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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: from my week end "musings"The Reality of Long Periods of Underperformance
The following is from Meb Faber.  I felt it worth sharing with you.  Please feel free to share it with your clients.
One of the biggest challenges of investing is long periods of underperformance, or outright negative performance and losses.  Cliff Asness has a fun piece out on his blog where he talks about 5 year periods in stocks, bonds, and commodities and basically how anything can happen.
Unfortunately for investors there are only two states – all-time highs in your portfolio and drawdowns.  Drawdowns for those unfamiliar are simply the peak to trough loss you are experiencing in an investment.  So if you bought a stock at 100, and it declines to 75 you are in a 25% drawdown.  If it then rises to 110 your drawdown is then 0 (all time high).
One challenge for investors is how much time they spend in drawdowns.  It is emotionally challenging largely since they anchor to the high value in their portfolio.  If your account hit $100,000 last month up from $20k ten years ago, likely you think of your wealth in terms of the recent value and not the original $20k.  If it then declines to $80k, many think in terms of losing $20k rather than the long term gain.
I thought it would be interesting to look at a few asset classes and ask how long they spend in each outcome – either all-time highs or in a drawdown.  Below is a chart of a basic 60/40 portfolio’s drawdown since 1972, REAL RETURNS.  Notice how brutal the high inflation 1970s were to the portfolio:he investor only spends about 22% of the time at new highs, and the other 78% in some form of drawdown.  A few values for common asset classes below….
• US Stocks 17% new highs, 73% in some form of drawdown
• Foreign Stocks 12% new highs, 88% in some form of drawdown
• Bonds 16% new highs, 84% in some form of drawdown
• REITs 16% new highs, 84% in some form of drawdown
• Commodities 9% new highs, 91% in some form of drawdown
• Gold 4% new highs, 91% in some form of drawdown
• 60/40 22% new highs, 91% in some form of drawdown
Meb concludes, “So if you’re going to be an investor, get used to being a loser!”
print ONY if you think worthwhile info for members
CDJ
Read Answer Asked by claude on November 06, 2017
Q: Please provide comments on Hanesbrands. Share price has pulled back in the last few days. I believe due to lower Q4 and FY expectations. Is the recent price drop over done. Currently HBI represents 3% of my portfolio. Should I consider this a buying opportunity or just hold. Are there other Consumer Products I should consider?

I like the new features of the website. At first I found the larger font size and line spacing difficult. Changing the zoom setting (from 100% to 80%) for the browser tab has improved it for me.

Thank you

Stephen
Read Answer Asked by J Stephen on November 06, 2017
Q: Hi 5I- We are a couple of RRIF collecting seniors with 63% equities, 20% in your income portfolio minus AGU, CPD ,CVD and XHY, and 17% cash. Please comment on our plan to take some profits from our equities to add to our cash and invest half of cash in the missing parts of your income portfolio and wait for a downturn in the market to deploy the rest of the cash to your income model. Would you suggest another option? or add to some of our downers instead, eg. loblaws, enbridge, kwh.un, disney? Appreciate your advice and service, thanks.
Read Answer Asked by Peter on November 06, 2017
Q: Can you give me 2 companies in each of the growth and balanced portfolios in your opinion with the best upward momentum going forward.
Read Answer Asked by Mike on November 06, 2017
Q: In your recent response to Margita you recommended holding Enbridge for the dividend. As a retiree I purchased 1k shares of ENB not only for the dividend income but also the projected dividend growth of 10-12%. What are your thoughts on the later? Is there anything in the latest financials or management comments (or lack thereof) that would cause you to re-consider ENB for the balanced portfolio.
Many thanks
Mike
Read Answer Asked by michael on November 06, 2017
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