

The case for checking your statements seldom or never

Canada’s financial markets are closed July 1 for Canada Day. And U.S. markets will be closed on Monday, July 4 for Independence Day. 

Stock markets are clearly still in a nasty bear mode. Unlike the fastest bear market ever back in early 2020 that was caused by the pandemic, I suspect this one will linger. Perhaps as long as the Ukraine war drags on. 

This week, markets have been mostly down, as investors had to add a Russian debt default to a growing list of worries, which includes inflation, possible recession, U.S. political turmoil and much more. In fact, the first half of 2022 has been the worst first half in decades for both stocks and bonds, meaning investors couldn’t hide even in a classic balanced fund of 60% stocks to 40% bonds. According to Reuters, the MSCI World Equity Index has lost more than 20%, the worst fall since the index was created, and certainly since 1970. And because of rising interest rates, bonds have been no better. U.S. Treasuries lost 11% in the first half, which if this continues the whole year would make 2022 the worst year on record.

Which leads nicely to a question most of us can relate to, especially in recent months: How often should you check your investment statements? 

We’re starting to see advice from credible financial journalists about dealing with bear market stress by, in effect, behaving like an ostrich and sticking your head in the ground, instead of habitually checking your portfolio (or casting a sad eye to the continual market feeds on many cable news outlets, especially when they’re red).

Exhibit 1 is a Globe and Mail piece by Tim Shufelt: “If a tanking portfolio is stressing you out, try this: Unfollow the stock markets.” Shufelt cites research that says compulsively checking a portfolio may be detrimental to its long-term performance. He points to robo-advisor SifFig, which found that investors who peeked every day earned 0.2% a year less in return than average. And furthermore, checking twice a day doubled that underperformance. He suggests finding comfort in the fact that the stock market tends to rise over time—the S&P 500 has generated an average annual return of nearly 10%.  

Exhibit 2 is a blog post by fee-only financial planner Robb Engen. His Boomer & Echo post is aptly titled “Stop checking your portfolio.” He reminds investors how brutal 2022 has been, and not just for stocks. Even bonds have been underwater this year, which means that past stalwarts like asset allocation exchange-traded funds (ETFs) have been losing money. He cites Vanguard’s VBAL (which I also own) as being down 10% in 2022, after double-digit returns between 2019 and 2021. He supports the recommendation of American economist and professor John List that investors should check their portfolios “as rarely as possible.” 


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