Spring is in the air, stock markets are up and, as always, we face an uncertain future. This morning I am reviewing our quarterly newsletters written before the pandemic and hoping you will join me as I reflect with you not on the past three months but the past three plus years.
IF We’d Known Back THen What We KNow NOw…
In the January 2020 edition of this newsletter I invoked Mike Tyson’s famous quote: “Everybody has a plan until they get punched in the face”. We investors have since been “punched in the face” many times. Consider that we:
- were hit by a global pandemic
- took on ballooning government deficits
- looked on in shock as a war started in Europe
- found ourselves in an inflationary environment not seen in 30 years
- endured sharp interest rate increases while the value of our homes declined
- witnessed bank failures including the 40-year-old Silicon Valley Bank and 167-year-old Credit Suisse
…and this list is far from complete. All this makes me wonder:
If we had known back then what we know now about the first three years of the decade, would we have kept our money invested in businesses or would we have moved to so-called “safe” investments?
The Results are In
In January 2020 I encouraged you to “look forward with planning in mind – and continue to be prepared for the uncertainty we face”. Weeks later we entered the pandemic. We were nervous for our health, for our communities and for our investments. You were steadfast and stuck to the plan. The results are in over three years later:
- Sticking to the Plan: A $100,000 investment in the S&P/TSX Index (the 250 largest Canadian businesses) made on January 1, 2020 would have been worth over $131,900 by March 31, 2023 (Source: Morningstar. Compound Annual Growth: 8.9%).
- Not sticking to the Plan: If you had invested in GICs over the same timeframe your $100,000 investment would have grown to $108,356 (Source: Ratehub.ca. Compound Annual Growth: 2.5%).
That’s a 23.5% difference in just over 3 years.
Are THings Looking Up for First-Time Homebuyers?
For many young Canadians, we see an opportunity to acquire homes at prices lower than they have been for some time owing to higher interest rates. We will also be recommending that many of our clients (or their younger family members/friends) set up Tax Free First Home Savings Accounts. For more information on this account I recommend you check out our blog post.
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