By Tom Bradley

I use the word “diversification” a lot. I know the idea’s a bit basic, even boring, but over four decades I’ve watched clients with diversified portfolios build their wealth and achieve their goals.

Diversification is particularly important in times like this when markets have trended in one direction for a long time and rode a narrow set of themes (i.e. U.S. tech). When that happens, portfolios tend to drift away from their target asset mix toward what’s been working and is popular.

The word has more nuance than I sometimes let on. Are you diversifying to smooth out returns along your investment journey, protecting against violent, once-a-decade bear markets, or trying to avoid ever losing any money? It’s an important distinction because they require different strategies.

Before exploring each of these, here’s some background: Diversification is the practice of owning an assortment of investments in different asset classes, industries, geographies and currencies that each contribute to returns in different ways at different times. It’s often referred to as “the only free lunch” in investing because the down periods are moderated without sacrificing long-term returns.

The problem with diversification is that it feels uncomfortable at times, even wrong, because it involves owning assets that haven’t been doing well. It’s easy to forget that those currently unloved assets offer good long-term returns, too, and will take the baton when market winds change.

Now, back to the nuance. Which of the following descriptions fits your situation?

I can take down periods but don’t want a bear market to knock me off track.

A balanced portfolio is the answer here. Stocks offer the highest potential return but provide most of the volatility. Fixed-income assets like bonds and cash management products provide a counterbalance. The appropriate mix between the two will vary depending on your goals, time frame and investment personality.

There’s also room in the mix for other asset classes. Higher-risk credit products, such as corporate bonds, can potentially earn equity-like returns, as can real estate and infrastructure funds, but a word of warning: If a product offers equity-like returns, it has equity-like risks and may be highly correlated to the stock market. Neither of these products are bad in themselves, but it makes them less effective diversifiers. For example, high-yield bonds, which are highly correlated to stock prices, are a better substitute for stocks than cash or bonds.

I want a high return and can absorb the inevitable bear markets.

If you have an extended time frame and high-risk tolerance, an equity-heavy portfolio is the answer. Diversification here means owning companies across industry sectors, regions and sizes. The idea is that, for example, when Canadian stocks are suffering from a weak commodity market, foreign stocks in other sectors are doing better, and vice versa.

Diversification will moderate, not eliminate, the dips, but more importantly, it takes capital loss out of the equation. This is a bold statement, but history shows that diversified portfolios always recover their losses given time, which can’t be said for strategies that focus on a narrow theme and a handful of securities.

Certain alternative investments such as private debt and equity, and real estate, are appropriate here, but not all. For instance, funds that hedge out stock market risk to provide a smoother (low volatility) return are counterproductive. You’re seeking to benefit from credit and equity risk, not avoid it.

I don’t want my portfolio to go down.

If you can’t sleep at night when your portfolio goes down, the tools available to you are more limited, as are the expected returns.

If you can’t lose money, diversification means owning short-term bonds and mortgages, and savings vehicles like GICs and cash management products. Broader diversification strategies that include stocks work well most of the time, but loss prevention is not guaranteed.

You’re probably thinking, “Can’t I have the best of both worlds – benefit from strong markets and avoid weak periods?" This question is the subject of many of my columns and the answer is always no. It’s impossible to do, thus the importance of diversification.

Indeed, the biggest benefit of diversification is behavioural. A strategy, no matter what it is, only works if you stick with it, which is harder to do when returns are volatile. The most return-crushing mistakes, such as getting more aggressive near market tops or bailing out near bottoms, are made after big market moves.

Holding a properly diversified portfolio that offers lower highs and higher lows increases the chance that you’ll do the right thing when the wrong thing is much easier to do.

Tom Bradley is a portfolio manager with Purpose Investments, co-founder of Steadyhand Investment Management, a member of the Investment Hall of Fame and a champion of timeless investment principles.

By Tom Bradley

What do gold, bitcoin and Elon Musk have in common? They’re all chameleons.

Merriam-Webster describes chameleon as, “A person who often changes their beliefs or behaviour in order to please others or to succeed.” In the investment context, a chameleon is something or someone who can easily shift their story to fit the theme of the day. They offer something to investors one day and something else the next, without missing a beat. Here are some of them.

Gold

The shiny metal is a longstanding chameleon. Depending on the economic and market landscape, gold can be an inflation hedge, reserve currency, insurance against a financial crisis, or hedge against a weak U.S. dollar. It’s an investment for all seasons.

The variety of narratives around gold gives enthusiasts all the reasons they need. For them, gold is always a buy, whether it’s trading at US$2,000 or $5,000.

For occasional gold investors who use it for diversification, or simply to ride an uptrend, there’s always a rationale. Regarding the latter, I like how Joe Wiggins put it in a post about gold in his Behavioural Investment blog: “Price moves come first and then the narratives to justify it second.”

Bitcoin

Gold doesn’t have anything on digital gold. Bitcoin, which carries this label, comes with the same list of potential reasons to own it, but there are many more.

Early in its history, owning bitcoin was anti-establishment. Decentralized finance was the way to break free from the tyranny of established financial institutions. This applies less today, as cryptocurrencies become more mainstream and reliant on traditional institutional buyers, but people still tell me that it’s the future of finance.

There’s also the scarcity factor. A maximum number of 21 million coins can be created.

Enterprise Elon

Elon Musk is one of the greatest engineers of our time. He’s built amazing businesses and in doing so, has shaken mature, established industries to their core. His ability to get things done is unparalleled, going from zero to producing two million cars a year, and from brainstorming with a group of rocket scientists to building the leading space transportation and satellite communications business.

But to get his two public companies, Tesla and SpaceX, up to a capitalization of US$3.4-trillion, he’s needed more juice. The companies have relatively short track records and don’t generate enormous profits like other trillion-dollar companies such as Nvidia, Apple and Microsoft.

The booster juice is the credibility, trust, and in some cases, idolization, that comes from Musk’s record of innovation and wealth creation. It has allowed him to open one additional factory, a narrative factory, from which flows a world of possibilities, each more mindboggling than the last. The pitch to investors for the public offering of SpaceX was nothing short of science fiction.

Howard Marks, co-founder of Oaktree Capital Management, captures the power of Musk’s prophecies in a memo discussing AI: “... history can impose limits on awe regarding the present and imagination regarding the future. In the absence of history, on the other hand, all things seem possible.”

Unlike most other investments, gold and bitcoin don’t produce cash flow that can be valued, and neither will Enterprise Elon for the foreseeable future. Therefore, their prices don’t move around on dividend increases or changes to earnings forecasts, but rather investor mood swings. They’re driven by investors’ willingness to take risks and seek excitement.

As a result, they fit well into the momentum-obsessed market that we’re currently experiencing. When they’re on a roll, valuation metrics don’t get in the way. The sky, or should I say universe, is the limit.

Like other investments, however, investors need to be clear on why they hold gold, bitcoin, and even SpaceX and Tesla. Are they hedging against the excesses of the financial system or trying to capture the market for personal robots, interplanetary data centres, and driverless taxis?

Articulating the reasons for ownership allows the right questions to be asked. How is it doing against the objective? Are the reasons for owning it still in place? The answers to these questions are particularly important when prices are going in the wrong direction.

Chameleons can be successful investments. Investors just need to make sure they’re the ones controlling the narrative.

Tom Bradley is a portfolio manager with Purpose Investments, co-founder of Steadyhand Investment Management, a member of the Investment Hall of Fame and a champion of timeless investment principles.

Word is getting out that there’s a real benefit to having a steady hand on your portfolio! We serve a growing base of clients across Canada and are continuing to expand following our integration with Purpose and our shared commitment to deliver thoughtful, long-term investment guidance. We’re excited to share that we are currently hiring a Senior Wealth Advisor in our Vancouver or Toronto office. The successful candidate will play a key role in building and maintaining strong client relationships, providing ongoing investment guidance, and supporting clients with portfolio construction, asset mix decisions, and portfolio monitoring as clients’ goals evolve. Working closely with our internal teams, the Senior Wealth Advisor will also connect with new investors and support referrals, helping ensure clients continue to receive consistent, personal advice as our client community grows. If this opportunity sounds like a good fit for you, or someone in your network, we encourage you to take a closer look. Full details are available here. Interested candidates can apply through Dayforce by submitting a resume and cover letter. While we thank all candidates for their interest, only selected individuals will be contacted for follow-up. 

By Tom Bradley

Ever since the great financial crisis in 2008, I’ve thought that risk management departments at big financial institutions should have a grizzled old investor sitting on a stool in the corner. Someone taking it all in: the computer screens, the PhDs, and the supreme confidence.

I call it Grey Hair Risk Management. Blending in someone who isn’t deep in the weeds and may not understand all the complexities of the models, but who has seen many market cycles and knows anomalies when they see them.

If such a person was in the room right now, I have a hunch they’d have lots of questions. Here are a few:

How are our models assessing the discrepancy between the bond market and the stock and credit markets?

Rising bond yields indicate there’s trouble ahead. They reflect the potential for higher inflation and may be portending a time when governments struggle to finance their chronic deficits.

Conversely, high valuations on stocks, and narrow credit spreads between corporate and government bonds, suggest that it’s smooth sailing ahead.

Asset prices generally run counter to interest rates. What do outcomes look like if rates go even higher?

Does our system understand that everything is now one big artificial intelligence bet?

Chips and data storage are the focus, but AI’s impact reaches deep into the stock market. I saw a chart this week that showed 40 per cent of the S&P 500 has direct exposure to AI, but that’s just the technology component. The number is much higher when taking into account power generation, construction, building materials and industrial services.

Upping the ante is the wealth effect (how wealthy people feel), which is increasingly linked to how AI plays out. Widely-held index portfolios are heavily exposed to this singular theme.

There will be many exciting opportunities that come out of the AI build-out, but our risk assessments should assume that most will be cyclical, not transformational.

Speaking of cyclical, the data centre build-out is turning into the greatest capital spending cycle of all time, even though AI business models are still evolving. Revenues are hard to predict and assumptions around computing costs are changing by the minute.

In this context, how much thought have we given to the other side of the mountain?

Typically, the clean-up after a capex boom is messy because too much capacity gets built, bad loans are made and non-industry players get in on the action.

Capex cycles are different from other cycles. They end violently and without warning. Our worst-case scenarios should assume that spending falls off the table, not just flattens out or gently declines.

Have corporate earnings been affected yet by higher energy prices and increasing cost pressures on consumers?

Investors are celebrating every positive earnings surprise, and there have been many. But that was last quarter. Will the current economic reality serve up the same robust numbers in the coming months, and even if it does, will companies be able to meet the new level of expectations?

High price-to-earnings ratios and near-peak earnings are a bad combination. Are we modeling for a possible double whammy when profits and P/Es fall?

Are our risk models factoring in the wild party that’s going on in the markets right now?

It’s not normal. AI optimism is palpable, with discount brokers and the media leading the cheering section. U.S. investors own more of their net worth in stocks and are using more margin (money borrowed to invest) as a percentage of gross assets than ever before. Some are trading options like water and betting in the prediction markets.

And the AI giants are falling all over each other to get their shares to market in hopes of capturing the fervor. SpaceX, with its spacey projections and mercurial leader, Elon Musk, will be the first to test the market. If successful, it will force major changes to the market indexes, as will subsequent mega issues.

Our veteran is seeing lots of anomalies: the bond market warning, elevated valuations, rampant risk-taking and a euphoric one-theme market. Not all will turn out to be negative, but in aggregate they point toward caution. As Warren Buffett, the ultimate veteran investor, says, “Be fearful when others are greedy and greedy when others are fearful.”

Will our old colleague prove to be wise or out of touch? The latter is a distinct possibility, but one seasoned veteran and a stool seems like cheap insurance compared with the billions of dollars being spent on computer models that until now have proven to be as fallible as the humans they replace.

Tom Bradley is a portfolio manager with Purpose Investments, co-founder of Steadyhand Investment Management, a member of the Investment Hall of Fame and a champion of timeless investment principles.

A friend was telling me that his adviser is making a big shift out of U.S. stocks and into Canada. He couldn’t articulate the reasoning but knew the S&P/TSX Composite Index was up more than 30 per cent in the last year and was doing far better than the S&P 500, the most popular U.S. equity index.

The conversation lined up with reports I’ve seen recommending that now is the time to invest at home. For sure, Canada should be a part of a well-diversified portfolio, but this “all-in” narrative needs further analysis. Let’s look more closely at the reasons for buying Canadian stocks now.

Past performance

Indeed, the Canadian market has been on fire but as a poster in our office points out: “Last quarter’s performance is a reliable indicator of last quarter’s performance.” Investment products have a warning label on them for a reason – past is not a predictor of future.

For context, the Canadian market still lags the world index over 10 and 20 years (in Canadian dollars to April 30th) by 1 to 2 per cent per year, despite the latest surge.

Exposures

Our stock market is not well diversified. There are plenty of great Canadian companies, but it’s difficult to build a Canada-only portfolio that represents what’s going on in the economy. Rather, the TSX is an odd mix of sector bets, the primary ones being banks, energy and gold, with little exposure to the biggest economic drivers, namely technology, health care and consumer products.

Valuation

The pro-Canada reports usually point out that the TSX is trading at a lower valuation than the S&P 500. This general statement is misleading.

Our market should trade at a lower multiple. Banks make up a quarter of the index and trade at price-to-earnings ratios well below the overall market (as I explained in a recent column).

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When resource-related sectors are reporting top-of-the-cycle earnings, their stocks also tend to trade at low P/E ratios because investors don’t expect outsized profits to be sustained.

And part of our market is made up of domestic oligopolies such as groceries and telecommunications, where the companies are highly profitable, but not growing very fast.

The TSX is underexposed to higher priced sectors such as technology. We have a handful of growth stocks in other sectors, which are global leaders in some cases, but they trade at full valuations because of their scarcity value.

Valuation comparisons are a critical part of investment decision-making, but should be done at the company and sector level.

Currency

There could be currency reasons for making the shift. The Canadian dollar has been chronically undervalued relative to its purchasing power, however, predicting major shifts in exchange rates is a low-quality bet. Currencies can remain under or overvalued for decades because of deep-rooted political and economic factors, not the least of which are lower or higher interest rates.

If you want to bet on the loonie, it’s easy to do so using currency-hedged mutual funds and exchange-traded funds.

Canada-centric

By all means, buy Canadian stocks. Now is a better time than ever to support our own, given what’s going on around us. But don’t force it.

You might try what I call a Canada-centric global model. In building a portfolio that’s properly diversified across industries and geographies, start with Canada. Populate it with domestic companies you like, and that stack up well against their peers from around the world. And then, look elsewhere to fill out the sectors that aren’t well represented here.

Favour Canadian stocks, but don’t fill a sector with a weak player, or one that’s trading at an extreme P/E ratio, when there’s so many alternatives outside our borders.

And certainly, don’t buy an index ETF because you’ve heard it’s time to buy Canada, or you want to chase last year’s returns. The TSX may continue to do well for a while longer, depending on what gold and oil do, but short-term market calls don’t align with your portfolio’s goals and time frame.

Tom Bradley is a portfolio manager with Purpose Investments, co-founder of Steadyhand Investment Management, a member of the Investment Industry Hall of Fame and a champion of timeless investment principles.

We're not big on urgency for its own sake. But there are moments in the year when the timing genuinely makes sense, and this is one of them. Tax season just wrapped up. You have a clear snapshot in front of you: what you earned, what you saved, what you spent. That makes this a good time to step back and ask whether your plan still reflects where you want to go.

Final few days to take stock

There's also a practical reason to act before the end of May. We're running a 1% match promotion until May 31 — add to your Steadyhand account before then, and we'll match 1% of your contribution. A simple way to put a little more to work while the timing is already on your side.

Here's why this moment matters, depending on where you are.

If retirement is a few years away

The window between now and retirement is one of the most valuable you’ll have. You still have time to adjust, fine tune, and course correct — to make changes while you still have room to act on them.

That flexibility matters. Questions like whether you’re saving enough, what income you can expect from government benefits, how your accounts work together, and what spending might really look like are much easier to work through now, while there’s still time to adjust and make choices deliberately, rather than a year or two before your last day of work.

Tax season gives you a clear picture of where things stand. If you haven’t walked through the retirement numbers recently, this is a natural moment to do it, because understanding them now helps inform decisions both for the current tax year and starting to plan for when you’ll draw money later on.

The people who tend to move into retirement feeling more settled are the ones who took the time to look at things earlier while there was still room to make changes if needed.

If you're already retired

Tax season surfaces questions for retirees too, about withdrawals, income sources, and how different parts of your finances are working together. It's one of the few moments in the year when everything is laid out clearly in front of you.

A simple annual check in now can go a long way. It gives you a chance to plan ahead for the year, fine-tune things like tax withholding, reassess whether you’re on track, and adjust if you’re moving into a different phase of retirement.

You don't need to have everything figured out before we talk. That's what the conversation is for.

If you're saving toward a big goal

Big purchases usually start as conversations. You talk it over with a partner. You mention it to a trusted friend. You run it past the person you bounce money decisions off of. “What if we did this?” “Do you think it’s doable?”

That’s often the right moment to reach out to us, too.

Not because you’re ready to act tomorrow, but because talking it through early helps you see how the goal fits alongside everything else. Where the money might come from. What trade offs, if any, are involved.

Big decisions have a way of getting real quickly. Taking the time to talk them through before there’s pressure usually leads to better outcomes and fewer last-minute compromises.

The bottom line

Whether retirement is years away, already underway, or a major purchase is on your horizon, the best time to look at your plan is when you're not under pressure to act on it.

That’s now. Grab a coffee or a matcha, bring your questions, and let’s talk. That’s what we’re here for.

I've been working closely with Tom, Neil and the Steadyhand team through this transition, and I wanted to take a moment to let clients know that Salman Ahmed has decided to step away from his role as Chief Investment Officer.Salman joined Steadyhand 11 years ago, long before I came into the picture. In the time I've worked with him, I've found him to be sharp and curious but more than that, a good person who showed up every day wanting to do right by clients. He brought real thoughtfulness to how our investment approach connects to what you're actually trying to achieve — not just returns on a page, but outcomes that mean something to you. He cared deeply about where this firm is heading and took comfort in the fact that the values Steadyhand was built on aren't being left behind. They're the starting point for what comes next. That confidence is shared by everyone around him. We'll miss him. He's taking some time for himself right now, and I think that's well deserved. What the next chapter looks like, he's still working out, and I'm sure it'll be a good one.For those of you I haven't yet had a chance to meet: my work has always been centred around helping people connect their investments to the lives they want to live. I look forward to getting to know many of you over time.What isn't changing is what matters most. Tom continues in an active advisory role, engaged with clients and the direction of the firm, as the team around him grows. The broader Purpose team is behind you, and you'll be hearing more from us in the months ahead. The patient, diversified, fee-conscious approach that has always defined this firm continues, and you'll see us build on it — taking the connection between your investments and your personal outcomes even further.

Thank you, Salman, for your commitment to Steadyhand and to our clients.

Most people are better savers than they give themselves credit for. But saving well and planning well are not the same thing.

The gap tends to show up at the moments that matter most. Not as a disaster, but as an avoidable surprise. A tax bill that could have been smaller. A decision made on a rule of thumb instead of your actual numbers. A plan that made sense in isolation but hadn't accounted for how everything connects. Here's what comes up most often, depending on where you are in life.

The years just before retirement

A few years before retirement, most people feel like they’ve done what they were supposed to do. They’ve saved steadily. They’ve stayed invested. They have a rough date in mind.

What’s often missing isn’t effort. It’s a clear picture of how things will work once the paycheques stop.

• CPP and OAS decisions are often made the way most people make them: by reading an article, talking to a friend, or doing what feels “safe,” without running the numbers for their own situation.

• There’s usually a retirement date in mind based on age or how work is feeling, but it isn’t tied to actual income projections. Having a target date is different from knowing whether the income will support it.

• Spending in retirement doesn’t look the same every year. The early years are often more active, later years look different, and planning for decades of spending adds real complexity.

• Taxes are often looked at one account at a time rather than across everything. How you draw down your RRSP, TFSA, and non-registered savings together, and in what order, matters more over time than most people expect.

None of this is unusual. And all of it is far easier to work through with a few years of runway than a few months.

The clients who reach out earlier tend to move into retirement with more confidence and fewer surprises. That's not luck. It's what happens when you give yourself time.

Once retirement has started

• Retirement brings a different set of questions which most people have never had to navigate before. Some of the biggest adjustments aren’t whether the numbers work, but how retirement feels day to day.

• Many people start by drawing from the accounts that seem most obvious, without realizing how the order of withdrawals can shape taxes and flexibility over time. Small decisions early on can have a bigger impact later.

• Income doesn’t always feel as steady as expected. Even when the numbers work on paper, the month-to-month experience can feel uneven. Withdrawals, government benefits, and market movements don’t always line up neatly.

• Market swings can feel more personal once you’re relying on your portfolio for income. A difficult year can test confidence, even when nothing has changed about the long‑term plan.

• Tax decisions that don't stop at retirement. RRIF withdrawals, government benefits, and changing income needs mean tax planning continues to matter well after the transition out of work.

Over time, simplicity tends to matter more. What felt manageable at 65 can feel like a lot at 75 or 80, and plans that are easy to understand are often the ones people stick with.

When there's a major purchase in the picture

When you come to us with a large goal in mind, you've usually thought carefully about whether you can afford it. What often hasn't been worked through is the how.

• Savings often end up in the same place, even when they’re meant for different things. Money for a near‑term purchase and money meant for much later goals like retirement may share the same account, even though they usually call for different investment approaches.

• It’s common to focus on the account that seems “right” on paper. For first-time buyers, that can mean relying on an FHSA or RRSP alone, even though using a combination of FHSA, RRSP, and TFSA might work better.

• When markets are strong, it’s natural to want your money fully invested and growing. But if a home down payment is entirely invested in stocks and markets fall right before you need it, the timeline, or even the purchase itself, can come into question.

• Longer‑term goals can quietly get put on pause when more immediate needs take focus. Retirement can feel far off, and there’s always another “now” competing for attention, even though those skipped years of compounding matter more than they often seem at the time.

These are solvable problems. They're just easier to solve before the purchase than during it.

Across all of them, the pattern is the same: not bad decisions, but decisions made without the full picture. If any of this sounds familiar, we'd be glad to take a look together.

This article was first published in the Globe and Mail on May 8 2026. It is being republished with permission. 

It comes up in every conversation. Why is the stock market hitting new highs with all that’s going on in the world? There seems to be a long list of things that should hold it back.

The war in the Middle East is disruptive and inflationary. World trade is in disarray. Governments have shed any semblance of fiscal responsibility and are spending future generations’ money with impunity.

Private markets, previously a tail wind for portfolios (takeover premiums; exit strategies; financing options) are constipated with a backlog of companies to sell, lower distributions to investors and a reliance on creative financing structures to keep the wheels turning.

And then there’s the rush to build data centres that is helping the economy grow but also prefacing a severe hangover (capex cycles don’t gradually slow down, they go from 100 km an hour to zero).

But you know all of that. You want to know what forces are pushing in the other direction.

Why new highs?

Earnings: Companies are doing well right now. Profits are healthy and coming in above expectations – 80 per cent of S&P 500 companies that have reported first-quarter results beat analyst estimates. Recent earnings look backward, which Mr. Market never does, but demonstrate how resilient businesses are. Artificial intelligence: It’s still too early to calibrate what AI will do for productivity and profits, but the optimism has no bounds, mostly because the technology is moving fast and is so impressive, but also because investors can’t put numbers to it. AI-related narratives aren’t constrained by mundane financial measures such as return on equity and price-to-earnings ratios. The sky’s the limit.

Fiscal fire hose: The White House’s trade strategy is highly disruptive but with some positive effects. New trade relationships are being formed, and economic nationalism is on the rise in Europe and Canada, specifically in defence and infrastructure. The countries that can afford to spend more are doing so, which stimulates the economy, and ultimately corporate earnings.

Borrowing costs: Despite a constant plea for interest rate cuts, financing costs are reasonable, certainly low enough to support robust economic growth. In Canada, a fixed five-year mortgage at 4 per cent could even be viewed as stimulative.

TACO: ‘Trump Always Chickens Out.’ Investors expect President Donald Trump to stick to his playbook – grand pronouncements and bluster followed by hesitation and backtracking.

Buy the dip: And they’re also confident that any market correction will be short and followed immediately by a dramatic rally. It’s been that way since the Great Financial Crisis.

Price paid

My research focuses on where asset prices will be in five years, with little regard to how they get there. In this context, I’ve tempered my expectation for returns, partially because of the factors mentioned above, but primarily because of something more concrete and reliable: valuations. It’s an immutable law of investing that what you pay for an asset is the single most important factor in determining its return (just ask condo owners in downtown Toronto and Vancouver). A price-to-earnings ratio does nothing to predict a stock’s zigs and zags, but plays a huge role in determining what level it gets pulled toward with time. Right now, you’re paying full price for future earnings, even a premium in some areas. Stock valuations in most sectors are at the top, or above, their historical ranges.

Likewise, in corporate bonds, you’re getting little extra yield, or spread, for taking credit risk.

And I’m wary of valuations in two growing asset categories. First, aspirational assets such as precious metals and cryptocurrencies have no cash flow to value and solely depend on ever-changing investor sentiment. And second, privately-held companies produce cash flow, but the funds that hold them, and the lenders that finance them, offer little visibility.

Use it, don’t fight it

Whether you understand it or not, take advantage of what strong markets have to give.

Rebalance from a position of strength: If your portfolio has strayed from its target asset mix, it’s easy to fix.

Size your speculative investments: If you’re trading stocks and options, or investing in startups and cryptocurrencies, make sure the allocation is appropriate relative to the size of your assets.

Cash management: If you have known spending needs, now is a good time to set the money aside.

In other words, don’t fight what’s happening in the stock market. Enjoy it and quietly prepare for when things are just as confusing, but in the other direction.

Tom Bradley is a portfolio manager with Purpose Investments, co-founder of Steadyhand Investment Management, a member of the Investment Hall of Fame and a champion of timeless investment principles.

TD Direct Investing recently announced that it has increased the number of free trades it offers from 50 to 100 per year. Other discount brokers are doing the same. Both numbers sound high to a person committed to steady, long-term investing such as me.

I’m a big believer that incentives drive behaviour, so it’s clear what these firms are encouraging their clients to do: Trade, trade and trade some more.

Before looking at how good this is for the clients, it’s useful to understand what’s in it for the brokers, keeping in mind the warning label for the digital age – if you’re not paying for the product, you are the product.

Offering free trades attracts customers and brings assets to the brokerage platforms. That, in turn, gives the companies opportunities to charge other fees, such as foreign exchange, and to up sell other services. The bane of a discount broker’s existence is a steady, long-term investor who builds a diversified portfolio with exchange-traded funds and sticks with it.

So, what’s in it for the investor?

This newcomer brokerage is the latest to lure DIY Canadians with free trades 

Taking control

You’re taking control of your investments when you do your own trading. And as the Questrade ads emphasize, it breaks you away from what your parents are doing.

You save money by not paying for professional fund management and financial advice.

It can be fun, even thrilling, in good markets. Like sports betting, success produces dopamine.

And it’s an antidote to FOMO. You don’t have to sit out the stock market discussions at work or at the gym, which is a real problem with the aforementioned ETF portfolio.

Against all odds

But dopamine comes with trade-offs. Think about what you’re up against when trying to successfully catch price moves and trade in and out of stocks and options. First, short-term market moves are totally unpredictable. History tells us that broad-based indexes are up just slightly more than 50 per cent of trading days.

In this regard, hindsight can play tricks on you. It’s easy to think after the fact that you knew something you didn’t. It’s called confirmation bias, which is revealed when you hear someone say, “It was obvious that was going to happen.”

Opinion: Why are these big name investing apps using the gambling playbook to lure clients?

Part of the day trading community have moved into prediction markets, which are betting platforms overseen by financial regulators. The Globe and Mail’s Meera Raman reported last week on a study that determined, “71 per cent of users lose money, while a small group of skilled traders reap more than 80 per cent of all gains.”

These stats prompt the next question: Who are you up against? Who are the sophisticated few who are making the money? Well, they would be the best and brightest money managers with more capital and computing power than a small country.

Make it work

If you decide to actively trade stocks and options, think about putting some guardrails around it.

Size it correctly – Initially, make your trading account a small portion of your overall mix, the core of which should be a low cost, diversified stock portfolio.

Measure – Don’t be like many day traders who aren’t being intellectually honest with themselves. Make sure you use the performance tab on your broker’s website or app to monitor how you’re doing. I’m not talking about the last week or month, but rather, the past few years.

Milestones – Set some markers that must be achieved before allocating more assets to your trading account. There should three hurdles at a minimum – the amount of time (measured in years), the number of full market cycles (at least one) and returns (at or above comparable indexes).

If you sense a dash of cynicism in my take on this topic, it’s because my approach to investing is all about putting the odds in my clients’ favour. Making decisions based on the unknowable, and competing against well-resourced, hard-to-beat players doesn’t fit that description.

As Warren Buffett said: “The propensity to gamble is increased by a large prize versus a small entry fee, no matter how poor the true odds may be.” I’ve met plenty of day traders who are scary smart and love what they do, but none of them have built lasting wealth from doing it.

Frequent trading causes you to miss out on the surest thing in investing, what Albert Einstein referred to as the eighth wonder of the world. The power of compounding, when growth and dividends are given time, produces excellent and reliable results. When you transact 100 or more times a year, you’re only as good as your next trade.

Tom Bradley is a portfolio manager with Purpose Investments, co-founder of Steadyhand Investment Management, a member of the Investment Hall of Fame and a champion of timeless investment principles.

Most people who invest consistently are doing something genuinely hard. They've built a habit, stayed the course through uncertain markets, and kept their eye on goals that matter – some years away.

But there's a gap that doesn't get talked about enough, between saving well and knowing what your money can actually do for you. Between having a portfolio and having a plan.

That gap shows up differently depending on where you are in life but it tends to feel the same: I think I'm on track. I'm just not completely sure.

When retirement is starting to feel real

There’s a particular moment many people reach somewhere in their fifties or early sixties. The retirement date isn't abstract anymore, it's a few years away. The saving has gone well. And yet some important questions haven't really been worked through.

Is the date you want to stop working actually realistic?  Where will your income come from once the paycheques stop? And what happens if markets drop just before you retire?

These questions aren't complicated once you look at them directly. The issue is that most people haven't. And they're much easier to work through five or ten years before retirement than five or ten months.

Confidence about retirement doesn't come from having the most money. It comes from knowing how it all fits together and why it works for you.

When the paycheques have already stopped

Saving for retirement and living in retirement are two very different things. When you retire, your money doesn’t—but the way you relate to it changes. It's no longer about growing your money. It's about spending it wisely, in a way that is sustainable, tax-efficient, and feels steady year to year.

How much is safe to spend? Where should income come from? What do you do in a year when markets are rough? These are questions many people haven’t had to think through before retirement. Getting comfortable spending from savings, rather than adding to savings, can take time, even when the numbers look fine.

When there's a big goal on the horizon

Big financial goals rarely unfold exactly as planned. A first home comes up sooner than expected. A renovation stretches beyond the original budget. Time away from work takes more planning than you thought.

Most people save toward a number and trust it will work out. Sometimes it does. Other times, the money is there, but the path to using it isn’t straightforward. It raises new questions about taxes, timing, or trade-offs they hadn’t planned for.

Planning doesn’t make decisions simple. But it does make them clearer and easier to navigate when the moment arrives.

The value of looking now

The sooner you look at the full picture, the more options you have. Not because things are necessarily off track, but because understanding where you stand, while you still have room to adjust, is what turns 'I think I'm okay' into 'I know I'm okay.'

If you haven't had that conversation recently, or ever, we're here whenever you're ready.

Have you ever looked at your portfolio during a rough stretch and wondered if you were doing the right thing? Maybe you stayed put while everything dropped. Maybe you moved some money around. Maybe you just tried not to look.

That feeling, the doubt that creeps in when markets get uncomfortable, is one of the most honest parts of investing. And it's the part the financial industry talks about least.

Here's the truth: most of the industry is focused on the wrong things.

Early in my career, I was part of launching a fund that, by every conventional measure, was a remarkable success. Five years in, it was one of the best-performing Canadian equity funds in the country. The performance charts looked exactly as we'd hoped. We had every reason to celebrate.

Then I asked a quieter question: did the people who owned this fund actually benefit from those returns?

The honest answer was probably not, at least not most of them. Some bought in after a strong run. Some sold when things got scary in 2008. Some moved their money based on what a neighbour said or a headline they read. The fund performed beautifully. The investors, through no fault of design, largely didn't capture that performance.

We had won on paper. But we hadn't necessarily helped people.

The gap between what a fund returns and what an investor actually experiences is one of the least-discussed problems in finance. And the biggest driver of that gap isn't fees or strategy. It's behaviour. It's the very human tendency to panic when things drop, to chase what's rising, to do something when sitting still feels impossible.

That's not weakness. It's just being human.

What bridges that gap, more than any product or portfolio, is commitment. Staying invested through the uncomfortable stretches. Continuing to contribute when the news is bad. Not abandoning a plan because of a rough quarter. It sounds simple, but it's genuinely hard to do, and the effect of doing it consistently is anything but small.

Think of it this way: a modest improvement in your annual return, compounded over twenty or thirty years, doesn't produce a modest improvement in your outcome. It produces a transformational one. The math of long-term investing rewards consistency far more than it rewards brilliance. The investor who stays the course, year after year, ends up in a radically different place than the one who kept reacting to the noise.

That's the real goal of good financial advice: helping people stay committed long enough for that compounding to work.

Which brings me to the question of what good advice actually looks like.

Our industry has long positioned financial advisors as experts: people who know things you don't, who predict things you can't, who access things you couldn't on your own. That framing has its place. But it's not what most people value most in the relationship.

There's research showing that people often value their personal trainer more than their financial advisor. At first that seems strange. But think about why. A good trainer isn't pretending to be smarter than you about your own body. They're not lecturing you about physiology or promising guaranteed results. What they do is show up, help you stay accountable, and push you through the moments when you'd rather quit. They're your partner on a journey you're both on together.

That's what great financial advice should feel like.

Great advice shouldn’t be about predicting what markets will do next year, but someone who helps you stay on track when everything in you wants to react. Someone who organizes your plan, tracks what really matters, and checks in honestly along the way. When you're ahead of where you need to be, they celebrate with you. When life gets complicated, you work through it together.

That kind of relationship, steady and consistent, is the thing that lets the compounding do its work.

For long-term investors, especially those planning for or living in retirement, the goal has never really been to beat a benchmark. The goal is to have enough, to feel okay, to not lie awake wondering if you made a terrible mistake.

Those are human goals. They deserve a human approach.

The measure of good investing isn't how it performs in a great year. It's how it holds up when you're tempted to abandon it.

That's what we're here for. And we think, over time, that distinction makes all the difference.

In an article December last year, I wrote about government bonds: “They’ll be times when you wonder why you own them. That is, until they show up to save the day.” Well, today is one of those times when you have every right to wonder. The world is in turmoil. Stocks have been weak. Your portfolio needs diversifiers to kick in. And so far, bonds have done nothing. Even I am disappointed, as I have them in my Founders Fund. Before analyzing the letdown, let’s start with some basics. Why bonds When you own a bond, you’re lending to a government or corporation. In return for tying up your money and taking the risk that you won’t get paid back, you receive a rate of interest, as measured by the bond’s yield. There are three components to a bond yield – real yield, inflation adjustment and credit spread. The first two are connected. The yield has to more than offset what you expect inflation to be over the term of the loan so that you get a positive real (after-inflation) yield. In other words, when you get your money back, you’ll have more buying power than when you lent it. The credit spread, or extra yield, compensates you for the risk that the borrower defaults on the loan. Credit spreads vary widely, depending on the quality of the issuer. Government of Canada bonds and U.S. Treasuries offer little or no extra yield because they’re strong countries that have the ability to tax. For corporate bonds, spreads range from small premiums for high-quality issuers such as utilities, banks and mega-tech firms (half to one per cent) to double digit percentages for less established and/or more cyclical borrowers where the chance of default is considerably higher. When adding the components together, bonds provide steady income and portfolio protection during economic slowdowns or crises. How much protection The mix between income and protection, however, varies depending on the quality of the issuer and term of the bond. There’s no free lunch. To get more of one, you get less of the other. On one end of the spectrum are Government bonds which offer a modest income but plenty of protection. When interest rates fall to stimulate a failing economy, these bonds react immediately. On this note, I need to review something that confuses many people. When interest rates drop, existing bonds go up in price (and vice versa). Consider a simple example. If you buy a bond that yields 5 per cent and rates subsequently drop to 4 per cent, you’ve got a more valuable piece of paper. The price adjusts up until it too yields 4 per cent, which is the going rate. How much the price rises depends on the term of the loan. The longer the bond, the more sensitive it is to changes in interest rates and the more protection it provides when rates fall. If government bonds are at one end of the income-versus-protection trade-off, riskier bonds are at the other. High yield bonds, which woo investors with their annual income, offer substantially more income but provide little or no insurance. They trade more like stocks than government bonds. Where’s my diversification Now, back to the letdown. When bonds disappoint at crunch time, it’s usually because they’re too short term and have too much credit risk. They don’t benefit enough from interest rate declines to offset expanding credit spreads. But that hasn’t been the case this time. Credit spreads on corporate and provincial bonds have increased surprisingly little considering the turmoil. Bond investors appear to be looking beyond the current headlines and assuming the world economy is still on solid footing. Rather, what has held bond returns back is an increase to the inflation component. The linkage between higher oil prices and inflation expectations is unequivocal. What next Right now, there is a tug of war going on in the bond market. Those concerned about inflation are gaining ground, but the question is, will the issues at the other end of the rope win out over time? Will reckless fiscal management and an unstable geopolitical landscape cause an economic slowdown, such that interest rates need to come down substantially to stimulate growth? The strategies that have worked so far include holding cash, market neutral funds and resource stocks. If the outlook deteriorates further, however, longer-term, high-quality bonds are likely to be an important diversifier. Real yields will come down and more than offset any changes to credit spreads and inflation expectations.

by Tom Bradley

For a professional investor and student of cycles like me, it’s a fascinating time to be alive. Consider what capital markets were chewing through in the first quarter alone. 

The fear of AI disruption took hold in February, with the market vigilantes selling first and asking questions later as they rotated through the industry sectors deemed most vulnerable. 

As part of the hunt, sentiment shifted violently away from capital light businesses, the market darlings of the last decade, and refocused on industries perceived to be impervious to AI. Software is now a dirty word while the hot new acronym is HALO – heavy asset, low obsolescence. 

The world of private assets was in turmoil.  More people want out of credit funds than could be accommodated, and private equity managers were stuck holding companies far longer than planned. 

Gold continued on a tear until the thing most people hold it for happened. We had a geopolitical crisis and the price went down.

Budgets for data center spending, which has turned into the mother of all capital spending cycles, increased despite a view by many that it was already excessive.   

And of course, investors made decisions in the fog of war where the most important market factor was, how long will President Trump be willing to continue? 

You get the picture.  There’s a lot going on. The war has been blamed for recent stock and bond market declines, but as always, it isn’t quite that simple. The first bombs hitting Iran were clearly a trigger, but markets were already running on fumes. Bond and stock valuations were stretched, risk-taking was extreme (leverage; options trading; AI and bitcoin hype), and uncertainty around trade policy was moving into a second year. 

As you’ll see in this report, stocks were down across the board in the first quarter, with the exception of ones related to energy. I expect client returns will vary widely across the industry due to the war, and the rapid shifts between the narratives mentioned above. 

Our funds were cautiously positioned to start the year, not because we anticipated a war and energy crisis, but rather because of high valuations and excessive speculation. A larger than normal cash position served the Founders Fund well, as did an on-going focus on profitable companies trading at reasonable multiples.  

What hasn’t yet helped is the Founders Fund’s full allocation to high quality bonds. Bonds are usually a safe haven at times like this but returns were flat as worries about inflation pushed interest rates up and overshadowed an increased chance of global recession. Bonds don’t like inflation but thrive during periods of economic weakness. 

How do we plan to deal with what’s going on?  We will stay well diversified, and recommend being a little more cautious than usual, which means the Founders Fund is conservatively positioned and our retired clients have their spending reserves topped up. And as always, our fund managers and team here at Purpose remain laser-focused on long-term value, no matter how noisy it is around us.

I encourage you to read the rest of our Q1 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds. 

Canadians have just suffered through two overtime losses in gold medal hockey games. Goal posts, missed breakaways and bad checks all played a part. The line between winning and losing was ridiculously thin. Investing is like sports in this regard. The line between profit and loss, great and average, and bullish and bearish is razor thin, even though commentaries usually paint everything as being decisive, and having a clear cause and effect. There’s a big difference between sports and investing, though. For investors, there’s no final buzzer or sudden-death overtime. The game keeps going. Winners and losers are declared at quarter-end and year-end, but it’s meaningless in the context of what you’re trying to achieve. What worked last year and made the numbers look great may be a detractor this year. Longer-term results are the only thing that matters. A winning stock or fabulous year will contribute but won’t show up on a chart of your 10-, 15- or 20-year returns. The flukes and upsets disappear into the bigger trend. I’m always careful about bragging (or commiserating) about what happened last quarter or last year, because of how quickly things can change. Here are other examples about how easy it is to go from one side to the other. Narratives Short-term stock market moves are all about narratives. For instance, one month the world is running out of copper, and then AI is going to destroy software companies, and this month, it was Jevon’s Paradox making everyone bullish on AI again. And regarding the Middle East war, the energy markets seem to have a different tone almost every day. Robert Shiller, the American economist and academic, wrote a book called Narrative Economics: How Stories Go Viral and Drive Major Economic Events. If you think monthly economic data is unpredictable and prone to revision, narratives around the economy and capital markets are even flakier. They can turn on a dime. I’ve used this example before. At the beginning of 2025, Apple AAPL-Q (+0.11% increase) was falling behind in the AI race, and the stock was lagging other mega-tech stocks. Later in the year, when concerns about a data centre spending bubble took hold, Apple became the anti-AI stock and regained the lost ground. Apple’s approach and positioning didn’t change, just the narrative. Fear and greed I use investor sentiment as a reality check and risk management tool. I follow Warren Buffett’s simple advice, “Be fearful when others are greedy and be greedy only when others are fearful.” Unfortunately, sentiment indicators are bouncing around more and getting harder to read. The difference between greed, when buyers are highly motivated, and fear, when sellers are more urgent, can flip from week to week. All it takes is a few good or bad economic statistics, a couple weeks of strong or weak markets, or a change to an important narrative. Good and great It’s said that a great fund manager gets their stock picks right 60 per cent of the time. It’s not as simple as that, but the point is valid. Every portfolio has some stars, some dogs and a bunch of stocks in between. Two funds that have essentially the same holdings can have vastly different short-term returns based on a couple more stars or fewer dogs, or by having different allocations to the same set of stocks. The hot managers garner most of the attention and appear to be smarter, so knowing how tenuous that brilliance can be, I try to watch and talk to managers on both sides of the industry medians. Trust the process Good sports teams like to talk about process. When they’re winning, it’s because they stuck to the process. If a few years go by and a championship doesn’t come, however, the process gets tossed out and they start again. It’s called rebuilding. You shouldn’t be too quick to rebuild your investment process, though. You’re playing a game where there’s no end and the goalposts keep moving. Perceived success and failure can bounce from one side of the line to the other, influenced by narratives, surprises and extreme behaviours. The results you care about are measured in decades and are tightly linked to having a plan, being disciplined and consistent, and controlling costs. Along the way, you’ll dance on both sides of a very fine line.

Our March 3rd post, Boots vs. Bombs, by my colleague, Craig Bassinger, ended with the following conclusion.

We don’t know how this conflict plays out; it could be short or it could become drawn out. Nobody knows. The longer it goes on, the higher the probability of a risk-off event [weak markets], which may be a buying opportunity given the economic backdrop. As the Chinese proverb goes: 'We’ll see.'

More than two weeks later, we still don’t know where this conflict is going, although the human and economic toll is in full view.

While the initial market reaction was muted, as Craig pointed out, markets have been declining more recently. The Founders Fund is down about 5% since the bombs hit Iran on February 28th (down 1% year-to-date). Stocks are down everywhere, with market declines (in local currencies) ranging from 5% in the broad U.S. market to almost 10% for Canadian stocks and 12% for European. Our all-equity Builders fund is down 7.8% since February 28th.

As investors holding Founders will know, we adjust our allocations to the underlying funds based on our assessment of the investment landscape, valuations and investor sentiment. In recent months, we’ve had the risk dialled down with stocks making up about 55% of the total fund (5% below the long-term target). The remainder is invested in bonds (35%) and cash instruments (10%).

We certainly weren’t anticipating a middle east war when we positioned the fund this way.  Our caution was based on stretched valuations in both corporate bonds and stocks, and a highly charged investment environment characterized by short-term speculation (i.e. risk taking) and an increasing use of leverage.

Cash and bonds generally protect portfolios when stocks are weak and investors are risk averse, each helping at different times in different ways. During this crisis, the cash has moderated Founders’ declines but concerns about rising inflation based on higher energy prices has caused longer-term interest rates to rise. As a result, bond prices are down and the Income Fund has not yet provided a buffer.

Energy prices and inflation may stay higher than expected for longer, but if the world economy weakens significantly, we continue to believe that the high-quality bonds in the Income Fund will provide a safe haven for Founders.

We anticipate maintaining Founders’ positioning for the time being. If further declines occur and the buying opportunity Craig referenced appears, the fund is in a good position to take advantage.

I want to build on a March 6 article on bank valuations by David Berman. Canadian bank stocks have done exceptionally well over the last year and a half. Their businesses have been strong, but the biggest factor has been expanding valuations. As David pointed out, RBC is trading at 14.1 times earnings, well above the long-term average of 11.9. To most investors, both these numbers seem low, especially compared to companies in other industries that don’t appear to be nearly as good. Indeed, if someone described the attributes of a Canadian bank to me in a blind test, I’d likely say the company should trade at either side of 20 times earnings. What’s not to like? The Canadian banks have unassailable franchises. They provide a necessary service, have sticky customers and can raise prices with impunity. They’ve become high-octane marketing machines and operate in a government-supported oligopoly characterized more by co-opetition than competition. And for income-oriented investors, they provide healthy and growing dividends. So why do these powerhouses trade at such low multiples? Risk and leverage First and foremost, banks are highly levered. The amount of money they lend out is many multiples of their common equity. Small errors, while unlikely, can turn into huge loses. Unlikely, but it can happen, as Hugh Brown, one of Canada’s best bank analysts, pointed out in a 2011 exit interview. “In 1982, Third World debt collapsed. The Big Five Canadian banks had 2.5 times their equity invested in Third World loans, and those loans plunged to 50 cents on the dollar. On a mark-to-market basis, the banks were insolvent.” Back then, banks weren’t required to market down distressed loans and were able to work their way out of the hole in the years that followed. Citigroup, the global financial services giant, wasn’t so lucky. Shareholders were severely diluted during the 2008 financial crisis and two decades later, the stock trades 80-per-cent below its 2007 high. Banks report their results in great detail but there’s little transparency around the most important risk, loan losses. Structural mismatch Customer deposits are a wonderful source of funding, but banks must manage a liquidity mismatch. The money coming in from individuals and companies (bank accounts; GICs) is plentiful and cheap (low or no interest cost) but can be withdrawn at any time. On the other hand, investments made with the deposits (loans and mortgages) aren’t so easily liquidated. Because of the leverage and mismatch, banks must maintain depositor and investor confidence in their lending practices and financial management. A crisis of confidence like the one Silicon Valley Bank suffered three years ago can have a dramatic effect. Economic and market sensitivity Banks’ fortunes are closely linked to the strength of the Canadian economy. If borrowers are losing their jobs and can’t make their payments, and the collateral is not easily sold, as is the case with real estate today, banks will feel it. The good news is they’re more diversified today than they were decades ago, but wealth management and capital markets have their own sensitivity to the stock market. The next wave of growth Canadian banks have done an amazing job of expanding into new business areas, including brokerage, wealth management and insurance, and increasing their share of Canadian wallets. The question is: Where will the growth come from? On the asset side of customer balance sheets, banks already have a huge share of savings and investments. On the liability side, they’ve been so successful that borrowers are running out of room to add more debt. The Canadian banks could find themselves in the same box as the multinational consumer product companies that have run into a growth wall. After squeezing every bit of revenue and profit out of their customers, leading companies like Nestlé, Unilever, Procter and Gamble, Pepsi and Coca-Cola have little room to raise prices and are struggling to grow. Foreign expansion is a potential growth area although the historical record is mixed. There have been plenty of missteps (and write-offs), and the successes are far less profitable than the home market. A core holding Canadian banks are great businesses and should be core holdings in your portfolio. Like any investment, paying a reasonable price is important so you want to add when you can’t believe how cheap they are (and yields are high) and hold off when analysts are rationalizing why they should trade at a market multiple. Remember, there are structural reasons why banks trade at low valuations.

Picture this: it's a regular Tuesday morning. You search for Steadyhand, click the first result, and log in. The page looks right. The logo is there. You enter your username and password without a second thought.

But the site wasn't ours.

That's how these things happen. Not because someone was careless, but because fraudulent websites are built specifically to look like the real thing. Industry regulators have recently flagged a rise in exactly this: fake login pages that closely mimic legitimate investment firms, sometimes appearing at the top of search results through paid ads. You don't need to be doing anything wrong to be caught out.

The good news is that a few simple habits make a real difference.

What to check before you log in

• Type the address directly. Always reach us by typing steadyhand.com into your browser, not through a search result or a link in an email or text message.

• Use a bookmark. Save our site once and you'll never need to search for it again.

• Check the address bar. Look-alike URLs are designed to be easy to miss — an extra word, a slightly different ending. A quick glance before logging in is worth it.

• Slow down if something feels off. Close the tab, type the address directly, and start fresh.

Red flags worth knowing

These sites are built to look normal, but sometimes something feels slightly out of place — a font that's not quite right, a layout that's almost familiar, a message creating unexpected urgency ("Your account requires immediate action"). Any request for your password outside of a normal login page is also worth pausing on.

Trust that instinct. If something seems off, it probably is. Close the page and start over.

If you're not sure what just happened

If you've entered your credentials somewhere and aren't certain it was our real site, change your password right away and call us. We'd much rather hear from you and confirm everything is fine than have you stay quiet and wonder.

And to be clear: Steadyhand will never ask for your login credentials by email, phone, or text. If you receive a message asking for that information, don't engage — call us directly.

A shared responsibility

Online security is an ongoing process, not a one-time fix. We stay on top of it on our end. These simple steps on yours make a real difference.

As always, if something doesn't feel right, we're just a phone call away.

Questions or concerns? Call us at 1.888.888.3147 or visit steadyhand.com.

This article is authored by Craig Basinger, Chief Market Strategist at Purpose Investments, on March 3, 2026. It’s Tuesday morning, and we won’t be rehashing details of the events. There’s a lot of great content out there to put things into perspective from folks who know tons more about waging war, the political dynamics of the region, and/or the states/people involved. Instead, we’re going to talk markets, because we’re portfolio managers, not fighter pilots. My wife knows one who is both, but it’s rare. Markets managed rather well on Monday. After a weak start for the first trading day since hostilities broke out, North American markets managed to finish in the green. Oil was up, as were safe havens, including gold and the USD. Tuesday looks like another weaker start, with everything down from overseas markets to bonds, gold to North American equities. Rebounding from this one may be an even bigger challenge. The U.S. dollar and oil are just about the only things higher.  Why the Initial Muted Response From Markets? #1 The conflict is not really a surprise – Tensions had been building over the past few months and weeks, with military assets increasingly moved into the region. Add this to a U.S. administration that appears to want to use its military more, and the surprise would have been if there wasn’t a conflict.  Markets generally move when surprised. Perhaps Iran’s retaliation on some of its neighbours is a bit of a surprise, or a few signs that the conflict is spreading. More U.S. casualties would have been a negative surprise, as would the targeting of energy infrastructure, which is possibly starting to show up now. The magnitude is clearly greater than the brief bombing of nuclear development sites last year or the Iran-Israel missile exchanges of April 2024, but so far, not many surprises. Obviously, this can change; that’s why they are called ‘surprises.’   #2 A learned response of boots versus bombs – The market remembers, with short-term memory much more dominant than long-term. Putting boots on the ground leads to much longer and more painful market reactions. Dropping bombs can end as quickly as it started.  The following chart shows the past five times Iran has been bombed and the path of oil prices. The turquoise line is the current situation, already off to a bigger start than past episodes. The general trend is for a spike, then oil prices come back down. It’s a very different chart if you go back in time to boots on the ground in the next set of charts, which had often seen a doubling of oil prices. One reason the energy markets may endure this supply disruption a bit better is the amount of global supply versus demand. A surplus of two million barrels a day certainly makes managing a temporary supply disruption much easier.  Final Thoughts  We don’t know how this conflict plays out; it could be short or it could become drawn out. Nobody knows. The longer it goes on, the higher the probability of a risk-off event, which may be a buying opportunity given the economic backdrop. As the Chinese proverb goes: “We’ll see.” Sources: Charts are sourced to Bloomberg L. P. The content of this document is for informational purposes only and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document, and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable; however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice. Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated. Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” intend,” “plan,” “believe,” “estimate” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are, by their nature, based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

This column is aimed at younger readers, and children and grandchildren of older readers, who are sick of hearing about how their parents’ generation built wealth owning homes and riding the stock market (while leaving a huge debt load behind). Some have rebelled by embracing things parents don’t understand and/or can’t do, such as cryptocurrencies, meme stocks and day trading. I’m old enough to be a grandparent but do understand these approaches and think there’s a far better way to rebel. It involves using the advantages young investors have – time, cost and product choice – and doing some basic, return-enhancing things that previous generations didn’t fully embrace. Start earlier From my observation, too many investors have their “come to Jesus” investing moment in their 50s or early 60s, when retirement is in sight. It’s not too late to get organized, but by getting a plan in place decades earlier and executing on it, you’ll be cruising by that age. If you establish a routine now, it will last a lifetime. For instance, setting up automatic monthly contributions forces you to save, and takes the emotion out of decision-making. When I look at statements of our long-standing clients, what screams out at me is the power of compounding. A portfolio that averages a 7- to 9-per-cent annual return doubles every 8 to 10 years. Even small amounts invested today will have huge impact decades from now. Take risk My generation has a love affair with GICs and other products that offer minimal volatility. Stable returns make sense for older investors, but your time frame is much longer. You’re not hurt by short-term market declines, and can focus on owning assets that will grow over time. For your TFSA and RRSPs, that means a diversified portfolio of stocks. Stay steady For older generations, return expectations go up and down like a yo-yo. After a good year or two, they expect double-digit returns until retirement. After a bad one, they’re never going to meet their goals. You can do better. The reality is, long-term returns don’t change much after either type of market. Over your 30- to 50-year investing career, you’ll experience four to seven bull markets and the same number of bear markets. You can expect the bears to be brief and jolting, and the bulls to be long and rewarding. This combination adds up to unbelievably good odds. Stay invested Your predecessors ask about one thing almost as much as the weather – what is the market going to do? The question appears innocent enough, and is often a good conversation starter, but it leads to poor behaviour. The problem is, it comes from a desire to avoid something that’s impossible to predict, a bad market. It causes investors to abandon those great odds I mentioned in pursuit of something that’s unattainable. Bear markets, as painful as they are, are the price of admission for bull markets. Learning to embrace them may be the most important skill you’ll develop. Remember, lower prices are a blessing when you’re accumulating assets. Find a fee fit In the popular Questrade ads, breaking from your parents equates to doing it yourself. For certain, buying stocks and ETFs online is a great way to keep costs down, but only if you have the time, ability and confidence. If you need advice and reassurance, you’ll have to pay for it. Unlike your parents, however, don’t be afraid to ask how much it costs and what you’re entitled to receive. You don’t want to pay for what you’re not getting or for the same thing twice (i.e. two full-service advisers). Slay it One disadvantage you have, which is controllable if you choose, is the amount of distraction around you. Today, there is more than ever. Hyperbolic newsfeeds and social media, a fire hose of notifications, and day-trading colleagues. They all talk about short-term, non-urgent, rapidly changing, distracting stuff. This is where you can really rebel. Instead of getting caught up in the next interest-rate cut, political hype, or heaven forbid, what the market is going to do, stay laser-focused on the prize. What are you going to do to generate long-term investment returns? More specifically, how are you going to save, what you’re going to own, how much you’re going to pay, and what information are you going to focus on? Cryptocurrencies, meme stocks and day trading may be part of your success, but only a part. The habits and routine you establish early on will pay far bigger dividends.

Let's try a thought experiment. Imagine you stored your clothes in four different closets. One at home. One at your office. One at your parents' house. And one in a storage locker across town that you visit maybe twice a year. Would that work? Technically, yes. Would it be super frustrating? You bet. You'd spend half your life wondering where you put your good jacket. You'd buy duplicates of things you already own because you forgot you had them. And every time you needed to get dressed for something important, you'd have to mentally map out which closet had what. Now here's the uncomfortable part: that's how a lot of people manage their money. An RRSP from a job you left in 2015. A TFSA at the bank that you opened because they gave you a free tote bag. An investment account with an advisor you haven't spoken to in three years. Maybe a GIC that auto-renewed last December and you didn't even notice. Each one made sense at the time. But together? It's chaos pretending to be a system. And just like the closet situation, you don't realize how counterproductive it is until you need to make a decision. Then you're logging into four different accounts (password reset, password reset, security question you definitely made up and can't remember), trying to figure out what you actually own and whether any of it makes sense anymore. Consolidation isn't about being tidy. It's about not making your life harder than it needs to be. When you bring your scattered accounts to Steadyhand, something shifts. Questions get clearer. Decisions get simpler. And when you call us, you talk to an actual person who knows your situation—not a call center three provinces away reading from a script. The 1% Match Promotion is designed to remove the friction that keeps people living out of multiple financial closets. We'll reimburse your transfer fees up to $150 + taxes, do most of the paperwork, and help you finally get everything in one place. Once that's done? You'll wonder why you waited so long. (Spoiler: it's because moving accounts sounded tougher than it is. We get it. That's why we handle it for you.) Register for the 1% Match Promotion

The Ontario Securities Commission is attempting to do something that’s harder than finding ice cream without calories or building a great relationship without compromise. It’s exploring how best to bring private assets to individual investors. Before I explain the challenge, some background. Go private, young man Funds investing in private assets offer the potential for higher returns if investors are willing to make a long-term commitment. It’s known as an illiquidity premium. As a recent article in the Report on Business pointed out, there’s pressure on the Ontario Securities Commission to approve this new category of funds for broader distribution because private markets are now a large part of the investment landscape. Companies are staying private longer and growing to be very large, while the number of publicly traded companies is in decline. The pressure is coming from both industry and government. Managers of private equity and debt, along with infrastructure and real estate, desperately want access to a big, untapped market, individual investors, and the federal government wants to see Canadians provide more long-term capital to build infrastructure and support innovation. Clink, clink, clunk It all sounds good but there’s a giant elephant in the room – the liquidity mismatch. There’s no way around it. Putting assets that are not easily tradable in funds that investors can move in and out of is a huge mismatch. Investing in private assets requires long-term capital that allows fund managers to buy unique assets, fix them up, scale them and then sell them opportunistically. They need to know the capital will be there while doing that. Without that assurance, managers are forced to water down their process – keep more cash in reserve; use less leverage; forego opportunities that will take years to play out; and at times, be forced to sell when they’d rather be buying. In private funds that offer redemptions, everything works well when markets are good and more money is coming in than going out. But if the worm turns and investors are queueing up to redeem, however, the cash reserves suddenly look too small, and investment strategies go out the window. Like good publicly-traded companies, private funds can get through tough times and come out the other side even stronger, but not if the recovery time is cut short. Imperfect solutions The OSC is looking for an unattainable balance that requires fund managers to offer more client-friendly products and buyers to understand what they’re getting into. It’s unattainable because if they put too much emphasis on constraining managers, investors will get a watered-down product that has little hope of meeting its promise. It’s already hard enough, and costly enough, to generate extra returns, without the challenge of uncertain capital, restrictions on leverage and diversification, and the additional cost of compensating advisers. In my view, the compromises should mostly be on the client side, these ways: Make it harder. Buying a private fund shouldn’t be as easy as an ETF or mutual fund. There needs to be symmetry between buying and selling. If it takes months or years to get out, after notice periods and redemption limits, buying should also have extra steps that signal what’s ahead. That’s certainly been my experience with private investments. The paperwork and lawyers are painful, which always prompts me to ask, is this worth it? Restrict liquidity. The OSC shouldn’t assume that investors need monthly liquidity. Indeed, illiquidity should be positioned as a benefit, not a detriment. After all, it’s an illiquidity premium, not discount. If investors want the returns, they have to give up something. Certainly, if I’m buying, I want to know that my fellow investors are in for the long haul. Otherwise, I have no interest. Clearly state the consequences. Institutions have a safety value. They can sell their private holdings to other investors in the secondary market at a discount to net asset value.  Individual investors should also be penalized for changing their mind. Perhaps, something like this: If they want out in 30 days, the price is discounted by 20 per cent, with the foregone value staying in the fund to compensate the remaining unitholders. After one, two or three years, the discount goes to 10 per cent. And so on – the shorter the notice period, the larger the discount. Like GICs, investors can get their money back any time, but there are consequences.    If investors want to access private assets and earn an illiquidity premium, they need to be the ones to compromise. These funds belong in a different bucket than their bonds, stocks, ETFs and mutual funds. For individual investors, it should be labelled: “Don’t touch.”

Word is getting out that there’s a real benefit to having a steady hand on your portfolio! We serve a growing base of clients across Canada and are continuing to expand following our integration with Purpose and our shared commitment to deliver thoughtful, long-term investment guidance.  We’re excited to share that we are currently hiring an Investor Specialist in our Vancouver or Toronto office.  The successful candidate will play a key role in building and maintaining strong client relationships, providing ongoing investment guidance, and supporting clients with portfolio construction, asset mix decisions, and portfolio monitoring as clients’ goals evolve. Working closely with our internal teams, the Investor Specialist will also connect with new investors and support referrals, helping ensure clients continue to receive consistent, personal advice as our client community grows.   If this opportunity sounds like a good fit for you, or someone in your network, we encourage you to take a closer look. Full details are available here. Interested candidates can apply through Dayforce by submitting a resume and cover letter. While we thank all candidates for their interest, only selected individuals will be contacted for follow-up. 

As we look back on 2025, Tom, Salman, and Lori share their reflections on a year that turned out to be stronger than expected. In this short year‑end video, Tom provides an update on our integration with Purpose, Salman walks through market results and recent portfolio moves, and Lori highlights the real‑life decisions that you (our clients) made that helped keep their plans on track.

If you’re interested in what drove returns this year, how we’re positioned for 2026, or simply want a steady perspective on navigating uncertainty, we hope you enjoy the conversation.

And if you’re thinking about consolidating your investments, don’t forget we’re currently offering a 1% match on eligible asset transfers until May 31, 2026—a simple way to give your portfolio an immediate boost. Learn more here.

To help with your tax filing this year, here is a list of the documents Steadyhand clients will receive based on the type of account(s) held, along with a brief explanation of their purpose. 

Please note: All documents are now provided electronically via our client portal, rather than by mail. This allows us to deliver them to you faster, more efficiently, and securely.   

Non-Registered Investment Accounts 

T3 Slip 

If you hold a non-registered investment account (an investment account other than a RRSP, RRIF, TFSA, or FHSA), we send you a T3 slip for each Steadyhand fund you hold. T3 slips show realized capital gains, dividend income (and any corresponding dividend tax credit, if applicable), and other investment income that you must report on your tax return. Timeline: These slips will be uploaded to our client portal the week of February 16. 

T5008 

T3 slips do not include any capital gains (or losses) that you may have incurred from selling or switching units of Steadyhand funds in your non-registered account. If you made such a transaction(s), we send you a T5008 slip for each applicable Steadyhand fund. Timeline: These slips will be uploaded to our client portal the week of February 16. 

RRSPs 

Contribution Receipt 

If you made a contribution(s) to your RRSP between March 4, 2025, and December 31, 2025, we provide you with an RRSP Contribution Receipt for the total amount of contributions you made over this period. Timeline: These slips were uploaded to our client portal in late January. 

If you made a contribution (or plan to make one) between January 1, 2026, and March 2, 2026, we send you a separate receipt for any contributions made in the first 60 days of the year (this amount can be applied to your 2025 tax return, or to a future year if you choose). Timeline: These ‘first 60 days’ receipts will be uploaded to our client portal around mid-March.  

T4RSP 

If you made a withdrawal from your RRSP in 2025, we send you a T4RSP slip. This slip shows the amount of any withdrawal(s) you made and any withholding tax remitted to Canada Revenue Agency (CRA) on your behalf. Timeline: These slips were uploaded to our client portal in late January. 

RRIFs 

T4RIF 

If you hold a RRIF, we send you a T4RIF slip. This slip shows the amount of your withdrawals (including your minimum payment and any additional withdrawals) and any withholding tax remitted to CRA on your behalf. Timeline: These slips were uploaded to our client portal in late January. 

FHSAs 

T4FHSA 

If you hold a FHSA, we send you a T4FHSA slip. Timeline: These slips were uploaded to our client portal in late January. 

TFSAs 

If you hold a TFSA, you do not receive any tax slips from us. These accounts are exempt from tax, and any contributions/withdrawals do not generate any tax-related documents. However, be sure to adhere to the maximum contribution limits for these accounts and the rules relating to re-contributions if you do make a withdrawal. 

If you can’t find a slip/receipt you think you should have, or if you have any questions about a specific document, please contact us at 1-888-888-3147 from 7am - 5pm PT Monday to Friday. 

Most investors don't set out to make their finances complicated. It just happens. You start your career and your employer sets you up with an RRSP. Great. A few years later you switch jobs, and that RRSP just... stays there. Because dealing with moving it seems like a hassle, and also, how’s it even doing? You're not sure. You'll check later. Then at some point you open a TFSA at your bank because the person at the counter was very enthusiastic about it and you were there anyway. Later, you work with an advisor for a while. That relationship doesn't quite work out, so you move on—but the account stays where it is because, again, moving it sounds like too much time and too much frustration. None of these decisions are wrong. They all make sense at the time. But ten years later, you've got investments in four different places, three different passwords you can never remember, and a creeping sense that you should probably pay more attention to what you own than you currently do. Welcome to portfolio fragmentation. It's extremely common and quietly expensive. When accounts are scattered, basic questions become surprisingly hard to answer: How much risk am I actually taking? (No idea—I would need to log into three places and add it up manually.) Am I diversified, or do I just own the same stuff in different accounts? (Probably both?) How much am I paying in fees? (Let's not think about that right now.) Are these accounts working together? (They're definitely not working against each other. Probably.) Here's the thing: scattered accounts don't feel like a problem until you try to make a decision. Then suddenly you're squinting at four different statements, trying to figure out what you actually own, and wondering why this is so complicated. Bringing all your assets together fixes that. Not in a boring, administrative way—in a "oh, I can actually see what's happening now" way. When everything is in one place, you can see your real asset mix. You know where your risk actually lives. You can make changes without logging into a bunch of different portals and hoping you didn't miss something. At Steadyhand, we've built our entire approach around this kind of clarity. Our portfolios are designed to work together, not compete. Our fees go down as your assets grow, not up (wild, we know). And our team invests the same way our clients do—we eat our own cooking, as they say. To make consolidation easier, we're offering a 1% Match Promotion on assets you bring over by May 31, 2026. We'll also reimburse transfer fees up to $150 + taxes and handle most the paperwork, because the paperwork is genuinely the worst part of this. The 1% bonus is nice. But honestly? The real reward is never having to remember four different passwords again. Learn More About the 1% Match Promotion

No explanation required.  Note: The above table shows the returns of our five long-standing funds: Steadyhand Savings Fund, Steadyhand Income Fund, Steadyhand Equity Fund, Steadyhand Global Equity Fund, and Steadyhand Small-Cap Equity Fund. The Steadyhand Founders Fund is not included in the table, as it was not launched until 2012. The Global Small-Cap Equity Fund and Builders Fund are also not included, as they were launched in 2019.  Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. 

Here's something that happens to thousands of Canadians every December 31st: Their GIC matures. And immediately reinvests. At whatever rate the bank is offering that day. No phone call. No email. No "hey, just so you know, your 5% GIC from 2022 just renewed at 2.8%." It just... happens. Many of us set up a GIC years ago when rates were decent, then completely forget about them. Which is fine when rates are stable or climbing. But when they drop? That automatic renewal quietly locks you into lower returns for another term. And here's the thing: a maturing GIC is one of the easiest assets to move. No complicated transfers. No selling positions. No tax complications if it's in an RRSP or TFSA. The money is just sitting there, waiting for instructions. If you had a GIC mature in late December (or if one is coming up soon), this is actually the perfect time to consolidate your investments. Move that GIC to Steadyhand, put it to work in a real portfolio, and through May 31, 2026, you'll get a 1% bonus on top when you make the switch. That's $500 on a $50,000 GIC. $1,000 on $100,000. And instead of locking into another term that quietly renews without you noticing, you'll have money that's actively managed and part of your overall investment strategy. We'll handle most of the paperwork. We'll also reimburse transfer fees up to $150 + taxes. You just need to register first so we know you're coming. Register for the 1% Match Promotion If your GIC renewed automatically and you didn't notice, you're not alone. But now you know you have better options.

January is a good time to tune up your behavioural game. Your investment routine, along with periodic actions and reactions, are key factors in your investment results. They’re even more important than picking a good stock or fund, or keeping fees down. At a time when there are so many unanswered, or should I say, unanswerable, questions about AI, cryptocurrencies, trade and geopolitics, I’ve got five questions that are eminently answerable. They’re not necessarily easy, but if addressed honestly, will improve your long-term returns. Does my strategy match my skills, experience and available time? It’s never been easier and cheaper to be a do-it-yourself investor. You have access to great information on the web and can trade stocks in seconds on your phone. But does going it alone fit with your situation? You need to make sure you have time to devote to the process, week after week, month after month and year after year. The more periods when you can’t (travel; family; work), the less of your portfolio you should manage yourself. And then there’s skill and experience. You need to have a good sense of valuation, the most reliable predictor of future returns, and portfolio construction. It also helps if you’ve been through a few cycles and seen different types of markets. If you don’t have good answers to these questions, keep your trading account small and take time to test your approach over a full market cycle. What is the objective and time frame for the money? This is ground zero for any investment decision. Together, these two things determine what risk is for you. If your time frame is short, risk is stock market volatility. The priority is security and limited downside. If your investment horizon stretches over decades, then stable short-term returns are unimportant. Your biggest risk is not having enough exposure to assets that will grow. In other words, not taking enough risk. Can I maintain my current risk level through all types of markets? It’s one thing to have a portfolio that fits with your goals, but theory can be quite different than reality. Can you stick to your strategy in noisy market conditions when emotions are running high? It’s best to assess your staying power ahead of time because your asset mix is only appropriate if it can be sustained. Look in the mirror and ask how you felt previously when your portfolio was down. What actions did you take during the 2008 financial crisis, during COVID-19 and on Donald Trump’s Liberation Day? Did you stick to your plan in 2025 when FOMO was running rampant? And did you take advantage of weak periods by rebalancing your portfolio? If you abandon your plan and bail out (or go all-in after being too conservative), there’s a high likelihood it’ll be done for emotional reasons and at the wrong time. Do my adviser and I know enough about each other? When you put your financial future in someone else’s hands, you need to know a lot about that person, and vice versa. I’m not talking touchy-feely, just basic stuff that goes beyond your goals. Your investment personality, communication preferences and what’s important in life. Is your adviser or portfolio manager willing to answer all your questions without reservation? After regaling you about the winners, do they also discuss the losers? And do they openly talk about your long-term results and the fees you’re paying? If you’re not there yet with this person who will shape your retirement, then fix it. Spend more time together. Clarify how you want to be communicated with, and at what level. Remember, there’s only one boss. You. Who do I rely on to tell me what the stock market is going to do? Regular readers will know right away that this is a trick question. If you’re basing your strategy on what the market is going to do next month, you’re behavioural game needs work. Timing the market is one of those unanswerable questions.

As we do every year, it is time to highlight a few important financial numbers for 2026. TFSA contribution limit: The maximum contribution limit for Tax-Free Savings Accounts this year remains at $7,000. This brings the total lifetime cumulative contribution room to $109,000 for eligible investors. TFSAs offer a valuable tax break that all investors should take advantage of. In the past, we discussed just how powerful a tool these accounts have become in our article, The eye-opening difference of using your TFSA for investing vs. saving. RRSP contribution limit: The maximum you can add to your Registered Retirement Savings Plan this year is the lesser of 18% of your 2025 earned income or $33,810 (unless of course you have unused contribution room from previous years). If you’re unsure which account is best for you, our TFSA vs RRSP Calculator can help. FHSA contribution limit: For those who have opened a First Home Savings Account, you can contribute $8,000 in 2026. If you opened one of these accounts in previous years and didn’t maximize your contribution, you can carry forward up to a maximum of $8,000 unused contribution room to this year. For a refresher on the rules and benefits of these accounts, check out our guide. As a reminder, you can contribute to your accounts with us by calling 1-888-888-3147 between 7am and 5pm PT, Monday to Friday. We can electronically transfer money from the bank account we have on file to your Steadyhand accounts.

We recently made a small behind-the-scenes change to the Purpose Cash Management Fund held inside our Savings Fund. The good news: nothing changes about your day-to-day experience. Your account works the same way, your expected yield stays the same, and the fund continues to do what it’s always done — provide a reliable place for cash inside a portfolio. That said, we believe in being transparent, so here’s what changed and why. What changed? Previously, the Savings Fund held MNY — the ETF version of the Purpose Cash Management Fund. We’ve now switched that holding to PFC7901, which is the mutual fund version. Same underlying strategy. Different wrapper. Why we made the change The fund itself hasn’t changed, but the mutual fund structure makes distributions simpler and more predictable. With the ETF version, distributions occasionally included a small return of capital component—meaning part of the payout was a return of the investor’s own money rather than investment income. That isn’t unusual in the ETF world, but it can add complexity and make payouts a little less straightforward. With the mutual fund version, distributions are cleaner. They more consistently reflect earned interest, without the occasional return of capital element. Just to underline the most important point: ✅ Your expected yield hasn’t changed✅ The management fee hasn’t changed The easiest way to picture it Think of it like two cups of the same coffee: Paper cup = ETF (MNY) Ceramic mug = mutual fund (PFC7901) The coffee tastes exactly the same, but the ceramic mug tends to be steadier and less messy. Bottom line Here’s what this means for you: The fund you hold remains the same quality and performance you expect There is no impact on your account or expected yield We switched from the ETF to the mutual fund version to keep distributions more consistent and the structure simpler  Transparency matters We’ll keep sharing updates like this as they come up, even when they’re small, because we believe good investing is built on trust, clarity, and staying informed.

It’s been said that if you hear something 30 times, you’ll think it’s true. I traced the root of this notion to a scientific theory called the Illusory Truth Effect, which refers to the human tendency to believe false information if it’s repeated often enough. This is an important concept in our world of high-velocity media where we’re increasingly barraged with fake everything. False narratives and images get in the way of truth, help maintain the status quo, entrench the elite, and, in the case of investing, lead to suboptimal decisions. Here are some things you may have heard 30, or three thousand, times that may not be quite right. It’s the economy, stupid Speaking of elite, economists are royalty on Bay and Wall Streets. The assumption is, where the economy is going, the stock market will follow. Unfortunately, it’s more complicated than that. The relationship is tenuous at best because the stock market is looking farther out than the next three to six months and is influenced by events and trends not contemplated in economic models. For certain, economic activity affects corporate profits, which are in turn the fuel for stock prices, but market moves in the near-term are driven by changes in valuation – how much investors are willing to pay for those profits – more than their earnings variability. Interest rates are going down Like older generations who remember buying a Canada Savings Bond with a 20-per-cent coupon, borrowers today remember how low their mortgage rate was three years ago. Since rates jumped in 2022, the recurring question in conversations and commentaries is, when are rates going back down? It seems like it’s only a matter of time before we return to 2021 levels, they say. But history suggests otherwise. The level of interest rates today is pretty normal, maybe even below normal. The laws of economics suggest that lenders should expect to have more buying power when the loan is repaid. In other words, they’ll have more than kept up with inflation. Today, if a bank makes a loan, or you lend money via a bond or GIC purchase, the yield is generally above the expected inflation rate (although not by a whole lot). This is normal. Interest rates may go down because of recession or political expediency, but it shouldn’t be an assumption in your financial plan. The economy is holding up I hear it regularly. The U.S. economy is doing amazingly well in face of all the disruption and uncertainty. Perhaps, but it’s useful to liken the economy to a neighbour who seems to be doing well. They just put in a new kitchen, have a fancy SUV in the driveway, and are enjoying beach vacations in the winter and European adventures in the summer. What you don’t know is how they’re doing it and what their balance sheet looks like. The U.S. government is living it up like that neighbour, but in this case, we know exactly how it’s doing it. The numbers are there for all to see. The federal government is spending 33 per cent more than it’s taking in, which amounts to 5 to 6 per cent of the overall economy. The next time you hear how miraculous the U.S. economy is, remember that you’re hearing about the top line, not the bottom line. Washington is running up its credit cards and line-of-credit, and certainly not maxing out its TFSAs and RRSPs. 2026 – another good year We’re coming to the end of the 2026 forecast season. You might have noticed that almost every investment professional seems compelled to make a pronouncement about the year ahead. After you hear 30 forecasts, almost all of which anticipate a positive year, you start to believe there are people who know what’s going to happen. Regrettably, the 30-times rule fails miserably in this regard. Short-term stock market forecasts aren’t worth the paper they’re written on. An overwhelming majority of them project a return of seven to 10 per cent, which seems reasonable given that the long-term average is at the top end of that range, but a more detailed analysis suggests otherwise. Since 1960, calendar year returns were within 7 to 10 per cent only two times (sourced from our Volatility Meter – 50 per cent Canada stocks/50 per cent global). Two out of 65. Meanwhile, on 20 occasions, annual returns were up over 20 per cent and 14 times were in negative territory. The investment industry is delusional about market forecasting, as it is about the importance of recent economic data. Don’t go down the same rabbit hole. If you want fiction, read a good book instead.

by Tom Bradley

It’s been a wild and wacky year. As I pointed out in a recent Globe & Mail column, 2025 ended up very differently than it began, and certainly tested our team and clients’ conviction and discipline along the way. It was a test for our fund managers because change came fast and unpredictably, abetted by AI and violent policy shifts. But there was more. What was popular in 2025 were assets that are difficult, maybe even impossible, to value. Things like gold, bitcoin, and AI-related businesses. These aspirational assets, as they’re referred to, are all different in their economic role and potential, but share one common trait – they don’t currently produce any cash flow to put a multiple on, and in some cases, are burning through cash.

The challenge of investing in aspirational assets goes beyond an assessment of usefulness and growth potential. Their prices are untethered by the constraints of historical valuation measures and therefore are driven by the mood of investors, a powerful but fickle force. For firms like ours that are attracted to profits, solid balance sheets and reasonable valuations, 2025 was bewildering.

Another challenge is that the foundation on which the economic and market system sits is deteriorating. It doesn’t seem to matter whether the short-term outlook is strong or weak, government and consumer debt keeps accumulating and is approaching unsustainable levels. Government policy is increasingly erratic and short-term in nature. And global leadership in a growing list of technologies is being ceded to China, including EV’s, renewable power, and perhaps in the not-too-distant future, AI and semiconductors.

These things were on our clients’ minds too, but the bigger tests for many of you were behavioural. While we were advising to stay on plan, you were being barraged with a firehose of negativity and uncertainty, both of which are dragging on. There’s been no resolution on how de-globalization will play out or what AI will mean for employment and human interaction.

FOMO was hard to avoid in 2025. The allure of quick riches fueled by volatile markets, a plethora of new products, and the ease of trading on handheld devices was hard to resist. These temptations made it more difficult to stay diversified, as did the wide dispersion of returns between industry sectors and asset types. And to top it all off, we surprised our clients with the sale of Steadyhand to Purpose Unlimited.

If you’re dazed by 2025, you’re not alone. We are too, but it hasn’t dampened our excitement for what’s ahead in 2026. Last year, our team worked tirelessly to analyze the opportunities our Purpose partnership could bring, and to transition our systems and operations (hopefully behind the scenes). There’s more to do on these fronts, and the benefits will be more obvious this year, particularly with regard to our client-facing technology and advice capabilities. Needless to say, it’s been a crazy year. No matter how 2026 plays out, we’re well positioned to take advantage in terms of both investing and serving clients. Happy New Year to you and yours.

I encourage you to read the rest of our Q4 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

If you've ever felt that your finances are more complicated than they need to be, you're not alone. Most people accumulate accounts over time—an RRSP from a former employer, a TFSA at the bank, investments spread across different institutions. Each one made sense at the time. But collectively, it becomes hard to see what you actually own or whether your portfolio is working together. Bringing everything into one place changes that. You see your full asset mix clearly. You understand your diversification. You make decisions with the complete picture—not fragments of it. To make that easier this year, we're offering a 1% bonus when you transfer (or contribute) $25,000CAD or more (per account) by May 31, 2026. That's $500 on $50,000. $1,000 on $100,000. $2,500 on $250,000. We'll also cover your reasonable transfer fees (of up to $150 plus HST), and we handle most of the paperwork. You just need to register first—assets only qualify after you're registered. Important Information: All investments with us are in Steadyhand proprietary mutual funds. The bonus is paid in two installments (July 2026 and February 2027) directly into your account. You must register for the offer before transferring assets. This offer is intended to help offset transfer costs and is not a recommendation to consolidate. Please consider whether this is suitable for your financial situation. Consolidating accounts may have tax implications or affect your investment strategy. We encourage you to speak with a qualified advisor before making changes. Register Now Questions? Call us at 1-888-888-3147. Steadyhand P.S. The bonus is paid in two installments (July 2026 and February 2027) directly into your account. Full details on the program page.

What’s changing? Previously, our website and your client statements show the fees you pay for our advice and services, including costs of managing the fund, operational expenses, fund manager costs, and taxes. We refer to this as the One Simple Fee - commonly known as the Management Expense Ratio (MER). Unlike most firms that layer advice fees on top of the MER, we roll it all together so you know exactly what you’ll pay upfront. Starting this year, it will also include Trading Expense Ratio (TER) – the variable cost of buying and selling securities within the fund, which is incurred as part of trading activities. These costs have always existed and are already reflected in your fund returns, though they were previously reported “under the hood.” When combined, the MER and TER make up the Fund Expense Ratio (FER). Under a new regulatory requirement called Total Cost Reporting, all firms must now show these fund-level costs in dollar terms in your statements. We’re big fans of this new disclosure and have advocated the regulators for it. Going forward, you can think of the FER as the One Simple Fee — a complete and transparent view of the total cost of investing in the fund. To make it clear, your fees are NOT going up — nothing new is being charged. You’ll just see a more complete breakdown, combining both the fees you pay Steadyhand and the fund-level expenses. Think of it like an airline ticket: the total price you paid has always included things like airport fees and fuel charges, even if they weren’t shown separately. Total Cost Reporting is simply itemizing those components so you can see how the total is made up. Why the change? The goal is to have the greatest transparency possible. While fund expenses have always been disclosed in documents like Fund Facts, many investors have not seen them clearly summarized in a single place. Regulators believe the new requirement gives a complete view of what it costs to invest, without having to dig through multiple sources. And we agree. At Steadyhand, we continue to prioritize straightforward communication with investors. We support this change because we believe investors should have an easy-to-understand view of all their fees, without fine print or extra effort. In many ways, it brings the rest of the industry closer to the standard we’ve always upheld.  There’s nothing for you to do — we’ll continue to handle the reporting, and you’ll start to see the updated format on the website in January 2026 and in your 2027 client statements. As always, our team is here to answer any questions and help you understand your statements. Please call us at 1-888-888-3147.

I write regularly about the disconnect between how predictable investors think markets are and how unpredictable they actually are. If I needed concrete examples to make my case, 2025 was a treasure trove. At the beginning of the year, sentiment on important issues was very different than it is today, with many twists and turns along the way. In January, who’d have thought that the Alberta government and Ottawa would finish the year in a pipeline love-in. And that our Prime Minister, who was previously a world leader in championing sustainability for global businesses, would push harder for fossil fuels than renewables. On a lighter note, who’d have thought three of the most dominant athletes in the world would be Canadian: swimmer Summer McIntosh, basketball player Shai Gilgeous-Alexander and hockey player Connor McDavid. Who’d have thought MAGA would end up being MEGA, at least from a stock market point of view. European stocks are up more than 30 per cent in U.S. dollars year-to-date compared with the S&P 500 at 15 per cent. In January, U.S. exceptionalism was the topic du jour. Now the conversation is more about how U.S. policy is fuelling China’s ambitions in renewable energy, semi-conductors, electric vehicles and artificial intelligence. Who’d have thought the stock market would be so good with such little resolution on trade issues and that Canada would be at the head of the pack. Just as surprising is that the S&P/TSX composite index did so well – up 30 per cent including dividends – without the usual stalwarts. The railroads lagged, dividend mainstays BCE Inc. and Telus Corp. had miserable years, as did perennial favourites Constellation Software Inc., Thomson Reuters Corp. and Alimentation Couche-Tard Inc. Banks, gold and natural gas led the charge. Who’d have thought the market for initial public offerings would fail to ignite against such a perfect backdrop. The pickup in IPOs was modest despite raging animal spirits, high public valuations and the desperate need for private equity funds to sell companies. In 2025, the consensus on AI moved around more than Patrick Mahomes in the pocket. It turned out to be the tale of two halves, with the focus shifting from a desperate need for more computing power – for training generative AI models – to a focus on the financial viability of data centres and where their power is going to come from. Companies investing aggressively in AI were rewarded in the first half and penalized in the second. Oracle Corp. was one of those. It initially got a boost when it announced it would spend a king’s ransom on AI infrastructure, but more recently has been hammered for the same reason. CoreWeave Inc., a pure play on the data centre buildout, is down almost 60 per cent from its June high. Conversely, Apple Inc., the anti-AI company, is finishing a great run after lagging behind hyperscalers Microsoft Corp., Meta Platforms Inc. and Amazon Inc. for most of the year. But the best AI-related performer was Alphabet, a company derided for ceding its technological leadership. It stumbled out of the gate but now has the best large language model and is by far the stock market winner. Crypto’s year also had very different halves. Believers were euphoric about the possibilities when the crypto-friendly U.S. President was sworn in. Prices skyrocketed and bitcoin treasury companies, which never made any economic sense, multiplied like rabbits. Strategy Inc., the archetype for the category, was up more than 50 per cent by mid-July, but with bitcoin now in the red for the year, its stock is down 45 per cent since the beginning of the year. Leading players in the sports betting epidemic, DraftKings Inc. and Flutter Entertainment Plc (which owns FanDuel), also started the year on a roll. More recently, however, they’ve been a bust as growth shifts to the prediction markets, which operate in the more regulatory-friendly environs of finance. What were the odds of that? The biggest takeaway from 2025 for investors is to be wary of bold pronouncements and confident forecasts about what’s going to happen in 2026. Many, maybe even most, will prove to be wrong, ill-timed or temporary in nature. I’ll end with a story from Morgan Housel of the Collaborative Fund. In one of his newsletters in 2022, he referenced the night before the D-Day invasion in 1944 when Franklin Roosevelt asked his wife Eleanor how she felt about not knowing what would happen next. She said, “To be nearly sixty years old and still rebel at uncertainty is ridiculous, isn’t it?”

I use the word “diversification”’ a lot. I know it’s basic, even boring, but I’m a believer. For over four decades, I’ve watched clients with diversified portfolios build their wealth and achieve their goals. But the word’s meaning is more nuanced than I sometimes let on, particularly with regard to fixed income. When I started in the 1980s, two asset types made up the secure section of portfolios – government bonds and T-bills. Today, there’s a plethora of products with different features and use cases. All have a fixed obligation to pay interest and repay principal, but they diverge from there. In balanced portfolios, some help smooth returns, some protect against market meltdowns, and some provide no diversification at all. Let’s look at the fixed-income tool kit through a diversification lens. Savings vehicles There are many options in the short-term savings category – T-bills, GICs, money market funds, and cash management products. These are simple to understand. The yield is clearly stated and the principal holds steady, even in bear markets. In a portfolio, they help smooth out the bumps and provide ready liquidity for spending and rebalancing. There’s a cost, however, to holding savings products in investment accounts. The yield will generally be below your required return and may not fully offset inflation. Government bonds Government bonds are longer-term loans (five to 30 years). Like the savings vehicles above, there’s no risk of default. You know you’ll get your money back. But government bonds are a more valuable offset to stocks because they’re sensitive to changes in interest rates. Remember, when market yields drop to stimulate a faltering economy or deal with a crisis, the bonds you already own become more valuable. With turbulence all around, government bond prices go up (the longer the term, the more a bond responds to rate changes). Government bonds are the place to be at crunch time, but there are trade-offs. They provide a steady income, but again, the potential return is less than most portfolios hope to achieve. And the returns can be volatile as interest rates change. They’ll be times when you wonder why you own them. That is, until they show up to save the day. I’ve talked so far about one source of return – interest rate risk. There’s another useful tool in the kit – credit risk, or the risk that a borrower defaults on a loan. Investment-grade bonds Corporate bonds have credit risk and holders are compensated with higher yields versus comparable government bonds. The extra yield is called a spread. How much spread depends on the reliability of the borrower. Investment-grade borrowers such as banks, insurers, telcos and utilities are unlikely to default and therefore have a modest spread – 0.5 to 1.5 percentage points. For bonds issued by less reliable and/or cyclical borrowers, spreads range up from three percentage points. Spread product is a valuable part of any portfolio but it complicates the diversification picture. When the economy and markets are weak, investors worry about defaults and spreads go up, which negates some of benefit derived from falling interest rates. High-yield bonds Riskier “high yield” bond funds have an excellent return record, in some cases rivalling equities. One of my rules of thumb, however, is that if something has equity-like returns, it also has equity-like risk, and most likely is highly correlated with the stock market. That’s the case here. High yield generally has shorter terms-to-maturity, which means it benefits less from rate declines. The biggest swing factor is changing sentiment towards defaults. Growing negativity can push spreads from the mid-single-digits to the low- to mid-teens. Yes, five to 10 percentage points. High yield is great return generator but not a great diversifier. It’s technically in the fixed-income bucket but behaves more like stocks. Private credit Private debt funds, which hold loans that aren’t publicly traded, have been the fastest growing asset class over the past decade. As the category matures, the differences between private debt and high-yield bonds are narrowing. There is one big difference, however – private loans usually have floating rates. The yield goes up and down with interest rates. In a falling rate environment, holders get hit by dropping yields. If spreads are also rising, these funds, like high yield, are not dependable diversifiers. I’ve left convertible bonds, mortgages and preferred shares for another day. In the meantime, I hope you’ll assess your fixed-income holdings with a more discerning eye. Be clear on their purpose, and ask yourself whether they’re there to enhance your returns or provide downside protection.

The year-end distributions for all our funds, except the Savings Fund, will be declared on Wednesday, December 17th and paid on Thursday, December 18th. The Savings Fund will pay its regularly scheduled monthly distribution on Wednesday, December 31st.  

Understanding distributions 

As a quick refresher, distributions are how mutual funds transfer accrued interest income, dividend income, and realized capital gains over the year to unitholders. Most investors choose to reinvest these distributions into additional fund units, though you can also opt to receive them in cash. 

Impact on fund prices

It’s important to note that immediately following a distribution, the fund’s price drops by an amount equivalent to the payment. However, you will receive additional units in the fund equal in value to the amount of the distribution. The result is that the value of your investment doesn’t change, you just own more units in the fund at a lower unit price. 

For example, assume you own 100 units of a fund valued at $10.00/unit (your investment is worth $1,000). If the fund pays a distribution of $0.10/unit, its price will drop to $9.90 following the distribution. However, if you follow the common practice of reinvesting your distributions, you will receive an additional 1.01 units in the fund ($10.00/$9.90), so the value of your investment remains unchanged (101.01 units x $9.90/unit = $1,000). 

Estimated distributions 

The estimated distributions for our funds (to be declared on December 17th) are as follows:  

• Income Fund: $0.17/unit (bringing the year-to-date total to $0.38/unit)   

• Founders Fund: $0.95/unit (bringing the year-to-date total to $1.08/unit)   

• Builders Fund: $0.69/unit   

• Equity Fund: $0.79/unit   

• Global Equity Fund: $0.08/unit   

• Small-Cap Equity Fund: $1.60/unit   

• Global Small-Cap Equity Fund: $1.00/unit 

Please note that these are estimates only and are subject to change. 

Important note for investors 

If you are considering purchasing units in the funds in a non-registered (taxable) account, you may want to wait until after the distributions are declared. Fund units purchased on or after December 18th will not receive distributions. 

If you have any questions about distributions, please call us at 1-888-888-3147. 

Each December, roofs shimmer with twinkly LEDs, Mariah Carey emerges from hibernation, and even the most cynical among us feels a flicker of… something. Nostalgia? Wonder? Relief that they can soon put on their out-of-office and ignore work emails? Hard to say. We tend to think the “magic” of the holidays comes from a single cinematic moment — the perfect snowstorm, the surprise gift, that part in The Family Stone where Diane Keaton looks past Sarah Jessica Parker’s strange throat tick and finally accepts her into the fold. But the truth (the unglamorous, vaguely anthropological truth) is something a little less Hollywood. The magic comes from repetition, ritual, and the layering of experience over time. It’s the result of consistency: the same rituals repeated year after year. The same ornaments pulled from the same box. The same movie watched on the same couch. The same recipe that never quite turns out the same, no matter how sternly you glare at it. Each repetition layers memory upon memory. The first time you bake cookies with your kids, it’s fun. The tenth time, it’s tradition. The twentieth time, it’s ✨nostalgia. ✨ In short: tradition compounds. That’s how investing works, too. There’s no single “magical” moment when wealth appears. No perfectly timed trade. No secret handshake into your cousin’s-barber’s-nephew’s stock-picking syndicate. And probably no meme stock rocket ship ready to whisk you, GameStop-style, to instant fortune. Wealth is built quietly, through repeated habits: saving regularly, staying invested, and resisting the urge to reinvent everything each season. Each contribution over the years, each decision not to panic, each moment of patience — it all layers together into something meaningful (and hopefully lucrative).  Holiday magic, and success in investing, both rely on the same principle: steadiness. Compounding doesn’t care about excitement. It rewards consistency.  Investing success is much less about finding the perfect moment and far more about not interrupting the process. Think of it as the financial equivalent of resisting the urge to open the oven every five minutes while the turkey is baking.  For a guiding principle referenced as predictably as the fruitcake that makes its annual rounds: the Rule of 72 reminds us that at roughly a 6% return, it would take about 12 years for your money to double.  Not because of cleverness or shock or spectacle. Just because time and consistency are quietly powerful. So as the year winds down, pour the cocoa, build the snowman, and enjoy the Mariah. Because the best holiday memories — and the best investment results — aren’t flashy. They’re faithful. Vanessa ☃️

Big news out of Ottawa: the federal government has announced that investment account transfer fees are being eliminated. These pesky charges, usually around $150 per account, have long been a thorn in the side of investors who want to move their money. Starting soon, Canadians will be able to switch firms without paying what amounts to a penalty for exercising choice.This is good news. Great news, actually. But let’s be honest: it’s also a little frustrating that it took government intervention to make this happen. The wealth management industry could have done this years ago. Instead, most firms clung to transfer fees as a way to keep clients from leaving. It wasn’t about covering costs. It was about creating friction.At Steadyhand, we’ve never charged transfer fees. Ever. In fact, we’ve joked for years that we’re the easiest company to leave. If you don't think we're doing a good job and want to move your money out, we’ll process the paperwork promptly and wish you well. No drama. No penalties. Because that’s how it should be.So, while the rest of Canada celebrates this change, our clients can smile knowing they’ve had this freedom all along. You’ve always been able to move your money without paying a toll. And if you’re coming to Steadyhand from another firm, we'll continue to reimburse any qualifying transfer fees they charge you (up to $150) until this new rule takes effect. Conditions may change.

The bottom line: competition is good for investors. Removing transfer fees is a step toward a more open, client-friendly industry. We just wish it hadn’t taken a federal budget to get here.

I used to think that plug-in hybrid electric vehicles were the perfect solution. They have enough battery life for city driving and no range anxiety for longer trips. I thought this until a friend in the auto industry pointed out that hybrids are the worst of both worlds. They’re more expensive than gasoline-powered cars, have a battery that degrades, are heavier so highway mileage is worse, and the costs of tires and brakes are higher. They also still require oil changes and maintenance, like gas-powered cars. I haven’t totally bought into his argument for cars yet, but for something I know far better, investment products, he’s spot on. There are plenty of products that are hailed as being the best of both worlds but are below average in both (I’ve written previously about index-linked notes). The analogy is relevant for the new darling on the investment landscape: private assets. As private funds open their doors to individual investors, they may be heading down a similar path to hybrid mediocrity. Private is where it’s at First, some background. I’ll focus on private equity, which has served institutional investors and wealthy individuals well for decades. There are many attractions to private investing. Investors get access to assets not available in public markets, and by sacrificing liquidity, they have the potential to earn higher returns (known as an illiquidity premium). Fund holdings are also valued less frequently, which smooths out returns and provides diversification. For fund managers, it means guaranteed capital for 10-plus years, which allows them to operate outside of the public eye. They can use more leverage to enhance returns and reduce taxes, and they can make changes without worrying about quarterly earnings calls – disruptive things such as management changes, restructuring, new operating systems or acquisitions. There’s a lot to like, but do these strengths hold for the private equity funds being offered to smaller investors? Unlocked and opened up It’s not yet known whether these retail funds will use less leverage and/or be required to do more quarterly reporting. Almost certainly there will be more regulatory and adviser scrutiny. The biggest compromise will be liquidity. Funds designed for individual accounts need to be open ended to allow for flows in and out. This is a critical difference considering the huge advantages that go with permanent capital, and it creates a mismatch – illiquid assets in a liquid fund. Open-ended funds can take precautions to manage the mismatch. To provide liquidity and protect the capital base, they usually hold liquidity sleeves that invest in publicly traded securities that can be sold to raise money. They also have redemption rules (how much, how often and how much notice) to discourage active traders. When investors start lining up to take money out, however, the game totally changes. Long sleeves suddenly feel like short sleeves, and fund managers are forced to take two unpleasant steps: close or limit redemptions and sell assets at an unfavourable time. I’m sure managers who deal with long redemption queues, such as Romspen, Hazelview Investments and KingSett Capital, would prefer to be buying instead of selling. Bumpier ride For open-ended funds to be fair to buyers and sellers, prices must be current. A delayed pricing mechanism doesn’t work. The more often investors can transact, the quicker assets need to be repriced and, thus, the more exposed funds are to the whims of investor sentiment. I haven’t mentioned cost, but suffice it to say an already expensive endeavour, private investing, will be more expensive. Accessing small investors is costly and comes with more mouths to feed. Due diligence Private assets make sense for institutions and wealthy families, but the jury is out on how they’ll work for smaller investors who don’t have the same resources and clout. Undoubtedly open-ended structures water down some of the advantages that institutional investors count on. If you want to invest privately, pay attention to the structure and who you’re investing with. It pays to be contrarian. Look for funds that offer limited liquidity, at least in the initial years. The tougher the exit, the fewer performance chasers you’ll have with you and the more effective your manager can be. If you want to avoid hybrid mediocrity and capture that valuable illiquidity premium, make sure your investment is truly illiquid.

If there’s one thing investors and investment managers can agree on, it’s this: talk is cheap. What really matters is what you do with your money. That’s what this blog is all about — our annual check-in on how we invest with our clients.

At Steadyhand, we don’t just talk about alignment, we invest it.

Let's be honest: it's common marketing to claim that our interests are aligned with yours, but few firms practice what they preach. Co-investment is one of our clearest signals. It means we’re incentivized to act not just as managers, but as fellow investors, right alongside you.

Here’s what co-investment means to us and why it matters:

Skin in the game. Steadyhanders feel fund performance directly. That’s a powerful motivator to act responsibly, think long-term, and tune out short-term noise. Credibility and confidence. When you hear us say we believe in this approach, we’re not just theorizing; we’ve backed it with our own dollars. Shared risk, shared reward. Co-investment reinforces that we succeed when our clients succeed. It’s not a marketing line, it’s a conviction.

That said, as of June 30, 2025, here’s where things stand: 82.3% of our team’s financial assets are invested in our funds. In total, our employees and their families have $63.2 million invested alongside our clients. 

So yes—when markets get bumpy and headlines get noisy, our team is right there with you, as fellow investors with the same goals in mind.

To us, co-investment is more than a number or an annual update. It’s a reminder of what sets Steadyhand apart: we’re in this together, following the same principles, navigating the same markets, and sharing the same results.

So, thank you for reading, trusting, and staying invested in every sense of the word.

See you in the next one, - Patty

Hi, I’m Patty, and I’ve recently joined the team at Steadyhand. If you’re imagining me hunched over spreadsheets, furiously cranking out market updates… think again. My job’s a little different: to keep you in the loop on what’s happening, with honesty, plain language, and a dash of personality.

I was excited to join because the team has a reputation for something rare in finance: clarity. Real, human, no-fluff clarity.

When I first started reading Cutting Through the Noise, I was struck by how different it felt. No corporate clichés. No dense charts. No scare tactics. Just straight-up insights, told with warmth, wit, and a good dose of common sense. That’s the kind of writing I want to help carry forward.

I’ve spent years in content and communications, in industries where words often complicate instead of explain. Joining a firm that believes investors deserve honesty and plain language? Refreshing doesn’t even begin to cover it.

And speaking of clarity, let’s talk about what’s likely on your mind: the recent updates to our Savings Fund.

At Steadyhand, every decision starts with one question: Will this help our investors achieve better outcomes?

The Savings Fund is evolving to serve you even better—offering higher yields and lower fees, while keeping the same personalized advice and simplicity you’ve always valued. With Purpose Investments—a pioneer in cash management—now overseeing the fund, your savings remain secure, flexible, and professionally managed in good hands.

It’s this combination of expert oversight and genuine care for investors that makes Steadyhand what it is.

Here’s to new perspectives—and the same “steady” commitment you’ve always known. - Patty

Some financial advice is more profitable for the advisor than it is for you. In this eye-opening Steadyhand Coffee Break, we discussed the uncomfortable truths behind sales quotas, hidden fees, and poor withdrawal strategies that could be draining your retirement savings. Watch now to avoid costly mistakes.

Every October, we decorate our homes with skeletons, don elaborate costumes, and pretend we enjoy being scared. But investors — the poor, thrill-seeking creatures that we are — don’t need haunted houses. The markets provide their own jump scares, complete with flickering charts, eerie acronyms, and the occasional ghost of financial decisions past.

If you listen closely, you can hear the whispers: “Buy the dip… diversify later…”

As an avid horror movie buff and a darkly amused observer of investor behaviour, let me use the excuse of the Halloween season to draw mildly clever analogies that guide you through the haunted corridors of modern investing. 

The Rise of the Quirky Acronyms

The stock market is many things — a pricing mechanism, a global capital allocator, and, occasionally, a stage for some truly bizarre theatre. It doesn’t just produce returns; it produces stories.

Once upon a time, the powers that be discovered that if you string together a few promising stocks or countries and give them a catchy name, people will believe in them forever.

In the 1960s, it was the “Nifty Fifty,” a set of blue-chip darlings considered so indestructible you could buy them at any price and allegedly never lose. In the 2000s, there were the BRICs (Brazil, Russia, India, China), randomly packaged together for quick consumption as the world’s next growth engines. More recently, FANG (Facebook, Amazon, Netflix, Google) evolved into FAANG, then into MAG7, because apparently seven is the new four.

Acronyms are comforting. They make investing sound like a club, or at least a Scrabble game. But they’re often catchier than they are useful.

Decoding them can feel like playing Sudoku where someone’s swapped out a few digits: you convince yourself there’s a pattern, even as the puzzle stops making sense. Investors do the same — holding on to old labels long after they’ve stopped adding up. 

• Horror movie equivalent: The Cabin in the Woods — you think you know the genre, but it’s really just another elaborate setup.

The Meme Stock Séance

For a brief, caffeinated moment in 2021, the stock market became a grade school sleepover. Everyone stayed up too late, dared each other to buy GameStop, and claimed they could talk to the spirit of Warren Buffett through Reddit.

Valuations rose from the grave, untouched by fundamentals or basic arithmetic. It was democracy meets chaos, with emojis. When it was over, the hangover was brutal. Many learned this ancient investing truth: just because something is trending doesn’t mean it’s immortal.

Fads fade, but strong companies with durable earnings, bought at a reasonable price, tend to serve long-term investors much better.

• Horror movie equivalent: The Scream series – self-aware, overhyped, and ultimately a cautionary tale about confusing irony with safety.

The Fog of U.S. Overconcentration

We all know the classic horror trope where the house that looks perfectly normal is actually sitting on cursed ground. Now I’m not saying that’s the U.S. equity market… but let’s dig in.

We know we’re supposed to diversify, still it can be hard to resist the warm glow of American exceptionalism. The S&P 500 has become the financial equivalent of a pumpkin spice latte: comforting, everywhere, but not nearly diversified enough (all I’m saying is don’t sleep on the brown sugar oat milk latte).

Consider this:

• The U.S. equity market has never been more top-heavy with largest ten top stocks making up roughly 38% of the total market capitalization

• Canadian investors can’t seem to get enough of U.S. markets, pouring about $59.9 billion CAD into American equities and debt between January and May of this year alone.

Meanwhile, the rest of the world’s markets languish in the basement, covered in cobwebs, mumbling, “Remember us?” But overconcentration is a quiet kind of horror. It doesn’t jump out and scream — it just slowly takes over the plot until there’s nowhere left to hide.

If you want a deep dive on this spooky reality, check out Purpose Associate Portfolio Manager Brett Gustafson’s recent article The Comfort Trap.

• Horror movie equivalent: Get Out – you think you’re in a safe, unremarkable environment, until you realize you should have left 20 minutes ago.

How to Keep the Monsters at Bay

If you’re retired, or on the way there, your goals are probably simple: protect your capital, generate a steady income, and sleep at night.

But real nightmare fodder can disguise itself. So, what can a sensible investor do?

1. Don’t chase ghosts. If an investment comes with a catchy name, it’s already been discovered. Ask what’s underneath the white sheet.

2. Revisit your portfolio’s cast of characters. If U.S. stocks have quietly taken over the starring role, consider adding some global exposure to balance the plot.

3. Talk to your advisor before you act. Especially if you find yourself thinking, “Everyone’s doing it.” That’s usually when the lights start flickering.

As the pumpkins glow and the markets twitch, remember: the scariest thing in investing isn’t volatility. It’s forgetting that markets, like haunted houses, are designed to make you panic.

Stay calm. Stay diversified. And if you hear whispering in the dark, it’s probably just the ghost of your GameStop investment.

Happy Halloween.

PS: You didn’t ask but my all-time favourite horror movie and top spooky recommendation is the 2014 horror/comedy Housebound. Check it out.

Vanessa

Higher Yield and Lower Fees: Here’s How We’re Improving the Steadyhand Savings Fund When you invest with Steadyhand, your money is managed with one goal in mind – helping you achieve better financial outcomes with confidence and clarity. To keep your cash working harder, we’re evolving the Steadyhand Savings Fund to deliver higher yields and lower fees. On October 31, 2025, the fund will transition to be managed by Purpose Investments to take advantage of its dedicated money-market expertise, institutional scale, and a process that has produced higher yield while preserving security. With this transition, the One Simple Fee on the fund will be reduced from 0.45% to 0.40% as of January 1, 2026. This change strengthens how we manage your cash investments by connecting them to one of Canada’s largest, most trusted and innovative cash management platforms. Who is Purpose Investments? Founded in 2012, Purpose Investments is a Canadian-owned, independent asset manager focused on delivering innovative, high-quality investment solutions. In 2013, Purpose launched the world’s first high-interest savings ETF, the Purpose High Interest Savings Fund, redefining how investors think about cash management and setting a new standard for yield, stability, and accessibility. Today, Purpose manages over $27 billion across a broad range of ETFs and mutual funds. The firm is led by entrepreneur Som Seif and operates as part of Purpose Unlimited – a modern financial services platform that leverages technology to empower Canadians. Through its businesses in asset management, advisor services, and small business lending, Purpose is committed to helping investors, entrepreneurs, and advisors grow with confidence and take control of their financial futures. Why this transition is a good thing for investors This update is about improving outcomes for Steadyhand clients while keeping the experience simple and familiar. Here’s what it means for you: ✅ Competitive yields – The Steadyhand Savings Fund will hold the Purpose Cash Management Fund (MNY), which has historically outperformed the Steadyhand Savings Fund by 5–15 basis points per year (that’s 0.05% to 0.15%), even after fees, thanks to its active money market strategy. Funds Comparison Performance Comparison YTD 1 Year 2 Years 3 Years Since Common Inception* Purpose Cash Management Fund Class A 2.07% 3.05% 3.94% 4.07% 4.05% Steadyhand Savings Fund 1.97% 2.93% 3.81% 3.97% 3.99% Difference 0.10% 0.12% 0.13% 0.10% 0.06% Source: Morningstar Direct as at September 30, 2025 *Common inception: 2022-09-15 to 2025-09-30 Purpose Cash Management Fund 7-day Gross Yield: 2.97%; 7-Day Net Yield: 2.50% as at October 28, 2025Steadyhand Savings Fund 7-Day Gross Yield: 2.62%; 7-Day Net Yield: 2.17% as at October 28, 2025 ✅ No taxable impact – This transition is seamless and won’t result in realized gains. ✅ Professional oversight – Your investments continue to be professionally managed within a trusted, disciplined framework. ✅ Aligned fees – Your fees will fall from 0.45% to 0.40% on January 1, 2026 – no new costs or hidden charges. ✅ Liquidity – You’ll retain full flexibility and access without any disruption to how you manage your account. ✅ Long-term confidence – By integrating with Purpose’s Cash platform, Steadyhand clients benefit from the same innovation, scale, and efficiencies that have made Purpose a leader in the Canadian cash market. Our shared philosophy This transition reflects our shared belief that investing should be transparent, accessible, and client-focused. Purpose and Steadyhand both believe in simplicity – managing money without unnecessary complexity – and in putting client interests first. By working together, we’re building a more unified and resilient platform that will continue to evolve with your needs. The change enhances performance potential while maintaining the same principles of clarity, discipline, and trust that define Steadyhand. The bottom line: your money stays safe, accessible, and professionally managed – now on a platform designed for the future. Commissions, trailing commissions, management fees and expenses all may be associated with investment fund investments. Please read the prospectus and other disclosure documents before investing. Investment funds are not covered by the Canada Deposit Insurance Corporation or any other government deposit insurer. There can be no assurance that the full amount of your investment in a fund will be returned to you. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed; their values change frequently, and past performance may not be repeated.

Like everyone, I’m trying to sort things out. What impact will tariffs have? How fast and far will AI grow? Can the stock market keep going up? Are we in a bubble? And is there anything I can do to find my bearings? I don’t have answers to these questions, but there are some immutable market truths that can be useful in processing what’s going on. Mind the gap Markets react immediately to policy announcements and socioeconomic events, but there’s a time lag before the true impact is felt. During this gap, the reporting and analysis can be sloppy, speculative and of questionable value. Commentators and analysts jump to conclusions far too quickly in search of a convenient cause and effect. It’s not useful to hear that last month’s economic data point was on track, or a company is doing well, when huge changes are ahead. Just because the effect isn’t immediate doesn’t mean it isn’t coming. When navigating the gap, be prepared for big swings in investor sentiment because there’s no concrete data to restrain it. There will also be plenty of other changes, many of which previously seemed improbable. The longer the lag, the wilder the ride and the greater need to be discriminating in what you believe. Bull market bluster Indeed, beware of bold pronouncements from investors riding the market wave. Extended bull markets have a way of making people look (and feel) smarter and as such, risks and rich valuations can be confidently rationalized away. And it’s common to see causality reversed, as Joe Wiggins points out in his Behavioural Investment blog about gold: “Price moves come first and then the narratives to justify it second.” Action breeds reaction We’re all guilty of predicting the future using one or two variables and assuming everything else remains constant. Unfortunately, it doesn’t work that way. If you’re assuming big changes in one area (new technology or products), you need to expect equally meaningful shifts elsewhere (inputs, competition, substitutes, customer preferences). No variable in an economic equation is fixed. For every action, there’s a reaction. Think exponential It’s human nature to think of growth and change as being linear, but when it comes to social and technological innovation, you need to push yourself to think exponential. The internet, social media and digital mobility didn’t grow x per cent a year, they grew x per cent a month. When assessing the impact of AI and tokenization (crypto) for instance, it’s fine to be skeptical, but do it with a mindset of explosive growth and ever-expanding applications. The market can’t keep going up Well, it can and will. The pattern is consistent on any stock market chart. Prices rise as time accumulates to the right. What we never know is how large the zigs and zags will be. We only know that they can last longer and go further than ever thought possible. Which leads me to the question of the day: Are we in a bubble? Are stocks out of touch with economic reality and going to fall precipitously when the bubble bursts? Stock prices may be ahead of themselves but keep in mind that bubbles are not about numbers and math, they’re psychological. Stock valuations are at the high end of their historical range but that, in itself, doesn’t constitute a bubble. A bubble is when enthusiasm knows no bounds. Certain stocks or assets are deemed to be great at any price. Confidence and optimism reigns supreme. It’s all about the upside, and the fear of missing out is palpable. Right now, gold, bitcoin and AI are certainly ticking some of these boxes. Gravitational forces Numbers may not be as relevant at this stage of the market cycle but are valuable guideposts when looking further out. Current yields are an accurate indicator of prospective fixed-income returns. Price-to-earnings multiples are good at framing future equity returns. And the amount of capital being spent on production capacity shapes the next profit cycle. A dearth of investment leads to shortages and price shocks in subsequent years (that lag again), and overinvestment has the opposite effect. The boom in data centre spending is being carefully watched right now, as should the bust in condo and rental housing construction. As you sort through today’s changing landscape, recognize what’s driving asset prices in the short term, but don’t lose track of concrete things that will determine returns over the medium to long term, namely profits, dividends and financial strength.

This article was first published in the Globe and Mail on October 10, 2025. It is being republished with permission.

In this increasingly polarized world, it can be difficult to have open and probing discussions about important issues. To resist this trend, I’ve latched on to a useful suggestion from Shane Parrish’s Farnam Street newsletter. “The next time someone disagrees with you or criticizes you, just shrug your shoulders and say, ‘you might be right,’ and watch the energy change. If you care about the outcome, focus on what’s right, not who is right. Keep the goal in mind.” Investing has its entrenched views that, like in politics, get in the way of sound decision making. That’s because nothing is clearcut about the economy, markets and the relationship between the two. There’s no room for one-sided, all-or-nothing, dare I say, naive views. With this in mind, let’s explore some topics where both sides are deeply entrenched and neither has a monopoly on the truth. Real estate versus stocks Real estate devotees believe it’s the surest road to wealth. You can feel and touch it. It will always have value because people need a place to live. Prices don’t bounce around from day to day, and it holds its value when stocks are down. Stock investors also point to strong past returns along with ease of implementation. There’s no upkeep required. Buying and selling is easy, cheap and instant. And outcomes are driven by a wide range of economic and geographic factors. “You may be right.” Both are wealth generating asset classes and belong in long-term portfolios. They’re cyclical and take turns leading and lagging, which makes them good diversifiers for each other (as we’re currently seeing). Given that most investors are homeowners, it makes sense from a diversification perspective to have a reasonable sized portfolio of financial assets before adding income properties to the mix. ETFs versus mutual funds Index investing is on a roll. Broad-based ETFs have low fees, are predictable (you get the index return minus a fee), and have been generating better returns than actively managed funds for more than a decade. It’s been the case that actively managed funds (mutual funds are my proxy here) don’t go up as much in hot markets but generally hold up better in weak markets. They access asset categories and markets where indexing is difficult and/or less effective. And they don’t require trading expertise – investors see their fund’s net asset value (to four decimal points) at the end of each day. “You may be right.” Both fund structures (they are fund structures, not investment strategies) have their strengths, depending on the portfolio need. Some markets, such as U.S. large-cap stocks, are extremely hard to beat whereas others need more management discretion (small-cap stocks; emerging markets; high-yield and private credit). Also, as ETFs have proliferated and gotten more specialized, the fee advantage over F-class mutual funds (advice charge not included) has narrowed. And in PACs (pre-authorized contribution plans) where transaction sizes are small, mutual funds work better. It’s not clear why you would limit yourself to one fund structure when you can take advantage of the strengths of both. Private versus public Like ETFs, private assets are winning over the hearts of investors and media. Private equity, debt and real estate funds offer the potential for higher returns combined with less volatility due to different pricing mechanisms (prices are struck less frequently and based on different factors). Public bonds and stocks have also done well. They are cheap, easily accessible and highly liquid, and there’s no paperwork to sign or redemption windows to monitor. They too benefit from the buildup of private capital, which brings more bidders to the table when assets are being sold or whole companies taken over. “You may be right.” Both approaches give you an ownership interest in a variety of businesses. A low-cost, broadly diversified stock portfolio is the core of any investment strategy. Private funds can be an excellent complement, especially when they’re invested in companies and industries not available in public markets and they’re truly private. Indeed, the more illiquid the better. To capture an illiquidity premium, you want to ensure that other unitholders in the fund can’t bail out on you at an inopportune time. There are other factors where views are highly polarized – Canadian stocks versus foreign, top-down research versus bottom up, growth versus value – where there’s useful and fruitful middle ground to tap into. When it comes to investment dogma, remember Mr. Parrish’s words – keep the goal in mind. It’s what’s right for your portfolio, not what makes you right.

Too many retirees hold back on their spending out of fear – and it’s taking a toll on their quality of life. Behind the Advice is a new series from Steadyhand that brings you closer to the team working directly with our clients. In this first episode, David Toyne sits down with Evan Parubets, Head of Advisory Services, to unpack one of the most important – and often most stressful – transitions for Canadians: shifting from saving to spending in retirement.

This article was first published in the Globe and Mail on September 26, 2025. It is being republished with permission.

In the fall of 1999, I was a newly minted CEO of a large Canadian asset manager and feeling pretty good about myself. That was until an important client, a prominent Vancouver businessman, called to introduce himself and tell me: "Tom, your firm isn't relevant any more." He was referring to the fact that we didn't own enough tech stocks such as Cisco, Nokia, Intel and, of course, Nortel. We just didn't get the dot-com era. Irrelevant? It turned out to be far from the case, but his words hit hard because we weren't keeping up with the high-flying U.S. market at the time. Today feels a lot like that moment. If you're a portfolio manager and don't own enough tech, specifically AI, it's a struggle to keep up with the market. And you're reminded of it every day by clients and the media. What do I do in situations like this? The first thing is remind myself of what got me here. If I've learned anything from previous cycles, it's not the time to fold your tent. During the tech boom, more than a few value managers changed their stripes and shifted to where the action was. After growth stocks rolled over, their franchises never recovered. The renowned hedge fund Tiger Management took a bigger step. It closed its doors in March, 2000, which turned out to be days before the market turned. What else? Well, I pray for rain (a cooler market would help) and talk to veterans who have been through this before. I also pull out a trusty old file folder called "KEEP. RE-READ." It contains reports and articles I've saved. While rummaging through it last week, I came across a Peter Bernstein interview in Money magazine from November, 2004. Mr. Bernstein is the author of Against the Gods, a seminal book about financial risk. To quote the article's introduction, he's "patient wisdom personified." Mr. Bernstein has long since passed, so we don't know what he'd say about today's investment landscape, but his words from 2004 are still useful and timely. I'll curate the interview through a 2025 lens. When asked what important things he had to unlearn over the years, he said, "That I knew what the future held, I guess. That you can figure this thing out. … I've become increasingly humble about it over time and comfortable with that." He elaborated, "Anything can happen. There really is such a thing as a 'paradigm shift,' when people's view of the future can change very dramatically and very suddenly. That means that there's never a time when you can be sure that today's market is going to be a replay of a familiar past." Fortunately, he has a solution for never-ending uncertainty. "That's what diversification is for. It's an explicit recognition of ignorance. And I view diversification not only as a survival strategy but as an aggressive strategy, because the next windfall might come from a surprising place. I want to make sure I'm exposed to it." Diversification is out of vogue today because markets have been led by a handful of U.S. tech stocks. I'm sure Mr. Bernstein would be frustrated by how long it has taken for those other windfalls to emerge, but they will. His understanding of investors' behaviour, specifically their inconsistencies, has always stuck with me. He observed that investors generally know their fallibility in calmer markets, but become confident in their views and bolder in their actions at points of extreme panic and euphoria. I would put today's investors in the latter camp. I listened to a tech-oriented podcast recently in which the panel agreed that investors won't make any money owning the S&P 493 (the S&P 500 minus the Magnificent 7). According to them, AI and crypto are the only places to be. Mr. Bernstein's most interesting comments tap into the speculative times we find ourselves in, when return is the sole objective and risk is swept under the carpet. "You have to think about the consequences of what you're doing and establish that you can survive them if you're wrong. Consequences are more important than probabilities." In other words, there's always a chance you'll be wrong. If you are, and your portfolio is devastated, it's not a justifiable strategy. And when Mr. Bernstein was asked 21 years ago if investors have gotten smarter, he said, "I think my answer would be no. The day-trader phenomenon would not have developed out of a population that was thoughtful about how the stock market works."

When David Toyne and I had breakfast in the fall of 2009, it was an important moment for me. At the time, Steadyhand was barely 2 years old and was struggling to get on investors’ radar. Here I was sitting across from a senior Bay Street executive who wanted to join our small team. His desire, or should I say, insistence, was reaffirming. This month, David is wrapping up his day-to-day job at Steadyhand. As he said in his note to clients and friends, “It’s been a joy to build Steadyhand’s presence in Canada, connect with clients across the country, and help shape how we talk about planning, investing, and retirement—not just in portfolios, but in real life, with real Canadians!” I first met David when he was with State Street Trust Company Canada. I saw him in action as he piloted the company through an amazing period of growth. We became friends while he was President of Thomson Financial Canada. In 2012, David wanted to do something meaningful and not have to report to a boss in the U.S. His pitch was simple. He’d give us an instant presence in Toronto, Canada’s largest market, and provide much-needed sales DNA. And what a presence it was. David knows a zillion people and is a natural connector. Both attributes contributed mightily to why a Vancouver-based company has almost half its clients in Ontario. It was also clear that David would bring energy to the firm. It reached all the way from a shared office in Toronto to the headquarters in Vancouver. We all fed off his drive and positivity, and needless to say, Christmas parties were a lot more fun. David’s claims to Steadyhand fame were numerous. His interview with Neil and me was done with all of us wearing ‘duck bill’ N95 masks. No, it wasn’t Covid. One of Neil’s kids had been exposed to SARS, and we were being careful. It looked and felt ridiculous. David single-handedly pushed us to start the Founders Fund in 2012, which turned out to be an important part of our success. He became a champion of the advice-only planning (AOP) community. He searched for AOPs that could help our clients, organised semi-annual round-tables where planners could share with and learn from each other, and he spurred us to set up an AOP directory. David also championed (along with Lisa and Salman) our YouTube channel and has been the face of it right from the start. And of course, he was ever present with clients in person and on the phones, and at our ‘Where to from Here’ and ‘Steadyhand Intro’ presentations. David’s imprint on Steadyhand will include a long list of ‘Davidisms’. For example: “Our goal is to serve millions of Canadians, not just Canadians with millions.” “I’d rather have a thousand experiences than one experience a thousand times.” “We should be relentlessly curious” David and I had a lot of fun doing things together, although at times we bickered like an old married couple. We pushed each other to be better, which meant I’d always hear when I screwed up or needed to pick up my game. As a Purpose shareholder and Steadyhand client, David moves on to pursue his other passions, knowing that the leadership and client service teams he helped build are pushing forward to improve the client experience. And we know that he’ll continue to bring his usual energy and passion to whatever he’s doing, including a few Christmas parties, I hope.

This article was first published in the Globe and Mail on September 12, 2025. It is being republished with permission.

Investors use all kinds of indicators to help them make decisions. Economic data, charts, ratios and even tea leaves. I keep a close eye on valuation metrics such as price-to-earnings multiples and credit spreads, as well as measures of investor sentiment. Unfortunately, none of these tools work all the time, which raises the question: If they’re fallible, are they valuable? Investing is tough in this regard. You can do the research, assess all the variables and still get a bad result. The stock goes down and never recovers, or the fund underperforms for years. Similarly, you can do no research and be rewarded. A tip from a friend works out even though you know nothing about what you bought. With the WNBA season heading into the playoffs, I’ll reinforce the point with a basketball analogy. A player can take a high-percentage shot and miss or a low-percentage shot and make it. The outcome doesn’t make the missed shot a bad decision or the made shot a good one. Over the course of a season, teams taking better shots win and players hoisting hope shots end up on the bench. Successful coaches and investors focus on what they can control. They put the odds in their favour and let randomness and luck even out over time. One-offs Doing this means pursuing a strategy in which the odds get better with time, as opposed to deploying many one-off tactics, each with a lower chance of success. Many indicators fit into the latter category. Win or lose, the odds are no better the next time. Betting on what the stock market will do each day is a coin toss. Markets are up about 50 per cent of the time, down 48 per cent and flat 2 per cent. It’s the same lousy odds every day. But if you base your strategy on what stocks will do over 10 years, your odds approach 100 per cent. Similarly, it’s great if you get an economic call right (hard) and predict how the market will react (harder), but it doesn’t make the next call any easier. Day trading and short-term strategies generally depend on one-of indicators such as interpreting a piece of news or searching for price momentum on a chart – things that might affect a stock price minute by minute but have no impact on a company’s ultimate success. Like fine wine Fortunately, investors with longer time frames can look to more concrete indicators that will affect outcomes – things that have no predictive value in the short term but, given time, increase chances of success. Stocks for the long term: The most obvious example of ever-improving odds is owning stocks. The evidence is overwhelming – stocks beat bonds and GICs. It only works, however, if the time horizon is years, not days, and you stay with it through all types of markets. Getting in and out quickly reduces the odds back to those of a coin toss (or worse if emotions are running high). Valuation: For a good company to be a good investment, the price paid must make sense in the context of future profits and dividends. Similarly, higher-yielding bonds only make sense if the additional income fully compensates for the increased risk of default. Capex cycles: For cyclical industries, I keep an eye on the level of capital investment. When everyone is building factories or mines, excess supply and lower profits are on the horizon. Conversely, when times are tough and companies are pulling back on capex, the outlook for investors gets more interesting. Cost: And you shouldn’t forget about the most controllable variable of all. The cost of investing is part of the equation for determining what you’ll have to spend in retirement. When it comes to trading commissions, fund fees and adviser compensation, don’t pay for anything you don’t need or aren’t getting. At the beginning, I mentioned investor sentiment. It fits in between the two categories. It isn’t fundamental to a business’s success, nor is it a precise timing tool, but knowing how greedy or fearful investors are puts other indicators in perspective. Are you getting swept up in the narrative or sticking to strategies that have the best chance of success? One of my favourite television ads starts with Michael Jordan saying, “I missed more than 9,000 shots in my career.” Like the greatest baller of all time, investors will have bad outcomes. It’s inevitable. The best way to deal with fallibility is to first accept that not everything will work out. Then, focus on taking high-percentage shots.

Decades of investing wisdom distilled into five simple habits. In this Coffee Break episode, David Toyne – drawing on 40+ years of experience – reveals what academic research, behavioural finance, and real-world investor outcomes can teach us about building lasting wealth in Canada.

I’ve been writing a lot about what’s abnormal in the investing landscape. After 40-plus years following markets, there are things that jump out at me as being extreme, irrational, or just plain silly.

I’m referring to themes and products that are far off trend or disconnected from basic financial fundamentals.

Some irregularities play out at the fringes (meme stocks; SPACs) but are good indicators of investor sentiment and risk taking, while others have a meaningful impact on the economy and capital markets. My topic here, the amount of capital being spent building data centres, is in the latter category.

It’s a phenomenon that can’t be ignored by any investor. It’s unprecedented and will be an important factor for future returns.

Economic impact

The need for data centres has been growing with the shift to cloud computing, but the demands of artificial intelligence are taking it to a new level.

The numbers are staggering. McKinsey & Co. says, “by 2030, companies will invest almost US$7-trillion in capital expenditures on data-centre infrastructure globally.” In 2025, spending on data centres contributed more to economic growth than consumer spending, the main engine of the U.S. economy.

I’ve seen capex booms before in mining, energy, real estate and automobiles, but nothing like this.

Many unknowns

There’s a long list of questions to answer in determining whether this spending boom will prove to be a new order for capital allocation or just the mother of all cyclical surges.

Demand: Will demand be as high as anticipated? Will the shift of emphasis from training AI models to inference, the process by which AI systems respond to user requests, have an impact on demand and the type of chips required? As I understand it, training is more computationally demanding but inference brings with it huge volumes.

Bottom line: Will companies be able to monetize their models? The efficacy of AI isn’t in question but the pathway to profitability is less clear. It will require that users generate enough incremental revenues and savings to justify the cost.

The big valley: Assuming an affirmative on the previous question, how big will the gap be between spending and profits? There will likely be a valley to cross, and history suggests that innovation leaders don’t always make it to the other side. Think back to the fibre-optic developers (Worldcom and 360 Networks), and the railroads a century before them. The mega-tech companies will navigate it, but there are other players in the ecosystem that aren’t as sturdy. They’ve become too dependent on the trend and/or are using debt liberally to increase capacity.

The losers: We don’t know who the winners will be. Several companies may be on the podium, or it will be winner take all. Either way, there will be losers, which prompts further questions. What happens to the capacity being used to train their models? How will it be absorbed, and at what price?

There’s more.

Who will benefit: The economy benefited hugely from the fibre-optic buildout and the railroad boom. The rising stock market tells us that AI will have a similar effect. What we don’t know is who will benefit the most. Will it be the providers who are putting the infrastructure in place or the end users?

Power: AI is moving at lightning speed. Power generation not so much (especially as the development of renewables is being discouraged in the U.S.). McKinsey points out that US$3-trillion of the total spend will go toward peripheral investments such as power infrastructure and real estate. Can power also grow at an unprecedented rate, and if not, how will it affect the spending cycle?

Obsolescence: There’s a chance that the power-hungry chips of today will be usurped by more efficient versions tomorrow. We can’t expect the innovation cycle for semiconductors to stop. Will the current crop of data centres become the equivalent of high-cost mines and oil fields?

The hangover

After every binge, there’s a morning after. If the hangover is severe, it will reach far beyond the tech darlings of today. The skewing of capital spending at the macro level have an impact on allocation decisions at companies, decisions that hinge on answers to the questions above. Many companies’ success, including Canada’s Celestica, is tightly linked to the data-centre boom.

There are always unanswered questions in investing. As Bob Hager, my former partner, used to say, “If you wait for certainty, you’ll miss the market.”

What’s so interesting with this uncertainty is the size of the ante. It’s a big bet and one that investors must keep an eye on.

Are Canada’s banks giving advice in your best interest or theirs? In this Coffee Break episode, David Toyne sits down with advice-only planner Sandi Martin, featured in CBC Marketplace’s hidden camera exposé, to unpack what the investigation revealed and what regulators are saying in a new 2025 OSC/CIRO report.

This article was first published in the Globe and Mail on August 16, 2025. It is being republished with permission.

The cool kids are all going private. It’s the place to be. I’m referring to the increasing popularity of and media attention on private debt and equity funds. David Swensen, the chief investment officer of Yale University from 1985 until his death in 2021, kick-started what became known as the endowment, or Yale, model. The difference? The Yale portfolio included a healthy amount of private assets and alternative strategies. Over the past three decades, other institutional investors have been playing catch-up, to the point where U.S. endowments and many pension funds are now all in on private debt and equity. And now the next phase: Privates and alternatives are becoming available to individual investors, aided by U.S. President Donald Trump’s move this month to open retirement plans to illiquid assets. The appeal of private assets is twofold. First, returns can be better (not guaranteed) by capturing an illiquidity premium. In other words, if investors are willing to sacrifice daily or even quarterly liquidity, fund managers are freed up to make bold business decisions outside the public eye and use more leverage, which reduces taxes and potentially leads to higher returns. And second, private assets act as a diversifier. The underlying fixed income and equity investments are affected by the same economic forces as public securities, but the funds’ pricing mechanism lags the hair-trigger public markets. Holdings are repriced less frequently based on factors such as cash flow and recent transactions. Stale pricing tends to smooth out returns. This week, there was a good example of this. Ontario Teachers’ Pension Plan reported first-half results that meaningfully lagged other balanced portfolios and didn’t align with rising stock prices. The reason? Negative price adjustments to private assets, the same holdings that allowed OTPP to have a positive return in 2022 when bond and stock markets were weak and most portfolios were deep in the red. These features are particularly appealing in light of today’s stock market volatility and a growing consensus that the U.S. market, everyone’s favourite, is expensive. The conclusion seems clear: Private is the way to go. Stocks are so yesterday. A little love Well, not so fast. Let’s give stocks their due. Easy access: Buying or selling a stock is a few clicks away on your phone. No extra paperwork. No holding periods or redemption dates to remember. Your shares are completely liquid (with the possible exception of micro-cap stocks). Opportunity: Access, when combined with price volatility, is a wonderful thing for investors who have an extended time horizon (a requirement for private investing). Unlike private funds that must put money to work a short time after they raise it, there’s no pressure for stock investors to buy. They can stand at the plate and wait for a pitch down the middle. They can take as many pitches as they want and not strike out. For long-term investors, volatility is a gift, not a scourge. Price transparency: With public securities, your broker or investment manager doesn’t have discretion as to how and when stocks are priced. The marks are there for everyone to see. If you buy a stock or equity fund, you can be assured the price reflects the current news. The amount of leverage is also in plain sight. It’s on the balance sheets of the companies you own, not layered through the portfolio. Cheap: Access and transparency come at a modest fee. Trading costs are now de minimis, and professionally managed funds, whether active or indexed, range from cheap to reasonable. The expensive part of wealth management, which applies to all types of investing (especially privates), is the cost of advice. Wealth creation: Stock returns are well above inflation for any period you want to pick. Not including this year’s strong returns, a half-Canadian/half-global portfolio has earned 9.8 per cent per annum since 1960 (a double every seven years), 8 per cent since 2000 and 9.9 per cent since 2020. All these time periods include years with negative returns. Depending on your objectives, alternative asset classes such as private equity and debt, infrastructure and real estate can be great complements to your public holdings, as can alternative strategies such as long/short and market-neutral funds (I own two market-neutral hedge funds as part of my fixed-income holdings). But low-cost, publicly traded equities should form the core of any portfolio. They’re simple, easy and transparent. They’ve offered excellent long-term returns and endured every industry trend that’s come their way, no matter how cool they were.

This image was generated by ChatGPT One of the downsides of working in the year 2025 is spending a regrettable amount of time on LinkedIn — and thus, being subjected to a regrettable amount of LinkedIn thought leadership. The latest controversy lighting up the feed? The em dash. Yes, the punctuation mark. Apparently, it’s now the telltale sign that someone used AI, as if our robot overlords were forged in the fires of Emily Dickinson’s diary. Somewhere between the rise of ChatGPT and corporate Karenism, the em dash has gone from charmingly informal to “suspicious.” It’s less a breezy punctuation mark, more a scarlet letter pinned to the chest of anyone accused of AI-assisted laziness. To this I say: who cares?? I use ChatGPT. I might’ve even used it for the first draft of this post. Why wouldn’t I? If the machines are destined to make me obsolete in ten years, I might as well use them to make my life easier in the meantime. It’s called working smarter. Same goes for investing. There’s a long-standing belief, mostly perpetuated by men with overly extensive watch collections, that investing is complicated. If it’s not complicated, you’re not doing it right. But effort does not equal virtue. Investing doesn’t need to feel like a part-time job. You shouldn’t need to decipher Greek letters or keep up with all the latest stock acronyms (FYI: check out a great take on the meme craze here). At the end of the day, we’re all just trying to protect what we’ve earned, see it grow, and maybe go on that bike trip through Europe Tom was talking about. The good news is this: Over the long run, disciplined investors — the ones who stay diversified, invest consistently, and avoid overreacting — tend to outperform the over-caffeinated stock pickers. Morningstar’s annual Mind the Gap study repeatedly shows that investors often underperform the very funds they’re invested in, simply because of poor timing decisions driven by emotion. The rules of punctuation haven’t changed, and neither have investing fundamentals. Save regularly Invest often Stay diversified Avoid emotional decisions Talk to someone who thrives on the details (e.g., Steadyhand Investor Specialists are masters of these technicalities) The trick isn’t in making it exciting — it’s making it sustainable. So go ahead — use the em dash. Use ChatGPT to write your anniversary toast or a mildly stern letter to your condo board. And opt for a clear, straightforward investment approach that doesn’t demand your attention every time markets wobble. There’s no trophy for making life harder than it needs to be. Ease isn’t cheating. Ease is, very often, the point. (And for the record — 7 em dashes. All intentional.) — Vanessa

Starting over later in life comes with more than just new beginnings — it can mean revisiting your estate plan, too. In this Coffee Break episode, David Toyne is joined by Money Coaches Canada’s Janet Gray to uncover the 7 most common mistakes people make when entering new relationships.

This article was first published in the Globe and Mail on August 1, 2025. It is being republished with permission.

I rarely find myself in a state of equilibrium. I’m either talking people up or bringing them down. When markets are weak and the tone is dismal, I’m reminding clients and readers that long-term returns will be higher — it’s a good time to invest. When things are going well and investors are euphoric, I’m dialling down oversized optimism.

Market extremes, when expectations are unrealistically bullish or bearish, are when the biggest mistakes are made. I’m not talking about buying a stock that doesn’t work out or a fund that underperforms, but rather crippling errors such as getting caught up in the news and diverging from your long-term plan. Going to cash because of what’s happening in Washington or chasing a theme to the point of being undiversified. Strategies that, if wrong, set you back years in terms of achieving your long-term goals.

Today’s landscape is unusual in that I find myself playing both roles. For long-term investors who are freaked out about the state of the world, I’m reminding them of the positive factors (as I did in a recent column) and the benefits of owning a variety of companies from different industries and regions.

And then there is the other end of the spectrum: investors who are caught up in the speculative fervour. Those who are running hot and in need of a cold shower. I say that because animal spirits are running high. There are many indications that speculation and risk-taking are at extremes.

Head-scratchers

For instance, meme stocks are back. These heavily shorted stocks are rocketing higher even though company fundamentals are weak. In 2021, it was GameStop Corp. and AMC Entertainment Holdings Inc. leading the way. This time around, it’s GoPro Inc. and Kohls Corp.

Special purpose acquisition companies are back in vogue. SPACs, which were also popular in 2021, are a type of initial public offering in which a well-known business or investment person is given a blank cheque to go out and make an acquisition. SPAC issuance is occurring despite a history of abysmal returns and an incentive structure that’s stacked heavily in the sponsors’ favour.

At Robinhood, a popular U.S. discount broker, options and crypto trading made up 84 per cent of transaction-based revenues in the first quarter. Yes, you read that right: 84 per cent. Stocks accounted for just 10 per cent.

As for cryptocurrencies, people are making money with the rise of Bitcoin, but the risks in the digital ecosystem are also rising. There’s been a surge of companies abandoning their core business and becoming Bitcoin proxies (Strategy Inc., formerly known as MicroStrategy, is the model). This tactic has pumped up their stock prices because investors are valuing the Bitcoin holdings at double the market price. And if you find this perplexing, stay tuned because investment bankers are feverishly looking for other assets that might trade at a premium when held in a public vehicle.

As my former partner, Bob Hager, told me years ago, when something doesn’t seem to make sense, it usually doesn’t. These premiums will inevitably disappear and go to discounts, and for companies that are highly leveraged, the ride for shareholders will be painful.

No profits, no worries

As I’ve noted before, the hot sectors in the stock market are the ones that are unburdened by earnings expectations and price-to-earnings ratios. They don’t yet have earnings to value. Companies linked to crypto and artificial intelligence are being driven more by investor optimism than business fundamentals. A Goldman Sachs index of unprofitable tech companies is up more than 50 per cent since April 8 — its highest level since 2022 (a year when it halved in price).

For stocks that already have a P/E ratio, there are bargains to be found, but most risk assets are expensive relative to their history. Stock markets have been driven as much by rising P/E’s as expanding profits and dividends.

Similarly, corporate bond yields are low relative to more secure government issues. The extra yield they offer, called a spread, is the reward for accepting a higher chance of default. Today, the reward is near an all-time low across the risk spectrum (from investment-grade bonds to high-yield bonds and private loans).

Look in the mirror

With everything going so well, it’s a good time to ask yourself: Are you being greedy like investors around you, or are you using this time as a cue to be more cautious, like Warren Buffett counsels? Are you far off the plan you (and your advisor) laid out a few years ago? Are you taking more risk today than ever and using more leverage? Are you no longer well diversified? And if you’re wrong about a strategy or theme, will it wipe out years of returns?

If the answer to those questions is no, then stick to what you’re doing and remember the old adage “Markets climb a wall of worry.”

If you answered yes to some or all of those questions, you may be operating without a net. It’s time to hit the shower and turn on the cold water.

Thinking of downsizing – or helping a loved one through a major life transition? In this Coffee Break episode, we sit down with Adam Gordon of Gordon’s Downsizing to explore what really goes into decluttering and letting go.

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I recently took a bike vacation with Butterfield and Robinson (a proud Canadian tour company) that implores guests to “slow down to see the world.” I particularly like this tag line because there are few cyclists slower than me.

I also like it because it’s a good investment motto in this sped-up world we live in, where news and views are delivered via fire hose, and taking action is only a few clicks on your phone.

There are investment firms that have the technology and knowledge to thrive in this hyper environment, but for the rest of us, going slow is a better approach. Indeed, if done consistently, slow can give you a big edge.

First, let me explain what makes investors want to go so fast.

False urgency

Media outlets need a steady flow of new content to fill their pages and broadcast hours. This content must have a sense of urgency to grab your attention, whether it’s important or not.

Stories are meant to trigger action. Another click. A trade. A portfolio shift. The purchase of a new product.

The unimportant becomes important for an hour or a day. This false urgency might come in the form of a monthly economic statistic, a quarterly earnings release, a new or approaching milestone for a stock index (usually a round number), or a market strategist’s confident prediction. The result is the same. You’re left feeling like you need to do something.

You may devour the business news like I do, but don’t confuse what’s urgent for a day trader or headline creator with what’s important to you. Their interests aren’t aligned with your portfolio’s goals and time frame.

Think about it for a week

You’re not going to beat or out-think the traders who push stocks up or down milliseconds after an announcement is made, so it’s better to take some time and figure out what the market is reacting to. Is the news significant enough to change your long-term thesis for why you want to own the stock? What do sellers know that you don’t? Is what’s being said knowable, or just speculation fueled by a rising (or falling) stock price?

Successful money managers analyze a company for months. If it’s a good story and the decision is to invest, then they wait for a price that makes it a good investment. Market volatility and false urgency are gifts for investors who know what they’re buying and how much they’re willing to pay.

I liken the slow approach to sound e-mail habits. If you’re hot about something and rip off a scorching e-mail in response, it’s best to put it aside and read it in the morning before sending. Investing is the same.

Giving yourself some time also tests your conviction. Are you still interested in owning the stock after the buzz has abated? If it’s down, are you keen to buy more? How you feel when the urgency is gone is telling.

Position of strength

To slow down, you need to neutralize the false urgency. A big step in that direction is starting with a portfolio that already reflects your goals, time frame and investing personality. I talk a lot in these columns about having a strategic asset mix, or SAM. Your SAM is the mix of asset types, industry sectors, geographies and currencies. It’s your default portfolio, your position of strength.

Urgency bounces off a diversified portfolio, especially if you stick to it and keep changes to a minimum.

Baby steps

If you must react to news of the day, start small. Buy enough to feel invested, but not so much that you can’t do more after you’ve taken time to think about it and/or the price is down. Investing is about putting the odds in your favour and being patient. Chances are that if you feel you’ve missed something, you’ll get another chance.

Investing is a sprint for some investors, but very few. If you’re not a day trader or hedge fund, slow down and enjoy the road.

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Most Canadians want to stay in their own homes as they age, but do they know the costs? From unexpected bills to the heavy emotional toll, financial planner Julia Chung of Spring Plans joins us in this Coffee Break to discuss how families can plan for their long-term care and aging in place needs.

by Tom Bradley

This week we’re saying goodbye to the voice of Steadyhand. Scott Ronalds, my long-time partner and collaborator, is stepping away and taking time to explore his many other passions.

I say voice because over 18 plus years Scott has posted over 700 times on our blog, as well as overseeing all of our publications including 73 Quarterly Reports. He's had a hand in everything that came out of Steadyhand (except this blog) starting 6 months before we opened our doors in April 2007 (Scott and Elaine were our first recruits and both were founding shareholders in Steadyhand).

Scott has had a huge impact on the firm's development and our clients' comfort with investing. His approachable, casual (but not too casual) and engaging communication style gave us a personality and epitomized our approach to investing and client service. He wrote informative pieces on markets and investing, and kept clients abreast of important dates and information.

Along the way, he's been our ‘jargon cop’. Acronyms and cool insider words never got past him. They were to be used sparingly, and if at all, they had to be explained.

Scott has a special talent for explaining things, often using analogies that are familiar to people. The posts that got the most reaction were the ones where he married an interesting (or obscure) aspect of life (e.g., the Costco hotdog; salmon spawning; Ikea), or something that caught his eye in the media (gin-aissance; Keith Richards), with an investment principle, or some aspect of the Steadyhand philosophy.

“Every time I venture down to California or Vegas (not as often as I’d like), a stop at In-N-Out Burger is a must. Health food it's not, but if you're looking for a fresh, good old-fashioned burger, this is the place to go. Loosen the belt buckle and try the Double-Double with fries and a chocolate shake. You won’t be disappointed.

What does In-N-Out have to do with investing? Nothing really. But along with the top-notch fast-food fare, they've got a great burger philosophy - Keep it Simple.” — August 27, 2007

Through his educational posts, we got to know a little about Scott and his wife Angele's life along the way, including some recipes.

“For true spot prawn enthusiasts, the direct-to-consumer route (DTC) is the way to go. Buying straight from the boat means no middlemen, no extra commissions, and no packaging fees. It's fresher, cheaper and offers a uniquely personal experience.” — May 28, 2025

I have a friend who sends me a note occasionally to comment on something we've written. Most of the time, she offers kudos to me for a post she loved and passed on to friends and family. Without fail, the pieces she was raving about weren't mine, but rather another Scott life story.

Scott came up with the idea and wrote The Steadyhand Dictionary.

sen∙ti∙ment (noun) — The mood of the market. The attitude of investors towards the near-term prospects for a particular index, asset class, or security. Some investment managers view market sentiment as a valuable contrarian indicator. That is, when the bulk of investors are sour on the prospects for the market, it is often a good time to buy, as bad news is already reflected in prices and the downside risk is limited. Conversely, when an asset class can seemingly do no wrong and investors are piling in, it's often a good time to trim back.

He was never shy about using humour to poke fun at the Canadian banking oligopoly or calling out an industry practise he didn’t approve of. His candor started early.

“My future has never looked so bright. I’ve been watching a lot of the big banks' commercials on T.V. lately, and I'm really excited about my financial future. Apparently, I can send my daughter to med school and buy the cozy villa in Italy. Because my bank is putting me first, it turns out I will be able to retire on my own terms. … That vineyard that I was thinking of starting? No problem. They've got me covered.” — March 7, 2007

In preparing to write this, I spent a few hours poking through Scott's work. The examples above just scratch the surface. I'm sure I've missed some of our clients' and team's favourites.

As we head into our next chapter as a part of Purpose Unlimited, we'll miss Scott's wit and wisdom but we're thankful for a legacy that’s given us a wonderful foundation to build on. I'm going to miss you, Buddy.

We're not a bank. Which means we don't have to communicate like one (phew!). Sign up for our Newsletter and Blog and join the thousands of other Canadians who appreciate the straight goods on investing. Subscribe

What happens to your Canada Pension Plan (CPP) if you defer payments and pass away before collecting? In this Coffee Break, Certified Financial Planner Brett Martinson breaks down how CPP survivor benefits and the one-time death benefit work. He also explains what your spouse can expect if you pass away before claiming any CPP benefits.

by Tom Bradley

While the world is being turned upside down and our relationship with our southern neighbour, and democracy in general, is in question, we’ve added more uncertainty to the mix—a change of ownership at Steadyhand.

In June, we closed our deal to sell the firm to Purpose Unlimited. This important step will be good for our clients and team, and will help fuel our ambition to be a bigger positive force in the investment industry. As more responsibility falls on Canadians to manage their retirement savings (i.e. fewer defined benefit pension plans), we want investors to benefit from our investing process and client experience.

As you do, they can gain from a business model that revolves around prompt, friendly service, reasonable fees, accessible investment advice, a curated list of diversified funds, radical transparency, and of course, a steady hand when it’s most needed.

In Purpose, we found a partner who believes in our mission. In the words of Som Seif, our CEO: “From the outset, Purpose’s interest in Steadyhand came from a place of genuine admiration. Steadyhand’s client-first philosophy, long-term investment discipline, and clear, human approach to communication have always stood out in our industry. That’s not something we want to change—it’s something we want to protect, support, and build on.”

Som goes on to say, “What unites us is bigger than any one brand or platform. It’s a shared belief that finance should serve people—not the other way around. That advice should be honest. That investing should be simple. That outcomes—not products—are what truly matter.”

In these turbulent times, staying steady has never been more important for achieving good outcomes. In times of extreme pessimism, we often find ourselves pumping people up (just as we cool them down when expectations are too high). Now is one of those times.

In a recent post, Joe Wiggins, research director at St. James’s Place in the U.K., quoted Daniel Kahneman, a pioneer in behavioural finance. Kahneman said, “Nothing in life is as important as you think it is while you are thinking about it”, which Mr. Wiggins went on to say, “beautifully encapsulates our tendency to significantly exaggerate the importance of whatever is on our minds at any given moment.”

We believe today’s negativity is overdone, at least as it relates to your portfolio. The issues in the spotlight are real, but the mix of factors effecting capital markets is more balanced than you’re led to believe.

There are many companies outside of the hot sectors of artificial intelligence, crypto, and gold that are being overlooked and are unburdened by high expectations. There are well-run, well-financed companies that are users of AI, not providers, and are trading at reasonable valuations. Indeed, the valuation gap between the hot and the not is unusually wide.

As always, we encourage you to reach out if you have questions about your portfolio or our new ownership structure. Our Investor Specialists remain highly accessible, friendly, and ready to help where and when they can.

I encourage you to read the rest of our Q2 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

We're not a bank. Which means we don't have to communicate like one (phew!). Sign up for our Newsletter and Blog and join the thousands of other Canadians who appreciate the straight goods on investing. Subscribe

by Tom Bradley

Maybe it’s the summer weather or I’m just getting sick of all the bad news and uncertainty, but it feels as if I need to give the positive forces equal time. What you read in the news almost always has a negative bias, but it’s particularly dreary right now. And that includes investment news.

A former business partner used to tell me that when a stock is down, you must dig deep to find the positives, because the negatives are in plain view.

I didn’t find my search for good news all that hard. My list is long in life and investing. In our day-to-day lives, we’re experiencing the golden age of television, there couldn’t be a better time to participate in and watch women’s sports, people are drinking less and biking more, cellphones are lasting longer, society is significantly safer (think sunscreen and kids’ helmets) and the young people coming into the work force are amazing.

As for investing, people will be pleasantly surprised when they open their second-quarter account statements. The stock market is doing just fine and so are most portfolios.

What is helping the market buck the geopolitical turmoil? Nobody knows for sure, but I’ll float a few positive reasons, starting with some favourable long-term trends and finishing with shorter-term factors.

Important forces such as globalization, declining interest rates and deficit spending are waning, but others are alive and well (despite the politicians’ best efforts to get in the way). There are mind-blowing advances in health care, transportation and power generation, management and storage. The middle class is expanding rapidly, particularly in India and China. New, much-needed sources of energy are attracting capital, and costs are coming down with volumes and experience.

Digitization of the economy is well along, but electrification is just getting started and is a one-way street. By that I mean taxi drivers and friends who buy electric vehicles are unlikely to switch back.

The benefits of (non-artificial-intelligence) technology keep spreading through organizations, reducing costs and improving the customer experience. Late adopters, such as government services and health care, are adopting tools and processes that private companies have been using for years.

The trend toward industry consolidation is unrelenting. Fewer rational players mean better control over pricing and more sustainable profits, which is a boon for investors (even if it’s not for consumers).

As for consumers, the world’s biggest customer, the U.S. consumer, is in good shape. Compared with Canada, debt levels are lower, the job market is stronger and housing affordability is far better.

More broadly, however, the U.S. move toward isolation, and the end of the supposed era of American exceptionalism, means there’s more opportunity for everyone else. Actions by the leadership in Washington are serving to share the wealth with other regions. They’ve incentivized China to go full-bore on AI, semi-conductors and electrification. They’ve given Europe’s defence industry a boost. MAGA is out, MEGA is in (make Europe great again).

And Canada? Well, we’re still figuring it out, but there’s no doubt we’re able to hire and retain more world-leading engineers and academics who are feeling less welcome south of the border.

For investors who are driven by fundamentals such as profit margins and cash flow, there are plenty of forgotten stocks, sectors and even countries to choose from. It reminds me of the early 2000s, when valuation dispersion between the leading tech and consumer stocks and everything else was wide. The result was that many funds did well through the tech wreck years from 2001 to 2003.

Today, price-to-earnings multiples are reasonable everywhere except the U.S., and on anything that isn’t related to AI, crypto, gold and private credit. Until recently, sentiment toward Britain and Europe was rock bottom, along with stock valuations.

And finally, there’s AI. While we actively debate its safety and impact on society, the benefits will start spreading from the providers to the organizations that use it.

The negative stuff that dominates our discourse today will turn out to be not as bad as we now think. It usually works out that way. And the positive stuff we’re overlooking will have an impact, perhaps a significant one. Businesses will continue to grow, innovate and adapt despite chaotic political leadership.

We're not a bank. Which means we don't have to communicate like one (phew!). Sign up for our Newsletter and Blog and join the thousands of other Canadians who appreciate the straight goods on investing. Subscribe

Why is it so hard for retirees to start spending the money they’ve worked so hard to save? In the final part of our retirement transition series, we speak with Steve Bridge from Money Coaches Canada to explore the psychological side of retirement spending and how retirees can build the confidence to enjoy their financial freedom.

by Scott Ronalds

“If you don’t like to read, you haven’t found the right book.” — J.K. Rowling

We all know the power of a good book. It can transport you to another place and time, teach you things, entertain you, sharpen your mind, ground you, or simply help you unplug. That’s why we put a lot of thought into our Summer Reading List each year.

As usual, this year’s edition spans a variety of topics. From business and investing to poetry and Pacino, there’s sure to be a title with your name on it.

Supremacy: AI, ChatGPT, and the Race that Will Change the World, by Parmy Olson Recommended by our Co-founder, Tom Bradley, this 2024 Financial Times Business Book of the Year is a must-read for anyone curious about artificial intelligence. In his quest to learn more about the technology, Tom thoroughly enjoyed Supremacy. It takes readers through the development of AI and follows the paths of Sam Altman, CEO of OpenAI, and Demis Hassabis, CEO of DeepMind (now part of Google). Despite the complex subject, Olson makes it engaging and accessible—Tom says that even he could follow it. An important read in these rapidly changing times.

All the Glimmering Stars, by Mark Sullivan Lori Norman, one of our Investor Specialists, recommends this powerful novel inspired by true events. It tells the story of two teenagers kidnapped by African warlord Jospeh Kony in 1990s Uganda and forced into slavery as child soldiers. Kony, later indicted by the International Criminal Court, was responsible for thousands of murders and the enslavement of over 20,000 children. All the Glimmering Stars is a story of hope and resilience, and as Lori says, “Some stories are meant to leave a mark.”

Crypto Confidential: An Insider’s Account from the Frontlines of Fraud, by Jake Donoghue Our CEO, Neil Jensen, recommends this first-hand account of how the crypto industry operates. Written under a pseudonym, the author is a former insider who co-founded the U.K.’s top crypto marketing agency and worked with some of the biggest names in the business. Now a whistleblower, he pulls back the curtain on the darker side of digital assets. Neil found the book to be “a lively and entertaining ride through the heyday of crypto promotion.” Equal parts thrilling and sobering.

The Food Lab: Better Home Cooking Through Science, by J. Kenji Lopez-Alt David Toyne, our Chief Development Officer, recommends this cookbook, which is his go-to source for culinary tips. In David’s words, “It’s not just full of great recipes, it’s a deep dive into the why behind cooking, rooted in science, testing, and curiosity. I’ve learned a ton about how to properly cook fish, meat, poultry, and more, and I find myself returning to it again and again.” The book comes with high praise outside the Toyne household, too, winning the James Beard Award for General Cooking. With summer heating up, take your grilling skills to the next level with The Food Lab.

Getting to Yes: Negotiating Agreement Without Giving In, by Robert Fisher and William Ury Chris Stephenson, one of our longstanding Investor Specialists, recommends this international bestseller on the art of negotiation. First published in 1981, the book has helped millions of people learn and practice a better way to negotiate through a step-by-step strategy that draws on the work of the Harvard Negotiation Project. Chris found it a great resource, noting “I have a tendency to get in my own way and this book is a great reminder to ‘separate people from the problem’ and ‘focus on interests, not positions.’” It’s sure to come in handy, too, as you negotiate with your kids over summer chores and ice cream.

Home Body, by Rupi Kaur Our Chief Investment Officer, Salman Ahmed, endorses this collection of poetry by the celebrated Canadian author. Home Body is Kaur’s third book, following her acclaimed New York Times Bestseller Milk and Honey, and The Sun and Her Flowers. It’s a “collection of raw, honest conversations with oneself – reminding readers to fill up on love, acceptance, community, family, and embrace change.” Salman received the book as a gift and initially scoffed at the idea of reading poetry. By the end, he was wondering why he doesn’t read more of it.

Sonny Boy: A Memoir, by Al Pacino This one’s my pick. If you’re a fan of The Godfather, Scarface, or Scent of a Woman, you’ll want to dive into this memoir. From childhood escapades in the Bronx to behind-the-scenes stories from some of his biggest films, Pacino shares the journey of an unlikely Hollywood legend. Full of interesting nuggets—like the fact his grandparents hailed from the town of Corleone, Sicily, the very name that became iconic in The Godfather—Sonny Boy is a fun read, perfect for a road trip. There are even some financial lessons to take away. Despite earning a fortune, Pacino went broke due to overspending and a lack of financial literacy. A shame he wasn’t a Steadyhand client.

Happy reading!

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by Tom Bradley

There are a lot of unsettling things going on right now, and it’s not limited to politics and foreign affairs. The investment world has its share of curious developments. On their own, they may not be unprecedented or troubling, but in aggregate, well, it’s not normal out there. The tenets of investing, as I know them, are being stretched or obliterated. Here’s a few examples.

The next Kodak

A long list of iconic growth companies are hitting the wall. I’m not talking about their stock prices being down because sales failed to meet analyst expectations. No, in many cases sales are down in absolute terms, sometimes by a lot, without a recession to blame. These bluer-than-blue chip companies have gone no growth and may even be turnaround stories.

I’m talking about Nike, Starbucks, McDonald's, Pepsi, Lululemon, luxury brands like LVMH, booze stocks such as Diageo, luxury car manufacturers including Tesla, and yes, Apple.

The reasons are different in each case but in part trace back to the fact that the growth engines of the world economy – declining interest rates; deficit spending; globalization; and emergence of the Chinese consumer – are losing power. Tailwinds have swung around to become headwinds. These companies are unlikely to be the next Kodak but are certainly looking at tougher years ahead.

Untethered optimism

At the same time, there’s an inordinate amount of attention and money going toward assets that have no cash flow and/or are hard to value. Assets where investors’ optimism isn’t constrained by fundamental measures such as year over year sales, profit margins and price-to-earnings ratios.

Gold and bitcoin are playing a bigger part in portfolios. Both provide diversification, but neither generates a profit nor has a clear business purpose.

Private equity funds are also getting an increased allocation. They own real businesses but many of their holdings are getting ripe on the vine and need to be divested. This backlog, combined with a sticky market for initial public offerings, means funds are trading more among themselves at prices outside of investors’ purview.

And certainly, financial metrics aren’t curbing optimism for anything related to artificial intelligence. Hope and hype are years ahead of any concrete economic assessment.

To be clear, artificial intelligence’s impact is not in doubt, but there are many unanswered questions. How will it be monetized? Will it generate net new revenue or simply be a competitive differentiator needed to justify current revenue? Can capital costs and power requirements be reined in? Can power grids keep up? How does the environmental impact get factored in? And is AI moving tech companies from being capital light to capital intensive?

Sizzle without the steak

Speaking of hype, the crypto world has a product that’s exploding in popularity – stablecoins.

These tokens make it easier to transact and transfer money on blockchain, but there’s a catch. No income. When coins are minted, the proceeds are invested in securities like U.S. Treasury bills (i.e. stable assets) but the interest is kept by the coin sponsor.

For individual investors, stablecoins are the digital equivalent of putting money under the mattress. They make low-interest bank accounts look like a bargain. For issuers, stablecoins are one of the most profitable investment products ever, which explains why corporations are lining up to issue their own versions.

Betting the farm

Related to cryptocurrency, the latest corporate strategy is to turn operating businesses into bitcoin proxies. Companies that have limited prospects can break out of their rut by filling the corporate coffers with bitcoin and telling the world about it.

Strategy, formerly an enterprise software company known as MicroStrategy, is the poster child for this trend. It has raised almost $30 billion via stock and debt issues to buy bitcoin, which has more than tripled over the last two years.

Strategy shareholders have done well and there’s now a slew of copycats that have shelved their business plans (formerly know as strategy) and are betting their companies on a volatile digital asset.

Most of these things I’ve listed, while fascinating, are playing out at the fringes of the capital markets. They indicate we’re in a period of above-average risk taking, but I expect they’ll have little or no impact on the long-term returns of well-diversified portfolios.

As for businesses, they are remarkably adaptable. For those that offer products and services that people need, markets are there, and economic principles still apply.

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What’s the best way to draw down your assets in retirement? In this Coffee Break episode, we’re joined again by Steve Bridge from Money Coaches Canada to explore the most effective strategies for withdrawing funds from your retirement and investment accounts in Canada. Steve shares insights on how to access your savings in the right order and at the right time—helping you reduce taxes and make your money last longer.

by Tom Bradley

We’re thrilled to share some exciting news. As of June 10, Steadyhand is officially part of the Purpose Unlimited family!

Back in March, we announced that we had accepted an offer to join Purpose, subject to regulatory and unitholder approval. Today, we’re pleased to report that everything is finalized, and we’re entering this new chapter.

This is a significant step forward for Steadyhand in our mission to deliver better investing outcomes and a simpler, more personalized experience for Canadians. By joining forces with Purpose, we’re gaining access to a broader range of expertise, tools, and resources, all of which will help us serve you better.

Over the past few months, we’ve been working closely with the team at Purpose to ensure a smooth transition and to identify aspects of our business that we can improve. One of the developments we’re most excited about is the progress we’ve made on our client portal, and we hope to roll out the enhancements later this year.

In the meantime, it’s business as usual across our investment, client service, and operations teams. While we have some exciting ideas in the pipeline, most are medium-term initiatives that we’ll share more about in due course.

As always, your feedback is important to us. If you have any questions or thoughts, we’d love to hear from you. Feel free to reach out at 1-888-888-3147.

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Thinking about commuting your pension? In this Coffee Break, we break down what you need to know about commuting a defined benefit pension, including the risks, opportunities, and real-life implications of this major financial decision. Certified Financial Planner Ashley Gordon joins us to explore the key question: Should you take the commuted value of your pension or stick with the traditional monthly income? We discuss who typically faces this choice and the critical factors to consider. To bring it all to life, we walk through a case study of a 62-year-old teacher deciding whether she should take the lump sum or rely on the lifetime income provided by her plan.

What if shifting your mindset about retirement could add years to your life? In this Coffee Break, Scott Armstrong, author of Retire and Aspire, shares how Canadians can rethink retirement — not as the end of work, but as the start of their most meaningful chapter. Drawing on insights from a 60-year meta-study and his work with retirees, Scott highlights the emotional and social sides of retirement and explains how your mindset about aging can impact your longevity.

by Scott Ronalds

Spot prawn season officially opened on the West Coast earlier this month. For a few short weeks in May and June, these sweet, succulent crustaceans that thrive in the coastal waters of B.C. go on sale to the public.

You can buy them two ways: from your local seafood shop, or directly from the boat.

For true spot prawn enthusiasts, the direct-to-consumer route (DTC) is the way to go. Buying straight from the boat means no middlemen, no extra commissions, and no packaging fees. It’s fresher, cheaper and offers a uniquely personal experience. More on that in a moment.

If you’ve ever visited our Vancouver office, you’ll know we’re a stone’s throw away from Granville Island — home to one of the main marinas where the prawn boats pull in to sell their bounty. I picked up a two-pound bag last week and they didn’t disappoint. Neither did the experience. There’s something to be said about breathing in the salty air, chatting with the fishers, and watching the marine life bustle around the docks.

Insider tip: flash boil your prawns for 60 seconds, then sauté in melted butter with garlic and a finely chopped Thai chili pepper (seeds removed). Cook for an additional minute or two over medium heat, then finish with a healthy squeeze of lemon juice and a sprinkle of rock salt. Serve with a warm sourdough baguette and a B.C. chardonnay. You’re welcome.

Now, let’s bring this back to investing.

The DTC model has flourished in industries like apparel, beauty, and farm-to-table food. In the U.S., investment firms like Vanguard have embraced the model, offering their products and services directly to clients and building enormous trust and scale in the process.

But in Canada, the story’s different. Most financial products are still sold through intermediaries—advisors, brokers, or bank reps. There’s a layer between the client and the investment solution that adds cost, and potential slippage around communication and reporting, which in turn can lead to an inferior client experience.

Why hasn’t it changed? Because the traditional model is highly profitable — for the intermediaries and the institutions behind them.

As one of the few “direct distribution” investment firms in Canada focused on serving investors with $10,000 to $1 million, we’re able to control every aspect of the client experience. That means:

• Real people (live, skilled professionals) answering your calls promptly. 

• A low fee schedule that rewards loyalty and puts more money in your pocket. 

• Reporting to you clearly, as we would want to be reported to ourselves. 

• Clear-cut advice tailored to your financial situation by professionals who know our investment funds inside out. We built them and manage them, after all.

Just like with spot prawns, going straight to the source in investing means better quality, fewer layers, and a more rewarding experience. Bon appétit.

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by Tom Bradley

For many Canadian investors, BCE is a core holding. It’s been in their portfolios forever and paid a healthy dividend along the way. Over the past three years, however, the stock has dropped almost 60 per cent and management recently announced that the dividend is being cut by a similar percentage. The stock has gone from being a staple to a loser.

I have no issue putting BCE in the loser category, but find that investors too often use the term incorrectly. Let’s look at the reasons why a stock might not perform as hoped.

Oops

The most obvious reason is that the investment thesis is wrong. The new product turns out to be a bust, international expansion isn’t working, or a much-hailed acquisition is a disaster. It happens regularly. BlackBerry failed to read the tea leaves. Nike is getting outflanked by cool new brands. Predicting the future is hard, but it’s not the most common reason for disappointment.

Market

The biggest reason is one you can’t control: the market. A company could be doing all the right things, and yet its share price gets dragged down by a market correction.

I’m focusing here on losers, but it goes both ways. I had the good fortune of the opposite happening early in my career. I was a conglomerate analyst and recommended that our clients buy CP Ltd., which at the time was one of Canada’s most important stocks. The call worked out brilliantly because the market went on a tear shortly after my report was published. CP got carried along and so did my reputation. I don’t remember if my thesis was correct or not. It didn’t matter. The market ruled the day.

Paid too much

Sometimes stocks perform poorly because you pay too much. Getting the outlook right is important but so is paying the right price. Howard Marks of Oaktree Capital captured it best when he said, “No asset can be considered a good idea (or a bad idea) without reference to its price.”

Overpaying takes many forms. For companies on a roll, the assumed rate and durability of growth can be overestimated and – if those sunny expectations come with a high price-to-earnings multiple (P/E) – then everything must go right for you to make money. There’s little room for error.

For cyclical companies, the opposite can happen. I learned this lesson from veteran investors such as Murray Leith and Bob Krembil. They taught me that low P/Es for airlines, heavy industrials and resources only come when companies are at the top of their earnings cycle. They knew these low-margin businesses swung back and forth between huge profits to losses, and weren’t wooed by single digit P/Es. Cyclicals need to be bought when they’re earning little or no money and have sky high P/Es.

Dividends rule

Related to valuation, investors, including many BCE shareholders, get intoxicated by a stock’s dividend yield and fail to assess the fundamentals. They’re blinded by the income and don’t question whether the company’s profits and competitive position will support the dividend.

Yield is not a valuation tool for stocks like it is for bonds. A dividend isn’t a fixed obligation like an interest payment is for a debt instrument, but rather a tool for distributing profits to shareholders, when there are profits. It’s an important distinction, as BCE shareholders are finding out.

Time frame

When a stock isn’t working out, it’s not usually because other investors have a meaningfully different view, but rather a different time frame. A day trader wants a stock to move by lunch. If it doesn’t, they sell. A long-term investor could care less what it does over the next few months, or even years. If it’s down by lunch, they’ll buy more.

Bell fits in multiple categories. The juicy dividend convinced people to buy, or keep holding, the stock, but they failed to appreciate how capital intensive and mature the cellphone and cable businesses are, and as a result, paid too much.

Is now the time to buy BCE?

Certainly, the valuation and dividend better reflect the company’s prospects. If you’re an income investor, you’ll need to compare it to Rogers, Telus and the Canadian banks, and importantly, make sure you have the right time horizon.

Your success won’t be determined by how it does in the next few months. It will take time for your dividends to accumulate and for you to determine if management’s fibre-first strategy is working out.

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In this Coffee Break, we explore what happens to your retirement accounts (RRSPs, LIRAs) once you stop working. Certified Financial Planner Steve Bridge joins us to explain how accounts are converted (RRSPs to RRIFs, LIRAs to LIFs), the rules around mandatory withdrawals, and the strategic roles that TFSAs and non-registered accounts can play in your retirement income plan. Steve also discusses common misconceptions about waiting until age 71 to begin withdrawals and highlights the potential benefits of starting earlier.

Trying to figure out how much you need to invest to reach a specific financial goal? Whether you’re saving for a big trip, a home down payment, or retirement, building wealth comes down to three key factors: your goal, your timeline, and your expected rate of return. In this video, Investor Specialist Jeff Stashuk walks through our How Much Do I Need to Invest? calculator to illustrate how even small adjustments to your inputs can lead to big changes in your financial future.

by Scott Ronalds

Steadyhand clients recently had the opportunity to vote on two important proposals regarding our partnership with Purpose Unlimited, as part of the regulatory process. The proposals were discussed and voted on during a virtual unitholder meeting held on May 9.

We’re pleased to report that over 90% of the fund units that participated in the vote were in favour of the proposals. This strong endorsement is a testament to the confidence our clients have in the future of Steadyhand and Purpose. Moreover, a meaningful number of unitholders showed their support for our partnership by voting in advance of the meeting. Typically, these types of events see low participation and engagement, so we were delighted to see healthy involvement and greatly appreciate your support.

While this was an important step, the transaction is not yet finalized. We are awaiting final approval from industry regulators, which is expected to take a few more weeks.

As a reminder, you can visit our dedicated webpage on the partnership to learn more about how it stands to benefit you and to see the voting results in greater detail.

We're not a bank. Which means we don't have to communicate like one (phew!). Sign up for our Newsletter and Blog and join the thousands of other Canadians who appreciate the straight goods on investing. Subscribe

by Tom Bradley

The focus of recent discussion in the media, and seemingly every dinner party, is who is losing from the tariff turbulence. The disruption will devastate some families and companies.

Less time is being spent on talking about the winners. Yes, where there’s losers, there’s winners. U.S. President Donald Trump’s turmoil will create new alliances between regions. Supply chains will become more flexible and robust. Talented researchers and engineers will move to Canada or stay here. Local merchants and tourist sites will benefit. And then there’s the matter of national pride. When was the last time you heard the national anthem being sung at the opera or symphony?

But it’s not just winners and losers. There’s another factor that goes into the economic equation. It’s the lost output because of what I call slippage. Change always comes with it, at least in the initial stages, but with Mr. Trump’s bull-in-a-China shop approach to trade reform, it’s off the charts.

We see slippage in decisions delayed because of uncertainty. The loss of months or years’ worth of economic activity and productivity gains that accrue when plants are built, products are launched, and young, innovative employees are promoted.

Slippage occurs when management time is chewed up doing damage control and preparing for multiple scenarios – none of which may occur. It’s the cost of the increased administrative burden on companies and government agencies related to new (and ever-changing) rules and taxes.

And most important of all, Trump-induced slippage includes the loss of trust and confidence, the lubricant for all economic activity. What took decades and centuries to build, has been obliterated in weeks.

As individuals we have little control over these kinds of impediments, but we can be on the lookout for them closer to home in our investment portfolios. Like the tariff turmoil, slippage can lead to meaningfully lower returns. The good news is, you have more control.

Slippage, or perhaps I should call it wastage or friction, is anything that lessens the amount of time and money that’s available for compounding. Albert Einstein referred to compound interest as the eighth wonder of the world. It’s a powerful and often underappreciated dynamic whereby an investor earns interest (return) on their interest (gains).

The list of possible sources of slippage mirrors those described with the tariff list above. It’s money that’s not invested right away. A bonus cheque or inheritance sitting in a non-interest-bearing account at your bank or broker for months.

Slippage occurs when you don’t take advantage of tax-sheltered accounts like TFSAs and RRSPs. It’s paying for a full-service adviser and getting little or no service and advice. (Canadian investors pay billions of dollars for services they’re not getting). It’s spreading money around in too many places and losing the benefit of scale (larger accounts tend to pay lower fees).

For money that has a longer time horizon (more than 10 years), slippage is pursuing strategies that sacrifice return for the sake of a smoother ride. Products designed to be less volatile offer less investment return, and generally have higher fees.

Frequent trading can cause slippage. Trading commissions have come down in recent years but can still add up. Active trading can trigger taxes prematurely and increases the likelihood that you’ll react unnecessarily to news and sell low or buy high. When chasing trends, the cost of getting it wrong can far exceed any commissions or bid/ask spreads.

On this point, it seems appropriate to join in on the celebration of Warren Buffett’s retirement with a favourite quote: “The stock market is a device for transferring money from the impatient to the patient.”

Changing advisers and/or investment firms too often can also result in additional commissions and transfer fees. Again, the fees aren’t always the biggest cost. The companies losing the assets often take their time transferring the money, which allows them to earn interest on your money while you’re underinvested. (Don’t get me started on this.)

Slippage for investors isn’t as impactful as what Mr. Trump is doing, but it can add up. As best you can, follow a routine that minimizes lazy money. Make portfolio or adviser changes sparingly. And share as little of your return as possible with the investment industry.

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With over $1 trillion in wealth expected to change hands in the coming years, many families lack a clear plan and haven’t had the necessary conversations to ensure a smooth transfer. In this Coffee Break, we’re joined by Julia Chung, Certified Financial Planner and Co-Founder of Spring Planning, to discuss intergenerational wealth planning. We explore key topics including tax efficiency in wealth transfers, how to prepare heirs not just financially but emotionally for future responsibilities, and tips for fostering family discussions around money.

by Scott Ronalds

To state the obvious, these are unsettling times. Our relationship with our closest friend and ally is on the rocks. The White House’s tariffs, policy flip-flops, and strong rhetoric are impacting our economy and even threatening our sovereignty. Other countries are just as worried, and the world’s trust in America is waning—a trust that is tough to win back.

Investors are concerned. The U.S. market experienced a correction last month (defined as a 10% decline from its peak) but has since recovered some ground. Tech stocks have seen sharp selloffs, there are mounting fears about the global economy, business leaders are anxious, and there’s talk that the American market’s long run of “exceptionalism” is coming to an end.

Yet, there is a silver lining. Canada is taking measures to remove internal trade barriers and diversify our economic relationships. Europe is striving for greater unity. Companies are being driven to become more nimble in response to these challenges. And let’s not forget, markets often overreact, and the doomsday scenarios the media loves to hype rarely come true.

As Tom Bradley noted in a recent Globe and Mail article, “The emotion quotient is off the scale, which is generally not a good recipe for making dramatic changes [to your portfolio].” From an investing perspective, the key to navigating this political and economic uncertainty can be summed up in one word: diversification.

Steadyhand investors benefit from broad exposure to different countries, industries, currencies, and asset classes. Our Founders Fund offers a truly global investing experience, with holdings in France, Germany, Italy, the U.K., Japan, Singapore, Hong Kong, Australia, Uruguay and several other countries, in addition to Canada and the United States. Equally important, your investments span a wide array of industries, from healthcare and financial services to consumer products.

It’s this diversification that helps cushion market shocks. You might be surprised to learn that European stocks have held up relatively well this year amidst all the chaos, rising 6% (as of April 30). Hong Kong’s market is up 10%, and the Yen has appreciated 6% against the Canadian dollar, mitigating the declines of Japanese stocks in Canadian dollar terms. Further, industries such as healthcare and consumer staples are doing well.

As a client, your portfolio is much better diversified than investors who have narrowed in on one region or theme, such as American technology. And in our view, you’re better diversified than those who own the broad global market through an index-tracking fund or ETF, as such products have become U.S. and technology centric. For example, American stocks make up over 70% of the MSCI World Index, with technology companies comprising 25% (tech stocks make up nearly one-third of the S&P 500 Index). In contrast, American stocks constitute 32% of the equities in our Founders Fund, with tech companies making up 14%.

On the theme of technology, we’ve discussed in recent Quarterly Reports our limited exposure to U.S. mega-cap stocks, with Microsoft being our only holding among the Magnificent 7, due to concerns about their high valuations (and thus, greater downside risk). While this positioning held back our returns over the past few years, it has benefited you in 2025, as these stocks have seen some of the biggest pullbacks this year. Our managers have taken advantage of this volatility, purchasing Alphabet (the parent company of Google) after the stock fell 20% and adding to Microsoft.

All of this means that your portfolio hasn’t experienced the same declines as those with a greater focus on one country or industry. Your investments in European companies have provided stability through the recent turmoil, and many of your holdings in defensive industries are holding up well. Our Founders Fund is up 1% on the year while many less diversified portfolios are in the red.

We can’t predict how markets will react going forward. As the saying goes, ask three economists and you’ll get five answers. Nor can we guarantee that the American market, and the Magnificent 7, won’t roar back to life tomorrow. But we can tell you this: diversification has proven its value for investors throughout history. There’s no reason to believe it won’t continue to do so in today’s unpredictable world.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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Is your CPP estimate on My Service Canada accurate? It might not be — especially if you’re still years away from retirement. In this follow-up to our popular My Service Canada video, we chat with Brett Martinson, Certified Financial Planner at Parallel Wealth, to dig deeper into understanding your Canada Pension Plan (CPP) estimate.

by Tom Bradley

When I was a young stock analyst, I was always amused when my bond friends referred to themselves as the senior market. Unfortunately (and embarrassingly), I came to realize they were right. Bonds may be boring to an equity guy, and confusing to many investors, but what drives them – interest rates – reaches deep into the economy, affecting how companies and governments fund their operations and consumers make decisions. Rates are the single biggest factor affecting all asset classes.

Right now, fixed income is not only important, it's extremely interesting. Patterns that have endured for decades are being tested.

Cream puffs no more

Since the George Bush/Alan Greenspan era in the 1990s, U.S. Federal Reserve chairs, and therefore other central bankers, have been pushovers. At the slightest hint of economic slowdown, they've jumped to lower interest rates. They were trying to prevent any kind of deceleration, not just recessions. The bank rate became a tool for managing economic activity.

Three decades of accommodation and micromanaging, however, reached a breaking point in 2021 when we had near-zero, recession-like rates and an economy that was doing just fine. Something had to give and in 2022, short-term interest rates moved up significantly.

Today, U.S. Federal Reserve Chairman Jerome Powell, and others including Bank of Canada Governor Tiff Macklem, are under intense pressure to lower rates and stimulate the economy. So far, they've resisted, preferring to keep their powder dry in case there's a full-fledged recession.

Complicating the situation is the potential for tariff-induced inflation, for which higher rates, not lower, are more appropriate. The outlook for inflation is an important determinant of interest rates. Investors require a positive real yield – that is, a yield in excess of inflation – in return for tying up their money and taking risk. There are periods when this isn't the case, such as the go-go years of 2020-22, but they aren't sustainable. Either rates need to go up or inflation down.

Fed watchers who are hoping for lower borrowing costs should be careful what they wish for. For central bankers to get on board, a recession is likely necessary.

The mighty U.S. dollar

The U.S. dollar is the world's most important reserve currency. Countries fill their international currency reserves with it and investors rush to own it when times are difficult. But the chaos caused by the Trump administration has those same people questioning whether U.S. Treasury bonds are still the ultimate risk-free asset. Disrupting global trade, destroying long-standing alliances and running a US$2-trillion deficit has banks and global investors looking to other reserve currencies like the euro and yen.

I'm not suggesting the greenback will completely fall off its pedestal, but the scrutiny and lack of trust is unprecedented and is worth watching.

Where are the canaries?

Throughout my career, the high-yield bond market has been an early indicator of trouble in the stock market. Tighter credit, rising defaults and higher yields were canaries in the coal mine.

This time around, the opposite occurred. While tariff turmoil had stocks gyrating down, credit markets didn't even flinch, at least initially.

Some perspective is useful here. We've been experiencing one of the great credit cycles of all time. Since the 2008-09 financial crisis, there were a few hiccups, the COVID period being one, but each was short-lived and inconsequential. Steady demand for high-yielding investments and minimal defaults meant risk-takers were rewarded.

Despite this long run of success, lenders are now starting to take their cue from the stock market. Buyers are worrying more about economic disruption and a rise in defaults. Credit spreads have widened (explained below) and Goldman Sachs recently raised its default forecast to 5 per cent for high-yield bonds (from 3 per cent) and 8 per cent for leveraged loans (from 3.5 per cent).

As a reminder, investors demand higher yields for bonds that carry an increased chance of default. The yield in excess of a government bond (with similar terms) is called a spread. Spreads vary widely and are cyclical. A bond issued by a Canadian bank might have a spread of 1 per cent to 2 per cent while a junior mining company might be 10 per cent to 15 per cent.

Diversification

There's one relationship not on my list that's getting plenty of buzz. Many are questioning whether bonds are still a diversifier, given that they've recently been moving in sync with stocks. This occurs from time to time. Bonds may not be smoothing the daily path of balanced portfolios right now but if we end up in recession, rates will come down (inflation be damned) and bond prices will rise.

We're not a bank. Which means we don't have to communicate like one (phew!). Sign up for our Newsletter and Blog and join the thousands of other Canadians who appreciate the straight goods on investing. Subscribe

by Scott Ronalds

Last month, we shared the exciting news that Steadyhand is joining Purpose Unlimited. Now, we want to address your most frequently asked questions and dive a bit deeper into what this partnership means for you, from the benefits it will bring to investors to the core aspects of our business that won’t change.

What benefits should I expect from this partnership in the short and long run?

In the near term, we’re focused on improving your online experience. This includes upgrades to the client portal and simplifying administrative tasks like password resets, personal updates, and opening new accounts (we know we’re a little behind the competition here). With Purpose’s tech expertise and resources, we’re excited to improve your digital experience together.

Looking further ahead, Purpose aims to provide our Investor Specialists with better tools and solutions to manage portfolios and financial plans. This means we’ll be able to enhance the level of advice we provide and allow our client service team to concentrate on the conversations that matter most. As always, our focus will be on keeping things simple and clear, with a human touch.

Will the Steadyhand funds change?

No, the Steadyhand funds are not changing in any fundamental way. The investment philosophy we’ve adhered to since our inception nearly 20 years ago is here to stay. Purpose shares our long-term approach and is committed to preserving what makes Steadyhand unique.

Our Chief Investment Officer, Salman Ahmed, will continue to play an important role in managing our funds and shaping our investment strategies. We’re also excited to leverage Purpose’s strengths — particularly in retirement solutions and fixed income — to further enhance what we offer.

Will my fees change in any way?

Steadyhand’s fee model and philosophy won’t change because of the Purpose acquisition. Like us, Purpose believes that low fees are crucial to investor success, and is committed to keeping fees low, clear, and competitive—so you keep more of your returns.

We have made changes to specific fund fees in the past—both up and down— and if we ever consider any future adjustments, we’ll communicate them clearly and well in advance.

Who is Purpose Unlimited, and what do they do?

Purpose Unlimited is an independent Canadian-owned financial services firm based in Toronto. They run three main business units:

• Investment products and solutions, through Purpose Investments. 

• Wealth management, supporting advisors and clients with tools and planning services through Purpose Advisor Solutions. 

• Small business lending, through Driven.

Purpose’s mission is to be the leader in modern, client-focused financial services. Their values align closely with Steadyhand’s, which is one of the key reasons we chose to partner with them. They believe in delivering great advice, keeping costs low, and making the client experience more human.

Will there be changes to Steadyhand’s advisory team or client relationships?

No, nothing is changing with the team you work with or how we deliver advice. The relationships our clients have with our Investor Specialists are at the core of what we do, and that’s staying the same. You’ll continue to work with the same people you know and trust, with the same focus on clear-cut advice.

Over time, our goal is to strengthen what we offer—by incorporating better tools and technology—but the core of our advice model won’t change.

What will happen to the Steadyhand name and brand?

Purpose plans to preserve the Steadyhand brand. Over the years, we’ve built something special—from our voice and identity to the client experience—and Purpose recognizes and values what makes Steadyhand unique.

Purpose will take some time to explore how we best fit within the broader organization. We’ve refined our brand over time, and if there are changes down the road, they will be handled with care.

What will happen to Steadyhand’s Vancouver office and West Coast presence?

Steadyhand's presence on the West Coast isn’t going anywhere. The Vancouver office will keep running just as it always has. We look forward to continue welcoming those of you who enjoy visiting us in person for a portfolio review over a coffee or handful (or two) of chocolate-covered almonds. Don’t worry, the jar will always be full.

The goal of this partnership is to build on the foundation we’ve created and make your experience even better. If you’re looking for further information, our dedicated webpage is a great resource. And you can always reach us at 1-888-888-3147, where you’ll promptly get the same friendly voices and service you’re accustomed to.

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In this Coffee Break, we welcome back actuary and retirement expert Don Ezra to discuss one of the most important aspects of retirement — how to confidently transition from saving to spending. Drawing from his own experience, Don shares a practical framework he and his wife use to manage their finances, centered around the concept of a “personal funded ratio.” The conversation also explores useful tools such as the Longevity Illustrator, how to think about real estate in your retirement plan, and why many retirees tend to underspend out of fear of running out of money.

by Tom Bradley

In these uncertain and highly emotional times, investors are wondering what to do. My answer will likely leave them unsatisfied and ensure that I won’t be asked to do any media interviews.

My suggestion is to do nothing.

There are two main reasons for such a radical recommendation. One is the value and importance of your investment plan, and the other is the lack of quality information on which to base decisions.

I’ll start with the plan, which is a qualifier for this strategy. Doing nothing is appropriate for investors who have a plan and have built their portfolio around a target asset mix.

An investment plan is designed for times like this. It requires that you hold a mix of asset types, industries, geographies and currencies. It assumes there will be both no-holds-barred good times and head-scratching bad times.

A proper plan anticipates that your riskiest investments will go down sometimes, maybe even a lot, when the news is dire, a recession is probable, earnings estimates are being slashed and investors are running for cover. But most importantly, a plan ensures you’ll fully recover from any downturns.

I’ve portrayed your plan as all-knowing, but sticking to it can be difficult, especially when you trust it the least – when your portfolio is well down from its high, and everyone in your investment ecosystem is telling you to do something different.

Which brings me to the other reason for doing nothing.

In turbulent times like we’re going through, the flow of information is plentiful, but the quality is questionable. Let me explain.

When patterns are disrupted and previously unknown factors take over, commentaries are reactive, not analytical. They can’t help but be. Changes are happening in real time, and clients want to know what to do – now! There’s little time for thought, let alone sober second thought.

What clients want is unachievable. They want to know the unknowable, preferably delivered in a confident voice. Unfortunately, many advisers will deliver a decisive strategy – sometimes naively, other times knowing it’s a shot in the dark. Could the economy grind to a halt? Could inflation prove to be a bigger problem? Could tariffs be gone by the time the strategy is implemented? Who can be confident enough to bet on any of these things?

The information flow also has an obvious bias. It’s overwhelmingly negative, even though the balance between positive and negative long-term market forces may have changed very little or perhaps not at all. Opportunities get buried away under a pile of risks.

Right now, little is being made of how adaptable the economy is (proven time and again) and the new economic alliances being formed. Nor is any attention being paid to the potential winners – strong, nimble companies that will come out the other side more dominant than ever. Or the fact that speculative behaviour, which is a millstone on future returns, is being washed out of the system.

Speaking of return expectations, in-crisis forecasts invariably project lower returns going forward, at a time when reduced price levels are setting the table for a period of above-average returns.

And one more. In times of crisis, everyone becomes an economist, which leads to an assumption that investment portfolios won’t recover until there’s good economic news. This in the face of overwhelming evidence that stocks can recover dramatically with no good news, just less bad news. Or, as was the case this past week, a reprieve from the irritant.

You get the point. In difficult times, there’s too little insight. Too much unwarranted confidence. An unhealthy need for certainty. And a natural desire to do something – or at least be seen to be doing something.

The late Peter Bernstein said it best: “In calmer moments, investors recognize their inability to know what the future holds. In moments of extreme panic or enthusiasm, however, they become remarkably bold in their predictions.”

So, what does doing nothing mean? It’s doing the little things you always do. Making regular contributions. Using inflows and outflows to rebalance to your target asset mix. Basing your expectations on potential returns, not recent returns. If you are prone to making tactical moves (not recommended), be defensive (or offensive) when others are greedy (fearful). And trust your plan, not people who confidently predict otherwise.

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Should you add your adult child to your bank account or property title? It might seem like a simple solution to help with estate planning, but joint ownership can introduce legal risks and tax consequences you may not be aware of, not to mention potential family conflict. In this Coffee Break, we welcome estate lawyer Mike Beishuizen, founding principal of West Coast Wills in Vancouver, to discuss the good, the bad, and the ugly of joint ownership. Mike explains the risks, probate myths, tax traps, and how to protect your legacy with a power of attorney.

by Tom Bradley

Before I address the current market turmoil, let me correct something I said in a recent post. I misspoke when I said, “The range of possible market outcomes [right now] is wide, making it a poor time to hang your hat on a few focused bets (including going all cash).” I was making the argument that it’s a good time for your investment portfolio to be diversified.

Yes, it has been a good time to be diversified, but it’s always a good time, and we should always be prepared for any and all possible outcomes in the short term. When markets are calm and the news is benign, investors (and professionals) are often guilty of recalibrating and narrowing the range of what can happen, but they shouldn’t. Nor should they exaggerate possible outcomes in difficult and confusing times like we have now.

It’s useful to review what it means to be diversified.

• You have exposure to a broad array of asset types, industries, economies, and currencies, all of which take turns contributing to returns. 

• You’ll participate in every bull and bear market, but not to the full extent. 

• You won’t love everything in your portfolio. Invariably, there will be holdings that haven’t contributed for a long time or have even been detracting from returns. 

• You’ll always recover after a big decline. Not everything will bounce back, but when you’re properly diversified, you’re assured of reaching new highs. It’s just a matter of when. 

• There will always be someone in your social circle who is on top of the latest trend and doing better than you, but it will be a different person every time. 

• Contributions, withdrawals, fund switches and rebalancing will all be done in the context of a framework. No emotionally charged, mind-bending decisions, or need to make what I’ve dubbed ‘the hardest decision in investing’ – getting back into the market after getting out. 

• And importantly, you’ll sleep better at night.

As you’ll see in the fund commentaries, our adjustments to the current situation were mostly done through the asset mix of the Founders Fund. The tariff news out of the White House was so unpredictable and ever-changing that it was difficult to justify making significant shifts in strategy in the underlying bond and equity funds.

In response to above-average valuations, rampant speculation and tariff uncertainty, we took advantage of strong markets and dialed down the equity content in Founders. With the proceeds, we increased the bond weighting (income; insurance in periods of economic weakness) and maintained a healthy cash position (income; liquidity to pursue opportunities).

Our funds are feeling the tariff downdraft, but not as much as the headlines and indexes would suggest. And importantly, they’re now in position to take advantage of price weakness and growing bearish sentiment.

In other news, you saw our announcement last month that we’re joining Purpose Unlimited. I’m excited about this partnership and the numerous benefits it will bring to our clients. If you have any questions about the deal, your portfolio, or the current market environment, please reach out to one of our Investor Specialists at 1-888-888-3147.

I encourage you to read the rest of our Q1 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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Retirement ain’t what it used to be. It’s often a much longer and rewarding phase of life now. But you may be asking yourself, “How can I stay fulfilled?” In our latest Coffee Break, we chat with Dr. Riley Moynes, author of The Four Phases of Retirement and TEDx speaker with over 4.5 million views, to unpack the deeper realities of retirement. Discover what to expect in the four emotional phases of retirement, why the “honeymoon phase” doesn’t last, and what happy retirees do differently. Whether you're newly retired or planning ahead, this video will help you think beyond the finances and focus on what really matters: enjoying your days to the fullest.

by Tom Bradley

The market response to President Trump’s 'Liberation Day' was decisive. Economic growth forecasts were slashed, earnings estimates reduced, and stock prices dropped sharply.

After dramatic days like April 3, the volume of commentaries explodes, while the quality of explanations declines. There is not a lot we can say at times like this that will make your concerns totally disappear. What we can tell you, though, is the defensive moves we’ve made in our funds over the last few months (which have benefited your portfolio) are behind us. Now, we’re closely watching how it plays out and getting ready to shift back to offense.

We’ll have a lot more to say in our Quarterly Report which will be out on Monday, along with your account statement, but here are a couple of advance clips.

From Bradley’s Brief: "Our funds will feel the tariff downdraft, but not as much as the headlines suggest. And importantly, they’re now in position to take advantage of any price weakness and growing bearish sentiment."

From the fund commentaries: "Founders [Fund] has been playing defense for a while now. We expect to shift back to offense in the coming weeks and months. The economic dislocation caused by the trade war will have a real impact, but many stocks will overreact. Lower valuations and fearful investors will provide opportunities to profitably allocate more of the fund into stocks."

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by Tom Bradley

I recently met with a friend to talk about investing. He’d just won the Grade 9 investment game at school (bitcoin, bitcoin, and more bitcoin) and was enthusiastic to learn more. He wanted to get started for real.

I struggle with these conversations because our goals are different. He wants to have fun and get rich, and I want him to learn some basics he can use for the rest of his life. As any parent knows, this is a big valley to bridge.

It’s a dilemma I think about constantly. A book publisher once said to me, “The problem you have, Tom, is that you’re asking people to eat their broccoli.” In other words, my approach to investing is fundamental and it works, but it’s boring. It pales in comparison to the sizzle of a steak or the crunch of a French fry. It’s not cool doing nothing when everyone else is urgently doing something. And I’m not giving people anything to talk about at a dinner party.

My new business partner, Som Seif, put it more positively than the publisher. He said, “Tom, not every successful investor does what you preach, but every investor who does is successful.”

Clearly, I need to try a new communication strategy.

Broccoli

Maybe I can build on the broccoli thing. People are really into health these days and broccoli is one of 25 superfoods. Eat it regularly and you’ll be healthier.

So, I could say you don’t get to have dessert until you’ve eaten your vegetables. Prior to getting started, you must have a plan that includes a clear goal of what you’re trying to achieve, a framework or target asset mix to guide how you allocate your dollars, and an understanding of how unpredictable markets are.

I like broccoli but it doesn’t seem like this will sell unless I can follow my mother’s lead and smother it with cheese sauce.

Layups vs. launching threes

What about sports analogies? They’re right in my wheelhouse. How about I say investors need to learn layups and bounce passes before they start launching threes? Or golf. They need to develop some scoring skills by learning to chip and putt before whaling on a driver.

In other words, before opening a brokerage account and trading stocks and options on your phone, you need to know that stocks are driven by profits in the long term and a random array of ever-changing factors in the short term. Stock markets rise over time, and you need to be there when they do. The way to reliably make money is to maximize the time invested. Day trading is, well, like throwing darts blindfolded.

Yeah, but sinking a three is such a great feeling.

Bragging rights

Maybe I can play to investors’ most visceral emotion – doing better than their friends and enemies. It fuelled Instagram to great heights. Why can’t it do the same for the ABCs of investing?

If you take care of the basics and develop a regular routine (make monthly contributions, read the quarterly reports, do a complete review annually), you’ll meet your goals and beat most, if not all, of your colleagues and neighbours. No extensive market knowledge required, nor any insight into whether Telus or RBC is a better buy. In fact, no brilliance necessary at all, just a healthy dollop of discipline.

And on the way to bragging rights, there’s two added bonuses. You’ll spend far less time on investing, and you’ll ooze confidence when talking about it. You may even be a little smug.

Well, emotion feels like a better hook than broccoli, but I’m not sure I’m there yet.

Social hype machine

Clearly, I’ve got to penetrate the social media machine. To do that, I need to create some buzz, hype even. Perhaps I can recast the basics in terms of what people are used to seeing and clicking on.

• You’ll triple your money. 

• You’re guaranteed to never miss a bull market. 

• You’ll achieve your goals and have financial flexibility in retirement. 

• You’ll do better than your obnoxious brother-in-law who follows the market and talks a big game. 

• You’ll have time to read five more books each year.

Now I’m getting somewhere but unfortunately, I’m meeting with my young friend again next week. I guess I’ll just tell him, “Eat your broccoli, kid.”

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Earlier this week, we shared some exciting news: Steadyhand is taking a significant step forward by joining Purpose Unlimited, subject to regulatory and unitholder approval. Purpose is an independent Canadian financial services company led by well-known entrepreneur Som Seif. In the video below, Steadyhand Co-founder Tom Bradley sits down with Som to discuss Purpose’s mission, the anticipated benefits this partnership will bring to Steadyhand clients, and the next steps in this new chapter.

by Tom Bradley

We are excited to announce that Steadyhand has accepted an offer to join Purpose Unlimited, an innovative and growing wealth and investment management firm. Subject to regulatory and unitholder approval, Purpose will acquire Steadyhand with the goal of expanding our wealth management capabilities and enhancing our ability to serve your investment needs.

Why we’re doing this

We initiated the search for a partner to find a firm that had the resources to help us broaden our ability to serve clients, achieve our ambition to serve more Canadians, and provide additional opportunities for our team. The Purpose/Steadyhand combination is about building on our strengths and fulfilling our goal to better serve Canadian investors of all sizes. It’s not about cost-cutting and rationalization.

The reason we chose to work with Purpose was their excitement for our approach to wealth management and our shared commitment to providing advice to all Canadians. Most other firms are focused on clients with millions of dollars. Purpose shares our passion for offering Canadians an alternative to traditional bank branches or advisors who may not fully understand their needs and service expectations.

Who is Purpose?

Purpose Unlimited is an independent Canadian financial services company led by well-known entrepreneur Som Seif. The firm’s mission is to be the customer-focused leader that the financial services industry needs. Purpose is developing a diversified product platform aimed to innovate and create the next generation of asset management, wealth management, and banking technology. The firm’s businesses include Purpose Investments, which offers a broad range of investment products; Advisor Solutions, which provides platforms to support advisor-client relationships; and Driven, a lender supporting small businesses across Canada.

Benefits to Steadyhand Clients

Over time, Purpose will help us enhance our offering in several key areas:

• Enhanced investment management: Combining the two businesses will allow clients to benefit from Purpose’s investment management capabilities, which include market leadership in retirement products and goal-based solutions.

• Improved online tools and client experience: Purpose’s expertise will enable us to improve our online tools (including our client portal) and overall client experience. 

• Increased resources: The combination of Purpose and Steadyhand will enhance our team’s ability to do what they do best, which is provide responsive service, investment advice and, most importantly, a steady hand. 

• Succession planning: The management depth and experience of Purpose will help us better address the challenge of succession that hovers over every small, independent firm.

Next Steps

Before we move ahead with Purpose, we need regulatory and unitholder approval. We expect this process will take 60-90 days, although there are no guarantees. Until that happens and the deal is finalized, you won’t see any changes to our business.

If the deal is consummated, management’s intention is to move slowly initially as we get to know each other and determine how to best take advantage of each company’s strengths. I want to emphasize that Purpose is excited about acquiring our firm because of the people behind it, and it’s their intention to keep all Steadyhand employees. As for me? While I may be getting up in years, I’m excited about the partnership and plan to play an important role in the transition phase over the next year.

As we finalize the details, we’ll have more information to share. In the meantime, please visit our dedicated webpage, which includes an FAQ, press release, and other details about the offer. If you have any questions, please call us at 1-888-888-3147 or book a meeting with one of our Investor Specialists.

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Navigating retirement income can be overwhelming, but understanding decumulation strategies is key to making your savings last. In this Coffee Break, we break down the biggest retirement withdrawal challenges, including market downturns, inflation, and tax-efficient income planning. We touch on how to protect your portfolio during volatile times, the benefits of using a cash reserve strategy, and how the Steadyhand Retirement Withdrawal Program helps retirees draw a steady income with peace of mind.

by Tom Bradley

In recent weeks, I’ve had a few clients wondering about reducing their equity exposure and sitting out the current chaos. The plan would be to lay low until things settle down and then reverse the trade.

It is indeed a crazy time, and the emotion quotient is off the scale, which is generally not a good recipe for making dramatic changes. There may be things to do in your portfolio, but spoiler alert, selling out is not one of them.

Before making specific recommendations, let me summarize my response to clients.

First, I remind them that Mr. Market knows more than we do. A lot more. He sees the chaos we see, as well as the array of opportunities and areas of growth. The market isn’t shuddering after reading the morning news like we are because it has already processed it and is looking further ahead.

There’s been evidence of this in recent weeks. On a few occasions, the market moved very little (if at all) when there was a horrendous announcement out of Washington. When it did drop meaningfully, it recovered the next day.

This disconnect between news and market reinforces what has to be part of every investor’s expectations. Short-term market moves are totally unpredictable. Even the keenest market observers don’t know what’s going to happen tomorrow, next week or next month. If a friend or financial adviser confidently says they do, tune out and look elsewhere for advice.

I also remind clients that for their first x years with us, they’ve built wealth far in excess of inflation. They’ve done it by sticking to a plan through all types of market conditions, including severe pullbacks in 2008/09, 2011, 2015, 2018, 2020 and 2022.

I point out that their portfolios are global in nature and not overly sensitive to what’s happening in Canada. A vast majority of the companies held are driven by sales and profits from around the world.

And then the clincher. If they want to liquidate their stocks, they have two decisions to make. The first is when to get out, which sets the stage for the second, when to get back in. If they think getting out at the right time is hard, try going the other way. I’ve dubbed it the hardest decision in investing.

Having said all of that, there may be things they, and you, should do.

Rebalance – It’s been a long period of good markets and generally the equity content in portfolios has crept up with stock prices. You may now be off your plan, or more specifically, be holding more stocks than your strategic asset mix calls for. Your SAM as we call it, is a long-term framework that fits your portfolio to your goals, time frame and investing personality.

If you’re carrying slightly more risk than originally intended, or are way out over your skis, some rebalancing is in order. Markets have been bouncing around so it might not be the perfect time to take profits and add to cash and bonds, but your portfolio is likely still close to its all-time high.

Diversify – If, in the good times, you tilted your portfolio toward particular industries, geographies or types of companies, then consider diversifying more broadly. The range of possible market outcomes is wide, making it a poor time to hang your hat on a few focused bets (including going all cash).

Plan to spend – And if you’re going to need cash in the next one to three years, don’t hesitate. Put it aside in a money market fund or GIC. This is pretty standard advice but is often ignored when markets have been good for a long time. Investors don’t want to miss out on potential returns. The operative word here is “potential.” Just do it.

Similarly, if you’re retired and drawing on your portfolio, it’s a good time to replenish your spending reserve. We’ve been advising clients in our Retirement Withdrawal Program to top up to a full two years of anticipated spending.

We’re living through volatile times and there will be dislocations. You may feel it at work or in the grocery aisle. Your portfolio, if properly diversified, is absorbing the same blows but is looking further ahead and assessing where things will be years from now.

If you need an emotional release, I suggest leaving your portfolio alone and taking it out on your tennis partner or a punching bag at the gym.

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Are you 65 or older and still working? You may be wondering whether contributing to the Canada Pension Plan is worth it. In this video, CPP expert Jason Yee explains everything you need to know about CPP contributions after 65. Learn about the rules for opting out, post-retirement benefits, the impact of enhanced CPP, and key tax considerations.

What if happiness actually increased as you got older? Research suggests that’s exactly the case. In this Coffee Break, we welcome back financial expert and author Don Ezra to explore the fascinating concept of the U-Curve of Happiness. Don explains why happiness tends to dip during midlife but then rises again, often surpassing levels experienced in early adulthood. He also shares why “satisficing”—embracing what’s ‘good enough’—can lead to greater contentment as we grow older.

by Tom Bradley

There are always trends that take over investors’ consciousness. They’re expected to be important and permanent features of the stock market, but often turn out to be cyclical. When they’re booming, they’ll persist forever. When they’re busting, well, not so much.

My contrarian nature leads me to assume that everything is cyclical until proven otherwise. The pattern goes like this: When the latest and greatest get popular, demand increases and prices and profits go up. To take advantage of the opportunity, supply expands such that when demand slows, there’s a glut and prices weaken. Rinse and repeat.

Think back to the fibre-optic buildout in the early 2000s. It proved to be essential, but the outcome for participants was highly cyclical, and companies such as WorldCom and 360networks went bankrupt. The commodity boom a few years later, which was driven by China’s unquenchable thirst for resources, was expected to go on for decades but instead lasted a couple of years. And closer to home, who can forget the cannabis boom-and-bust.

My skepticism has served me well, but it isn’t foolproof. Indeed, my record (and confidence) has been tested by the sustained growth of companies such as Alphabet, Amazon, Apple, Meta, and Microsoft.

This cyclical-versus-sustainable debate is coming into play with stock valuations. I’ve read recently that above-average U.S. stock valuations are here to stay. Going forward, price-to-earnings multiples (P/Es) will be in the twenties instead of the teens, owing to higher corporate profit margins, an abundance of private capital looking to buy businesses and the dominance of the megatech companies.

It’s a theory that I can’t buy into. In my view, stock valuations fit firmly in the cyclical category. The factors claiming otherwise mostly point to reasons why P/Es expanded in the past two years, not why they’re going to stay elevated. Indeed, it could be argued that high profit margins are a reason for P/Es to decline. They make future gains (and growth) harder to achieve and ultimately attract increased competition. Nvidia is a current example. It’s growth and profits are prompting other companies to invest heavily in designing their own chips.

Stock valuations are driven by market narratives but anchored by economic reality. Narratives play to emotion and, as with anything emotional, cause the stock market’s volatility. Exciting trends like artificial intelligence push prices up for a time, just as gloomy outlooks and economic shocks lower what investors are willing to pay.

What doesn’t swing back and forth is the economics of owning a business. The price paid must reflect the potential rewards and risks (companies don’t always live up to expectations) and offer a reasonable payback. The return needs to be meaningfully higher than secure alternatives like GICs and bonds. Valuations pivot around this reality.

Returns come from three sources. First is the dividend. Second is profit growth, which makes the company more valuable over time. And third is any change in valuation from the time of purchase. If you buy a company at a 15 P/E multiple and sell it at 25, you’ve had a powerful tailwind at your back. If the numbers are reversed, the investment will be disappointing unless the growth component is enormous. Individual companies may be able to overcome such a headwind (think Nvidia), but profit growth for the market overall, which is tightly linked to the economy, is more pedestrian.

I’d be remiss if I didn’t mention the one factor that could cause P/Es to stay elevated. Interest rates are the biggest determinant of P/E levels. If inflation drops, and interest rates follow, future earnings are more valuable, and P/E’s will adjust accordingly. Be careful what you wish for, however, as near-zero rates are likely to come with a recession or crisis.

The cyclical-versus-sustainable distinction is important. If a company is cyclical, then high profitability and a high multiple is a deadly combination. When growth moderates and earnings estimates are reduced, the P/E applied to the lower numbers also shrinks. It’s a double whammy and helps explain why quality stocks can drop so precipitously when they fall out of favour, despite the companies continuing to do well.

If you’re paying a high P/E multiple, it should be for a stream of earnings that is expected to grow for many years to come. Don’t count on high market multiples to skate you onside.

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We’re thrilled to have Ian Tam, an Investment Specialist at Morningstar Canada and a CFA charterholder, join us in our latest Coffee Break video. In this insightful discussion, Ian shares his top tips on how Canadians can build and preserve long-term wealth.

Wondering how to check your Canada Pension Plan (CPP) benefits online? In this video, we walk you through the My Service Canada portal step-by-step. We show you how to log in, review your CPP contribution history, and find your estimated retirement benefits. You’ll also discover how your work history impacts your CPP payments. If you’re wondering how delaying CPP can increase your monthly payments, be sure to watch our related video, CPP Timing Tips, with financial planner Jason Evans.

by Tom Bradley

The investment industry isn’t known for its intellectual honesty. It’s a nice-to-have but not obligatory. The analytical rigour between cause and effect is, well, not very rigorous. Narrative is more important than numbers.

There are many examples of this. We’re told an economic release or pattern on a chart caused a stock to go up when it could have been a multitude of factors. Market forecasts are published with little chance of being right. High-volume trading is encouraged despite evidence that it leads to lower returns.

Client reporting, the focus of this column, is another example. Investment companies sell their services based on their ability to generate returns, but after you’ve signed up, they make it hard to determine just what those returns are.

Fortunately, you have a chance to be intellectually honest with yourself. You should have recently received a report from your investment firm that has the facts. It’s required by regulators and has an uninspiring name, something like Performance and Fees Report.

If you get poor regular reporting, don’t pay any attention to how you’re doing or what you’re paying, or both, it’s the most important document you’ll receive all year. It will help answer questions such as: Is my investment process working? Are my moves in and out of the market helping or hurting? And do the fees I’m paying match up with the service I’m getting?

Lost return

In good markets – like we’ve had – fees tend to be overlooked. I hear it often: “It’s not what I pay that matters; it’s returns.” Returns are the goal, but the statement ignores the fact that fees have a meaningful impact. After all, long-term returns aren’t 15 to 20 per cent a year, they’re 6 to 8, which means that paying an extra (unnecessary) fee of 1 per cent reduces your return by 12 to 15 per cent, or $5,000 every year on a $500,000 portfolio.

The report is a good start in determining what you’re paying, but it doesn’t provide the full picture. It only shows what you’re charged for service, administration, and advice – things such as account fees, trading commissions and trailer fees – but doesn’t include expenses embedded in any funds and products you hold, which may account for most of the total cost (especially if they have performance fees).

As an aside, improvement is on the way. The Canadian Securities Administrators, which regulate the investment industry, are in the process of instituting rules that will make disclosure more complete. The initiative is appropriately called Total Cost Reporting.

Until we get there, less-than-total cost reporting requires you to ask questions to complete the picture. And you shouldn’t hesitate to do so because the answers can be revealing. For instance, if you get a squirm or an “I don’t know,” or are told it doesn’t matter, then you know you’re paying a lot and need to dig deeper.

Fees do matter and are one of the few things you can control in investing.

Reality check

The good news is the performance data in the report is more complete. The returns are, after all, fees and not only reflect how your bonds, stocks and funds did, but how you did. Let me explain.

The numbers you’ll see are money-weighted rates of returns, which take into account the returns of your investments as well as any impact of flows in and out of the account. If you are a regular contributor, don’t trade much and stick to a plan, it’s likely that your MWRR will be the same as the return of your investments. No slippage.

For investors who aren’t those things, there can be a shortfall between the two. If an investor went all in at the top of the market or sold out near the bottom, an extreme but not uncommon occurrence, the gap will be significant.

In aggregate, individual investors experience some slippage (often referred to as the behaviour gap) due to frequent trading, performance chasing, and buying high, selling low.

When analyzing your performance, the longer-term numbers are the ones to concentrate on. They provide more data on how your moves have contributed to or detracted from returns and will help even out factors such as strong and weak markets, well- and poorly-timed trades, and cyclical trends.

Reviewing your annual fees and returns report, and asking questions of your adviser, are important in testing, and hopefully confirming, your personal investment narrative. Be honest with yourself, even if nobody around you is.

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Tariffs are dominating the headlines, and investors are understandably concerned. President Trump recently suspended his plan to impose tariffs on Canadian imports into the U.S. until early March, but uncertainty remains. In this Coffee Break, we break down what tariffs mean for the Canadian economy, key industries, and your investments with Carolyn Kwan, Portfolio Manager at Connor, Clark & Lunn (the manager of our Income Fund and Savings Fund).

Retirement isn’t an ending; it’s a transition into a new phase of life filled with purpose, joy, and new opportunities. In this Coffee Break, we’re joined by Don Ezra, a former pension consultant and author of Life Two. Together, we explore the psychological and practical questions that arise during this stage of life. Don always offers great insights and tips on how to redefine retirement, and shines in this video.

by Tom Bradley

On her hit What’s Love Got to Do with It, Tina Turner could’ve been singing to an audience of investors. Investing is loaded with emotion. There’s no way around it because markets are volatile and regularly go to extremes.

The problem is, emotion isn’t good for investing. It clouds your judgment, causes you to ignore facts and may prompt you to act without understanding what you’re buying.

I’ve come to recognize the signs of unconditional love. It’s there when everyone is talking about something, including your cab driver and hairdresser. When the new thing is purported to represent a lasting secular change as opposed to a cyclical bump. And when there’s an air of confidence that makes you feel like you’re missing out.

The most reliable indicator of love is a valuation based on something other than profits. During the early days of the internet, it was eyeballs. When cannabis caught fire, it was square feet of planting. And when resources such as oil and gold are hot, it’s production growth. These can lead to future profits, but there’s no guarantee.

And don’t forget that love is blind. When investors fall for something, they often don’t know what their return is. They know the yield on a GIC or the return of an ETF, but they can’t tell you how they’ve done investing in their new love.

Some investment categories are more prone to emotion than others.

Dividends

People love their dividends – and for good reason. They provide a steady and growing income and bring fiscal discipline to a company’s management.

But too much love can turn an investor’s decision-making process upside down when their No. 1 (and maybe only) criterion for buying a stock is its yield.

Yield is a measure of value for bonds and GICs. The higher the yield, the better the expected return. That’s not the case for stocks, which are valued on the expectation of future profits (which are partially paid out as dividends). An investor’s decision hierarchy needs to reflect this.

If you want a dividend portfolio, set a minimum yield that you’ll accept – say, 3 per cent. Then focus on acquiring a diversified group of companies that are positioned to maintain or increase their dividends and, here’s the clincher, are reasonably priced.

The dividend threshold narrows the list of potential investments but is no excuse for an undiversified portfolio.

Real estate

You’ve heard it said, or perhaps said it yourself, “You can never lose on real estate.” That sounds like love to me.

Where’s the problem? Love-struck investors can be sloppy with the numbers. They’re too optimistic about rents and don’t account for all expenses. A property needs to produce an income. If it doesn’t, it’s simply a bet on higher prices, which requires impeccable timing and a strong housing market.

Let’s say you buy a property for $500,000 and sell it 15 years later for a million. That’s an average annual return of 5 per cent (before real estate commissions and leverage). Without positive rental income (after expenses, depreciation and taxes), that’s not enough return for the risk and trouble. Using a mortgage dials up the appreciation potential but adds to the risk and reduces the income.

The other place where love for real estate shows up is in asset allocation. Some investors have a net worth pie chart that’s dominated by local real estate. It’s a huge bet on one asset class in one economy, overwhelming the financial assets in their RRSPs and TFSAs.

Income properties can be an excellent investment. They provide a steady income and are good diversifiers, but to keep the emotion in check you need to pay attention to valuation and size of allocation.

Gold and cryptocurrencies

I’m lumping the two together because they’re both priced by investor sentiment. It’s not about far-fetched measures of valuation because there are none. It’s all about love.

When being implored to buy bitcoin, I always ask: What’s it worth? If it’s $200,000 and trades at $100,000, I’m all in, but I never get an answer – just a vague statement about crypto being the future and/or a store of value.

Gold is similar. Gold bugs only have one recommendation. It’s a buy whether it’s trading at $1,000, $2,000 or $3,000.

There’s money to be made in gold and cryptocurrencies, and certainly real estate and dividend stocks, as long as you keep Tina’s words in mind: “What’s love but a second-hand emotion?”

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We're excited to share highlights from another extraordinary year. Stock and bond markets continued their strong performance from 2023. Clients with balanced portfolios enjoyed double-digit gains and all our funds posted positive returns.

Looking ahead, we encourage some caution given the outsized influence of a small group of stocks on overall returns (U.S. mega-cap tech companies). That said, our medium- to long-term outlook remains optimistic. In our year-end video, we update you on the firm, share our market outlook, review our performance, explain how your portfolios are built to handle today's market dynamics, and update you on our advisory services.

by Scott Ronalds

The Globe and Mail recently asked dozens of experts, including investors, economists, and business leaders, to choose a chart they think will be important to watch this year. Steadyhand Chair Tom Bradley was one of those asked for a submission. His choice, which was created with the assistance of industry veteran Dan Hallett, was published on the Globe’s website and is reproduced below, along with Tom’s comments.

Stock returns come from three sources: dividends, earnings growth and changes in valuation. The first two are reasonably steady over time, but valuations can swing wildly and are the main reason why markets are so volatile. The overall valuation of the market can be a detractor at times (as in 2022) or a big contributor, as it was over the past two years. The makeup of the 2024 S&P 500 Index return is typical of a good year. Dividends delivered and corporate earnings growth (after inflation) was excellent, but returns were overwhelmingly driven by expanding price-to-earnings multiples.

The makeup of the S&P 500’s 10-year return, however, is more unusual. Normally, periods of multiple expansion are offset by periods of contraction such that changes in valuation net out to zero in the return equation. To have valuation contributing 3.5% per year over a decade indicates that it’s been an unusually good ride. As investors enter 2025, they need to keep expectations in check, particularly when it comes to U.S. stocks. The next decade is unlikely to have the same valuation turbo boost as the last one did.

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Earlier this year, we highlighted the important TFSA, RRSP, and FHSA numbers for 2025 that investors should be aware of. In this Coffee Break, we dig deeper into the numbers with Certified Financial Planner Owen Winkelmolen. We also discuss some other key figures important to retired Canadians, including the updated CPP, OAS, and GIS benefits, to help you stay on top of your financial plan.

No explanation required.

Note: The above table shows the returns of our five long-standing funds: Steadyhand Savings Fund, Steadyhand Income Fund, Steadyhand Equity Fund, Steadyhand Global Equity Fund, and Steadyhand Small-Cap Equity Fund. The Steadyhand Founders Fund is not included in the table, as it was not launched until 2012. The Global Small-Cap Equity Fund and Builders Fund are also not included, as they were launched in 2019.Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

by Tom Bradley

To start 2025, I want to focus on the theme of this column: cutting through the noise.

More than ever, it’s easy to let the amount of information out there overwhelm you. At times it feels like the volume is turned up to 10, and everything is urgent. Some of it is important to how you live your day-to-day life. Some is fun and entertaining. But much of it is just clogging your neural pathways.

A sticky on my computer monitor quotes a Farnam Street newsletter and reads “Attention isn’t free. It’s the most valuable thing you spend.” With respect to your investment process, I have some suggestions about how you can allocate a larger share of your 2025 attention budget to where it will matter the most.

Finding time

First, you need to find time, and there’s some low-hanging fruit. In general, try to devote less to informational inputs that have little chance of being right and/or have no impact on your long-term returns.

Things like analyses of monthly economic data (that’s inevitably revised next month), the political machinations in Ottawa and Washington, the tone of the U.S. Federal Reserve chairman’s last interview, and short-term market moves and predictions.

You might find a few minutes every day and hours per month if you stop checking your daily portfolio value. Historically, stock markets are up about half the trading days, down a little less than half, and flat 2 to 3 per cent of the time. None of these outcomes are relevant to your results.

I’m not saying you shouldn’t pay attention to the news, but as an investor, you don’t want to be consumed by something that isn’t going to have an impact. In other words, be macro-aware, not macro-obsessed.

Allocating attention

The first place to gain more focus is where it all starts: saving. Putting money aside to invest is the most important input for wealth creation. The size of monthly contributions to your portfolio is key to how much financial flexibility you’ll have in retirement.

Saving isn’t something you think about daily, but finding the right balance between spending, paying down debt and investing deserves your utmost attention. The outcomes are profoundly different between holding appreciating assets that compound in value versus servicing loans (used to buy experiences and depreciating assets) that compound against you.

For capital already invested, your focus needs to be on how it will be diversified across asset types, industries, geographies, and currencies. Getting the right strategic asset mix, or SAM, should take priority over deciding which bank or tech stock to own. It’s by far the biggest dial on your investment dashboard.

At least once a year, you should review your SAM to see if it’s still appropriate. That means pulling everything together (bank accounts, investments, pension plans, and real estate) to see what your personal pie chart looks like. How much of your net worth is in GICs, bonds, stocks and condos? Is one theme, such as U.S. tech or Canadian banks, disproportionately large? These questions are especially important after dynamic periods in the market like we’ve just had.

Keeping an eye on fees is also important. As the CEO of your portfolio, you need to look at both sides of the ledger – returns and expenses. Your fees should be commensurate with what you’re receiving. If you’re getting a high level of advice and planning, a fair price is more than it is for someone who’s doing it all themselves.

CEOs also spend time evaluating their team, and you should too. It’s important to periodically assess your investment dealer or manager. Hopefully, the answer is "Yes" to the following questions. Is your provider well aligned with how you want to invest? Do you trust them to put your interests first? Are they charging a reasonable fee and looking for ways to reduce your cost of investing? And are they an expert in the most important investment factor: you. Do they know where your moral compass is pointing, what you’re trying to accomplish, and the idiosyncrasies of your investment personality? Whoever you work with has to dance to your tune.

Over all, there are easy wins in the battle for your attention. Spend less time on reaction and speculation and more on background and insight. Make sure you’re not skipping over important return drivers (saving, asset allocation, thorough monitoring) to get to the fun stuff (picking stocks, trading). And never forget, you’re the only one who can allocate your attention, a most precious and limited resource.

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by Tom Bradley

2024 was a great time to be an investor while at the same time being one of the most confusing and noisy years I can remember. If you’re like me, you may be looking for a retreat from the holiday mayhem, AI mania, Ottawa and Washington upheaval, and Taylor Swift hangover.

I have a suggestion. Open your client statement and go to the picture in the bottom right corner of page 3. You know it. It’s a simple chart with two lines. The black one indicates the net amount you’ve invested in your Steadyhand accounts and the blue one (with the shaded area underneath it) is the market value. The difference between the two is what your money has earned.

Sample Client Statement Performance Chart

It’s a picture worth at least a thousand words, including these calming takeaways.

The 8th wonder of the world – That’s what Albert Einstein called the power of compound interest. If you’ve been with us a while, the picture illustrates his point. Sticking to a plan and giving it time to play out is indeed powerful. As the adage goes, ‘investing is about time in the market, not market timing.’

Nonlinear – The blue line trends toward the top right corner of the chart but there are lots of zigs and zags along the way. I’ve heard Lori Norman, one of our Investor Specialists, describe it to clients as “nonlinear”. That’s for sure. It’s not a smooth path and you shouldn’t expect it to be.

Foggy memories – The chart serves to cloud your memory of what previously happened in your portfolio. In a good way. The reasons for the dips, that seemed so important and defining at the time, are now just vague memories, or completely forgotten. Was it that banking crisis thing in the U.S., the shooting down of a Chinese balloon, or was it something said at the economists’ confab in Jackson Hole. Whatever it was, it appears to have been inconsequential.

Benefits of steady – Rudyard Kipling had it right when he said, “If you can keep your head when all about you are losing theirs …” (from If: A Father’s Advice to His Son). In a gunfight or hockey game, great instincts and quick reactions are invaluable (and perhaps lifesaving), but in investing, rewards come from doing exactly the opposite, keeping your head and staying steady.

I hope you can go forth in 2025 with a renewed sense of calm. And if you feel it slipping away, pull up your latest statement on steadyhand.com, or call 1-888-888-3147 for a calming voice.

I encourage you to read the rest of our Q4 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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A legacy or estate planning binder is an essential tool for executors. In this Coffee Break, estate lawyer Lucy Main explores the concept of a 'death binder', detailing the essential documents to include and providing tips on how to organize and maintain it effectively. Lucy is a Partner and Co-Chair of the Wills, Trusts and Estates Practice Group at WeirFoulds, with a practice that focuses on the legal and taxation issues surrounding estate and trust planning. She's an excellent resource on the topic and we're thrilled to chat with her again.

For more estate planning tips and insights, check out our previous video with Lucy and fellow subject matter expert Julia Chung.

by Tom Bradley

There are many who liken investing in stocks to going to the casino. I vehemently disagree (growing wealth by owning a diversified portfolio of companies is hardly gambling), but the tactics of many traders (I can’t call them investors) are indeed getting to be casino-like.

Investing is about reward and risk. The two find a balance over time but as 2025 starts, traders are heavily favouring the reward side. They can’t get enough of the strong stock market. The degree of speculation, in stocks and elsewhere, now rivals the go-go periods of 1999 and 2021.

As I noted in a recent post, it shows up in crypto (the more exotic the better), artificial intelligence, the Trump Bump (everything he’s going to do will be great for stocks), stock valuations, Judy Garland’s ruby red shoes from The Wizard of Oz selling for $28 million, and as per the chart below which shows options trading volumes, the activity of individual investors (my apologies, I can’t remember the source).

It’s no longer enough to own a volatile stock. Active traders are looking for more leverage through the use of options. Volumes have gone through the roof, and that doesn’t tell the whole story. Most of the growth has come from same-day options which are closer to buying a lottery ticket or betting on Austin Mathews’ next goal than they are to investing.

When things get this hot, our fund managers tend to get more cautious. This doesn’t mean avoiding stocks but rather looking for opportunities in the unloved areas of the market, keeping an eye on the bottom line (company profits), being mindful of valuations, and staying well diversified.

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by Scott Ronalds

As we step into a new year, it’s timely to highlight a few important financial numbers for 2025.

TFSA contribution limit: The maximum contribution limit for Tax-Free Savings Accounts this year remains at $7,000. This brings the total lifetime cumulative contribution room to $102,000 for eligible investors. TFSAs offer a valuable tax break that all investors should take advantage of. Last quarter, we discussed just how powerful a tool these accounts have become in our article, The eye-opening difference of using your TFSA for investing vs. saving.

RRSP contribution limit: The maximum you can add to your Registered Retirement Savings Plan this year is the lesser of 18% of your 2024 earned income or $32,490 (unless of course you have unused contribution room from previous years).

If you’re unsure which account is best for you, our TFSA vs RRSP Calculator can help.

FHSA contribution limit: For those saving for a first home, you can contribute $8,000 to a First Home Savings Account (FHSA) in 2025. However, if you opened one of these accounts last year and didn’t maximize your contribution, you can carry forward any unused contribution room to this year. For a refresher on the rules and benefits of these accounts, check out our guide.

As a reminder, you can contribute to your accounts with us by calling 1-888-888-3147 between 7am and 5pm PT, Monday to Friday. We can electronically transfer money from the bank account we have on file to your Steadyhand accounts.

Happy New Year!

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by Scott Ronalds

We’re excited to announce that our popular Transfer Fee Reimbursement Program is back — this time permanently! Starting January 1st, you can say goodbye to transfer fees.

Why we’re doing it

Our limited time program over the last two summers was a big success, and a good reminder that investors really hate transfer fees. And so do we, which is why we’ve never charged them on our end. So, we’re rolling out our transfer fee reimbursement program on a full-time basis to improve your investing experience and ease the burden of moving an account.

All investors are eligible for the program, but the details are slightly different from our previous limited time offers.

How it works

Transfer an account(s) to Steadyhand worth $50,000 or more and we’ll reimburse the transfer fees, up to $150 plus tax.

To receive the fee reimbursement, you must provide us a copy of your account statement(s) showing the transfer fee(s) charged, within 90 days of us receiving the transfer proceeds.

All transfer fee reimbursements will be in the form of Steadyhand fund units (based on your chosen allocation) and will not impact your contribution room for registered accounts (such as an RRSP or TFSA). In other words, if you are charged $150 in transfer fees, you will receive $150 in Steadyhand fund units in your applicable account with us.

The finer details

• You must be charged a transfer fee from your other institution to qualify for a fee reimbursement. 

• The minimum transfer requirement is $50,000 per transfer. If you are transferring multiple accounts, each must be for a minimum of $50,000 to qualify for the reimbursement. 

• The total maximum fee reimbursement per transfer is $169.50 ($150 plus tax). 

• All account types qualify (e.g., RRSPs, RRIFs, TFSAs, non-registered accounts, corporate accounts). 

• There is no limit to the number of accounts you can transfer which qualify for the fee reimbursement. For example, if you transfer five different accounts (each worth a minimum of $50,000) and are charged $150 for each transfer, we will reimburse you $750 (plus taxes). 

• You must provide us a copy of your account statement(s) showing the transfer fee(s) charged, within 90 days of us receiving the transfer proceeds. 

• We will reimburse all eligible transfer fees within 90 days of receiving a copy of the transfer fees charged. 

• Any assets transferred to us must remain in your Steadyhand account(s) for the balance of the calendar year, or the fee reimbursement will be fully clawed back. 

• We reserve the right to terminate the program at any time.

We hope this permanent program makes transferring your account to us easier. If you have any questions, please reach out to us at 1-888-888-3147 from 7:00am to 5:00pm PT Mon-Fri. We pick up our phone promptly!

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by Tom Bradley

Vancouver City Council voted recently to explore accepting payments through bitcoin. Earlier in the fall, Premier Doug Ford of Ontario dreamt (out loud) of building a tunnel under Highway 401. And the Leafs started the season with the second-best odds of winning the Stanley Cup.

These items sum up where we are on the fantasy-versus-reality spectrum. Certainly, for investors, the year of Taylor and Trump has seen a steady rise in speculation, risk-taking and, yes, dreaming. It’s like the euphoria of 1999 and 2021, but the mix is different. There’s no Pets.com, cannabis, NFTs or EVs, but there are plenty of other indicators.

Crypto is a big part of the speculator fervour. In hopes that president-elect Donald Trump will deregulate cryptocurrencies (or should I say, regulate them even less), bitcoin surpassed US$100,000 and lesser coins such as Dogecoin have skyrocketed.

It feels as if all the upside from the Trump election (deregulation, local benefits from higher tariffs) has been absorbed into stock prices, and little of the potential downside (trade retaliation, inflation).

Business icons in the president-elect’s inner circle, like Elon Musk, are riding high. Tesla is up 75 per cent since election night with the only news being about Mr. Musk’s pay package. Meanwhile, Trump Media and Technology Group has kept the meme stock craze alive. It’s valued at more than US$7-billion despite reporting revenue of US$1-million in the September quarter.

You might wonder why Truth Social and crypto-everything are indicators of speculation and risk. It relates to the absence of something to value. Investor excitement can drive up prices in the short term, but an asset must offer some utility and ultimately produce a profit for gains to be sustainable.

There are other areas that arguably look frothy. Artificial intelligence is one. AI does have utility and will have a profound effect on how businesses operate, but is also prone to hyperbole (this time around, companies are putting AI in their names instead of .com). The question is, will the excitement and huge capital and environmental costs be accompanied by a commensurate amount of sales and profit? Will AI produce incremental revenue, or just be a feature needed to justify the price of existing products and services?

Valuations of mainstream stocks and bonds are being carried along with AI and crypto. With a few exceptions, price-to-earnings multiples are above their historical ranges, and the risk premiums on high-yield bonds (the extra yield above government bonds) are at all-time lows.

Not surprisingly, people are optimistic. Investor sentiment, which is a contrarian indicator, is moving into bullish territory.

To sum it all up, this isn’t normal. Quite the opposite. So what is a steady, long-term investor to do?

First, dust off a few investing basics and stick them on your fridge. Tenets such as “price matters.” If you pay too much, a good asset will be a bad investment.

The daily price doesn’t determine value. Value comes from revenue growth and profits.

And the mood of investors can change on a dime. It can go from bullish (greedy) to bearish (fearful) in a matter of days. (Going from bearish to bullish takes longer.)

The stickies hopefully will remind you that investment fundamentals still matter.

Second, don’t be frustrated by the craziness, but rather, use it to your advantage. If you need to set aside money to do or buy something, or if you’re retired and need to top up your spending reserve, it’s a great time to do so. If you don’t, use the strength to rebalance your portfolio back to its target asset mix.

Third, if you’re speculating or chasing the next great thing, size the bet appropriately. Professional managers are methodical about how big their stock and bond positions are, and you should be, too. The pursuit of a theme such as AI or crypto should be done in the context of a diversified portfolio.

And finally, don’t speculate with money you’ll need in the next three to five years. If it absolutely needs to be there, it’s not appropriate for riskier, long-term investment.

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Unlock the power of charitable giving with effective donation strategies that maximize tax benefits while making a meaningful impact. In Part II of our discussion with Aneil Gokhale, Director of Philanthropy at the Toronto Foundation, we dive into actionable ways Canadians can elevate their giving, from leveraging donor-advised funds to gifting appreciated securities.

Whether you're starting your charitable giving journey or planning a tax-efficient legacy, this video provides the insights and strategies you need to give smarter and more effectively.

by Tom Bradley

In the next few weeks, your newsfeed will be filled with predictions about 2025. Emerging trends. Stock market targets. Impact of government changes.

Before you take the time to read any of them, I implore you to look at these two pieces, both of which are from commentators that we like and value. The first is Ben Carlson’s ‘A Wealth of Common Sense’, in which he reminds readers that while market forecasts are mostly up and always single-digit, “Double-digit moves in both directions are the norm. In fact, in 70 of the past 97 years, the U.S. stock market has finished the year with double-digit gains (57x) or double-digit losses (13x).”

The second read is from Joe Wiggin’s Behavioral Investment newsletter. His latest piece is all you need to read at year-end … any year-end. He sums up what will be in a majority of the forecasts. My favourite item on his list is: – “The traditional approach to portfolio management might not work anymore: Just in case a reader is investing in an old fashioned, unsophisticated way.”

For a happy and fulfilling holiday season, I suggest a good book rather than subjecting yourself to the fire hose of articles about how 2025 is going to turn out.

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Charitable giving offers many benefits beyond just tax credits. It can enhance your happiness and help support causes that matter to you. In this Coffee Break, we chat with Aneil Gokhale, Director of Philanthropy at the Toronto Foundation, about how Canadians can make their charitable giving more impactful.

We explore the role of community foundations, the distinction between foundations and charities, and the ways in which giving connects us to our communities. Aneil also shares insights from the Toronto Foundation's Vital Signs Report, discusses how families can engage in meaningful philanthropy through donor-advised funds, and explains how aligning your values with your giving can create real change.

by Scott Ronalds

Last month, we hosted a lunchtime investment discussion with Nessim Mansoor, the manager of our Equity Fund. Nessim shared insights into his investment approach and discussed several of the fund’s holdings.

We’ve held similar events in the past, “pre-Covid”, and wanted to gauge interest in face-to-face events again now that virtual meetings have become so popular.

Your participation confirmed there is still a strong appetite for in-person events. We plan to host more of these sessions in the future, with the next one scheduled for Vancouver in February. Connor, Clark & Lunn’s Carolyn Kwan (the manager of our Income Fund and Savings Fund) will lead a discussion on interest rates, inflation and all things bonds. More details to come.

For those who were interested in Nessim’s discussion but couldn’t attend, here’s a recap of the key topics.

A new U.S. president and potential tariffs

“The companies we own have been through recessions; they’ve been through all sorts of tough times.”

Many investors are curious how President-elect Trump’s return to the White House might impact our investment decisions. Nessim explained that the impact is expected to be minimal. His team focuses on building a portfolio of strong businesses with good long-term track records that have done well regardless of the administration in power.

A prime example is S&P Global. The company provides credit ratings, market data, and analytics to a wide range of industries. With roots dating back to the 1860’s, S&P Global has thrived through many presidencies and economic policies. Its success is due to the high value it provides to customers and its expertise in what it does. Moreover, S&P Global operates in an industry with very few competitors and high barriers to entry (building 160 years of trust and expertise doesn’t come easy). So regardless of who is in the oval office, the company remains well positioned to succeed.

Turning to tariffs, where there is perhaps the most uncertainty, Nessim doesn’t foresee widespread impacts on our holdings. This is because we don’t own a lot of companies that are shipping physical goods to the U.S., like auto supplies, oil, or lumber.

Rather, our Canadian investments that conduct meaningful business in the U.S. tend to operate in the service industry. Examples include Thomson Reuters and CGI. Thomson Reuters is the world’s largest supplier of legal software and generates three-quarters of its revenues in the U.S. but doesn’t ship anything across a border. Likewise, CGI is a software company that has business contracts with the U.S. government but isn’t moving nuts and bolts potentially subject to tariffs.

Two exceptions are our railroad holdings, CN Rail and Canadian Pacific Kansas City. Both companies transport goods across the border and would be affected by tariffs or a trade war. Yet, because the talk is still aggressive rhetoric at this point, it’s difficult to forecast any potential impact. Of note, the two companies’ operations and earnings weren’t significantly impacted during Trump’s previous term.

Focus on companies that provide compelling value to their customers

“We look for companies with durable competitive advantages and strengths that will endure over time.”

A key trait that Nessim looks for in a business is an edge in the value proposition it offers its customers. Dollarama, Costco, and TJX Companies are examples.

• Dollarama: Known for its low prices and operational efficiency, Dollarama has doubled its revenues and quadrupled its net income over the last decade without spending a dime on advertising. How? It offers great value. What it sells is 30-50% cheaper than anywhere else. Dollarama is obsessed with low prices and is very shrewd about sourcing products. Management is also smart with real estate: the company has figured out a formula for fitting stores anywhere.

• Costco: The bulk retailer has an obsessive focus on lower prices; it’s the source of its competitive advantage. The company has doubled its revenues over the last 10 years and tripled its net income. Its balance sheet is rock solid, with no net debt. Half of its operating earnings come from membership fees, which is a powerful recurring revenue stream, so it can afford to take lower margins on its products. And with 900 stores globally, the company still has lots of room to grow. 

• TJX: The parent company of Winners, Marshalls, HomeSense, and TJ Maxx is the world’s leading off-price retailer for apparel and home goods. Like Dollarama and Costco, it offers great value and has been very astute and flexible on how it sources products (it taps 21,000 vendors across four countries and has a very sophisticated supply chain). The company has grown its earnings per share by more than 20% per year for decades and has maintained a consistent culture. When you walk into a TJX store, you always know it will be good value.

All three stocks have performed well this year, rising 30-50%.

A few words on debt

“We don’t like debt.”

Nessim prefers companies with low or no debt. Examples include Microsoft, S&P Global, Costco, and Keyence, all of which have more cash than liabilities; while Constellation Software and CGI are examples that have very little debt.

This bias is rooted in Nessim’s approach, which favours businesses that have proven they can operate well regardless of the prevailing interest rate environment.

Weaker performers

“We don’t like to make knee-jerk decisions, because we never want the stock price to tell us what we should do. That’s a recipe for buying high and selling low.”

While the fund has had a solid year since Nessim took over in January, not everything has worked out.

Nestlé and McDonald’s are two holdings that have struggled due to aggressive price increases that alienated customers. The question Nessim and his team ask when a company has a misstep is, “What are they doing about it?” In other words, does management understand where they went wrong, and are they taking action? In both cases, the answer is yes. McDonald’s is going back to its popular value menu, and Nestlé fired its CEO, replacing him with a long-time executive who knows the company culture well. Nessim is cautiously optimistic that both companies can right the ship but will be keeping a close eye on their results.

In situations where questions arise over whether an investment thesis on a stock is still intact, Nessim will have one of the analysts on his nine-member team conduct a fresh review. Sometimes, a fresh set of eyes can reveal faults about a company that may have been missed or overlooked. “We try to never keep our head in the sand”, is the mindset.

The Equity Fund’s place in your portfolio

As a reminder, the Equity Fund is a core component of the Founders Fund (20% of the portfolio) and Builders Fund (35%). You can always view its performance, composition, and latest commentary on our website.

If you have any questions about the fund or how it fits into your portfolio, please contact us at 1-888-888-3147 or book a meeting with one of our Investor Specialists.

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by Tom Bradley

Stock markets are booming and there seems to be an unquenchable thirst for risk, but there is one area of the capital markets that’s in the doldrums. The market for initial public offerings or IPOs is dead.

It’s clink, clink, clunk. Company valuations are on the high side of normal, and in some sectors, investors are willing to pay well above historical levels. Clink. There is a backlog of companies that need to be sold by private equity (PE) funds. Clink.

But then the clunk. Very few companies are being brought to market.

Industry veterans like me remember a time when there were multiple IPOs every month. There was a regular flow of interesting companies that had outgrown their family roots and/or needed to raise capital. But that has changed to the point where Craig Coben of the Financial Times described the IPO market this way: “With these meagre volumes, many international IPO markets aren’t mere backwaters; they’re fast becoming parched riverbeds, cracked and barren where once capital flowed freely.”

There are several reasons for the slowdown. One is the severe hangover investors are experiencing since the bust of the 2020-21 IPO boom. Most of those stocks are still trading below issue price.

The trend toward passive investing hasn’t helped either. Index funds don’t buy IPOs (the companies aren’t yet in an index) and there are fewer active funds that do. And with the continual consolidation of the asset management industry, most active funds are now too big to consider investing in a new issue.

But the biggest factor by far is the growth of private markets. Well-capitalized private equity funds now give potential IPO candidates another option. They can stay private, for which there are many advantages. It avoids the high cost of being public and lessens quarterly-earnings pressures and ESG (environmental, social and governance) scrutiny. Management is able to restructure and invest in businesses away from the shareholder and media spotlight, and can fund it using liberal amounts of debt, which in turn, reduces taxes.

The question is, what happens when PE funds get near the end of term and are required to return capital to unitholders (most have a 10-year life with the option of two or three one-year extensions). They must sell companies in their portfolios using one of three channels. They can take them public, sell to a strategic buyer, or sell to another fund (which is known as passing the package).

Strategics, as they’re called, are other companies that operate in the same business and want to expand through acquisition (i.e. a tool maker buys another tool maker to broaden its product line or expand into new markets). These sales, as well as IPOs, are the ultimate arbiters of price. The value of the company and success of the private journey is determined.

When PE managers transact with each other, however, the outcome is less clear. Did the seller get full value for the package, or did the buyer get a great deal? It’s one way or the other, but not both.

Now, back to the moribund IPO market. What’s needed to get it flowing? Would better markets do it? Well, as noted, things are about as good as they can get. Do we need more quality companies to take the plunge? No, the supply of candidates is deep. In North America, there have to be 50-100 companies ready to be public, if not more.

Perversely, the people who are complaining about (and wishing for) an IPO market are the same ones who control the flow. After scooping up most of the companies that might previously have gone public and taking many public companies private, PE managers now control the IPO market. They can turn on the tap in a heartbeat.

The reason they haven’t is simple. It’s a matter of price. PE funds want more for their holdings than public investors are willing to pay. PE sellers want full credit for the growth potential and desperately want to avoid a down round (a price below the last round of private financing). Their returns and future sales depend on it. Unfortunately, public equity buyers want some upside too, as well as a discount that recognizes the risk they’re taking a la 2020-21.

It’s not too late for the IPO market, but if private asset owners are going to hit the public bid, they’d better get started soon while conditions are favourable. The next few months will tell the tale.

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Are you confused about the recent Canada Pension Plan (CPP) enhancements? In this Coffee Break, advice-only financial planner Jason Yee breaks down the changes and their impact on your retirement planning. Jason walks through the enhancements, explains who benefits most from them, and discusses what it means for employees, self-employed individuals, and employers.

by Scott Ronalds

The Globe and Mail has been running a series of articles on TFSAs, including a feature called TFSA Trouncers, where they profile investors who’ve accomplished “incredible feats” with their accounts.

Rob Carrick highlighted a few numbers (obtained from Canada Revenue Agency) in a recent article that might make you envious. Two figures stuck out:

1. Twenty-nine investors have TFSAs worth $5 million or more. 

2. Over 300 investors have TFSAs with a value between $1-5 million.

Rob rightly points out, though, that you shouldn’t feel bad if your TFSA isn’t in the same league. To put the above numbers in perspective, there are over 17 million TFSA holders in Canada and 95% of accounts have a value under $100,000. Only 5% are between $100,000 and $200,000, and just 0.2% exceed $200,000. Further, those million-dollar TFSAs are likely the result of high-risk strategies not suitable for most investors.

Underutilization of TFSAs

One of my observations over the past 15 years about these accounts (they were established in 2009) is that many people aren’t fully utilizing their potential. The above numbers suggest the same. Many Canadians who have the means to contribute to TFSAs are using them as spending accounts or savings vehicles (holding low interest-bearing products) rather than investing vehicles, even when they have long-term goals in mind.

The name is partly to blame for this. They shouldn’t be called Tax-Free Savings Accounts, but rather Tax-Free Investing Accounts. Additionally, many people are either unaware that they exist or don’t understand how they work. Hopefully the Globe series will help change this.

What a fully funded TFSA looks like

In a follow-up piece, Carrick highlighted some numbers to illustrate what a TFSA might look like if you opened an account when they were first established, contributed the maximum allowable amount at the beginning of each year, and pursued either a balanced or growth approach.

• If you made 6% (after fees, compounded annually), you would have approx. $158,000 by the end of 2024. 

• If you made 7%, you would have $173,000. 

• If you made 8%, you would have $189,000. 

• If you made 9%, you would have $207,000.

In contrast, if you only held low-risk savings products in your account, such as a money market fund, you would have made around 1-2% per year, and your account would be worth roughly $110,000 (based on a 1.3% compound return, which is what the Morningstar Overnight Cash Index returned over the period). The difference between using a TFSA for saving versus investing is significant.

Your return will depend, of course, on your investment strategy and ability to contribute each year. The point of highlighting these numbers is to emphasize just how powerful a tool these accounts have become. If you and a partner both have growth-oriented accounts and have maxed out your contributions every year, you could have over $350,000 tax-free.

The key benefit: tax-free

Let’s turn to those last two words. The key benefit of TFSAs is their tax-free status. I thought it would be interesting to share some numbers on this, using a real account at Steadyhand for illustration.

The account in question has a growth focus and is comprised of our four equity funds. The client has contributed the maximum annually ($95,000 in total), and the account’s current market value is approx. $185,000 (representing an annualized return since inception of 8%).

If they decide to sell today, the client will have saved almost $25,000 in taxes over their holding period, assuming they’re in the highest tax bracket* (we break this down in the footnote).

Make the most of your account

Diligently contributing to your TFSA can lead to substantial tax savings that will continue to grow over time. If you’re unsure whether you’re making the most of your account, don’t hesitate to reach out to us, we’re here to help.

*Over the past 15 years, the holder has received $32,850 in distributions (as a reminder, these are the realized capital gains, dividends and interest income that the funds distribute to unitholders every year), which have consisted primarily of capital gains and dividends. The holder would have paid around $9,000 in taxes if these distributions were not tax sheltered. At the time of sale, the capital gain would be roughly $57,000 (the distributions over the years are added to the investor’s cost base, which serves to reduce the eventual capital gain). The tax payable on this would be approx. $15,000.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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by Tom Bradley

I gave in. I couldn’t stand it any longer. Everyone was doing it. No, I didn’t buy Nvidia. I started doing Wordle. And if it doesn’t take too long (ugh), I also play Connections.

For this column, I’m going to skip Wordle and ask you to play Connections with me. The investment version. For those who’ve never played, the rules are simple. You have 16 words — which appear in the above chart — and the task is to find the four groups of words that belong together.

Note: If you’re hard core, skip the next paragraph where I provide the categories in advance.

For those new to the game, the categories are: boring basics; lots of attention, little impact; too hard; and important but overlooked. Before I give you the answer, stop reading and see if you can find the four words in the chart that belong in each category.

Boring basics. A plan isn’t the most exciting aspect of investing, but it’s important. Without a road map, you can’t expect to get to your destination. Part of any plan is an asset mix that fits best with your goals, time frame and capacity for volatility. It’s the biggest dial you have on your investment dashboard for balancing risk and return. Speaking of risk, it’s the fuel that generates a return in excess of the risk-free rate. It works as long as you give it time. Get-rich-quick schemes are tempting but dubious. Time in the market with an appropriate asset mix is how wealth is built.

Lots of attention, little impact. Economists are media darlings based on the assumption that the direction and pace of the economy dictates where stock markets are going. Wrong. In the short term, the two are totally unrelated. Meanwhile, the business media (and economists) hang on every word from the U.S. Federal Reserve even though Fed moves are only important for a few moments of every cycle. Banter about a quarter-point rate cut is just noise. Elections can be one of the most emotional topics for investors and one of the least consequential to portfolios. Okay, maybe not the least consequential — that would be watching the ticker tape (or the daily value of your portfolio), which is totally random and risks taking you off your long game.

Too hard. And perhaps too dangerous. Warren Buffett has a “too hard” pile on his desk which is full of companies that are difficult to understand. The rest of us are well advised to follow his lead and stay within our circle of competence. Some things are even too hard for the pros, or aren’t even possible to understand. Market timing goes in the pile. It would be hugely valuable if it could be done, but it can’t. At least, not consistently enough to be useful. If you think getting out at the right time is hard, try getting back in. You can win big if you add leverage to your portfolio but investing on margin only works if you can stick with it, especially when stocks are down and you’re underwater on your loan. Options are in the same category. They too can juice returns, and in the hands of professionals are useful for managing exposures and risks, but buying naked options, well, leaves you naked. Index-linked notes are the banks’ most despicable product. The pitch: you get to participate in the stock market with no chance of losing money. The reality: after they strip out the dividends and create a Byzantine formula for how you participate, the bank is the only one ensured of making money.

Important but overlooked. Valuation is the most important factor on the road to success and yet it’s often overlooked by investors and commentators. The price you pay for anything determines whether it’s a bargain or not. Investing is no different. Sentiment, or the mood of investors, has an impact on how attractive valuations are, and is a valuable tool for measuring risk. When everyone is bullish, it’s time to get cautious, and vice versa. China is a huge part of the world economy and will shape how the next decade plays out. And closer to home, too many Canadians don’t know how much of their return is going to their adviser or portfolio manager. Make sure you’re getting value for the fees you’re paying. Investing shouldn’t be part of the sharing economy.

How did you do?

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by Scott Ronalds

If you’re a do-it-yourself investor and you’re getting up in years, succession planning may be on your mind.

Or at least it should be, according to Dan Hallett, an industry veteran who penned an article on the topic in the Globe and Mail recently. In his piece, Dan suggests that investors who manage their own portfolios could unintentionally be leaving a big burden on their family if they predecease their spouse or partner.

Often, the beneficiary(s) has little knowledge of the holdings in the portfolio, and little skill or interest in continuing to manage them on their own. Not knowing where to turn for help can make the task overwhelming.

For the DIYers out there, Dan offers some suggestions and strategies to ease the future burden on loved ones. The obvious one is to engage with an investment partner before that person or firm is needed. Yet, transferring your assets and giving up what may be a rewarding pastime (picking your own stocks) could be an unappealing option for many self-directed investors. Plus, it could trigger unwelcome tax liabilities.

The strategy that I found especially practical is to consider moving some of your registered assets (RRSP, RRIF, TFSA) to a trusted adviser or firm. This allows you to introduce a new financial partner to your family, while continuing to self-manage a portion of your investments, if you choose. And as Dan notes, “If it doesn’t work out, you can terminate [the relationship] and start again with no tax consequences.”

Portfolio succession planning is becoming an increasingly important topic among retired Canadians. As our population ages, this conversation is only set to grow. Many individuals in their 60s, 70s, and 80s have shared with us that their interest in managing their own investments is waning, their capacity to do so is declining, or they’re worried about the complexities that may arise if something happens to them (see Note from an octogenarian: What can you do for me?).

If you can relate, we invite you to reach out for a conversation. Financial advice is a key part of our offering, and we help many families with their retirement planning needs. Moreover, you can get started with us for as little as $10,000, allowing you to ‘dip your toe in’ with one of your registered accounts.

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In this Coffee Break, we chat with Brett Martinson, a seasoned financial planner with Parallel Wealth, about some of the pressing financial concerns of Canadians in 2024. From political and market uncertainties to inflation worries, Brett shares helpful insights on how he guides clients through economic turbulence and financial planning challenges, especially when it comes to retirement goals and family assistance. Brett also touches on crucial decisions like helping adult children with down payments and the importance of incorporating legal advice in financial planning.

by Scott Ronalds

The project was called Advice 2.0. An outdated moniker admittedly, but descriptive and functional. Plus, it was only an internal name. We would save our literary efforts for the final product.

The initiative, started earlier this year, was all about better communicating the scope of our advisory services. We’ve always provided advice at Steadyhand, but many clients and interested investors were unaware of all that it entails. We wanted to change that.

I’m happy to report that Advice 2.0 has come to life.

So what’s new? We’ve made changes to our website to more clearly outline how we work with clients and the extent of advice we offer. More specifically, we’ve created a new section called Services. Don’t be shy, give it a click.

You may not have been aware that we offer personalized advice on important issues such as asset mix, tax efficiency, and retirement income planning. Or that we aim to incorporate any other financial assets, pensions, and debt you may have into your plan. This is now laid out more explicitly on our site.

It’s here that you’ll also find all the tools we offer, including personal finance calculators and portfolio building tools. And our Retirement Withdrawal Program, launched last year, now has its own dedicated page. Many investors have praised this program, which helps retirees draw a steady income from their portfolio.

The advisory services we offer are included in the fees of our funds, which remain among the lowest in the business. If you haven’t yet taken advantage of our advice, we encourage you to do so — our online scheduler allows you to book a meeting with one of our Investor Specialists. After all, everyone can use a little steady (see, there’s that literary effort).

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by Tom Bradley

Of all the opportunities and risks that investors face, U.S. politics seems to elicit the strongest views, and most intense emotion. Many investors believe the coming election is a huge risk to their portfolio. Depending on their point of view, their net worth is going to take a hit when Harris or Trump wins.

I’m not going to wade into the election discourse, but rather use this moment in time to discuss the most misunderstood term in investing — risk. I’ll start by discussing what’s not risk.

Risk isn’t what the media is obsessing about. Yes, an election, or looming announcement from the U.S. Federal Reserve, is an uncertainty, but it isn’t a risk to your portfolio. That’s because it’s in plain view and has been factored into exchange rates, bond yields and stock prices. The market is like an oddsmaker. It doesn’t always get the call right, but rest assured, it hasn’t overlooked the issue.

Carl Richards, a financial planner and author, makes the point this way, “Risk is what’s left over after you think you’ve thought of everything.” The risks (and opportunities) that are going to move markets are not yet in the headlines and may not be receiving coverage at all.

While the election is getting all the attention, there is a myriad of other market forces working away in the shadows. For instance, yields rose in recent weeks, supposedly owing to inflationary policies of the candidates, but there were other important factors at play, including stronger-than-expected economic data.

And while macro mavens puzzle over polls and campaign promises, companies keep growing, innovating, and allocating capital to where they find the best opportunities. If the U.S. becomes less desirable to invest in after Nov. 5, management will turn their focus to other parts of the world that will be more desirable.

Risk also isn’t market volatility. It’s ridiculous how much attention the market’s zigs and zags get (and even more ridiculous that measures of volatility are the main input in most risk-management models). Think about it. One day, declining interest rates are good for stocks because lower financing costs will boost profits and encourage deal making. The next day, lower rates indicate the economy is weak and we’re heading into recession.

A sports analogy is illustrative here. On his way to scoring 69 goals last season, Auston Matthews was held scoreless in 36 games (out of 82). Four times he failed to score for a week or more (he was twice blanked for four games in a row, and twice for three games). Is it a risk when the market indexes drop 3 per cent in a week on their way to providing a 9-per-cent annual return over 10 years?

The biggest reason risk is hard to understand, however, is that it’s personal. It’s different for everyone. It depends on your background, personality, financial circumstances, and stage of life. As I heard it described this week at a GMO conference, “Risk is not having what you need, when you need it.”

If you’re a long-term investor who is building wealth for retirement, urgent headlines and short-term volatility are irrelevant. Even longer periods of market weakness have little consequence for your future wealth. Risk for you, given your time frame, is failing to achieve a long-term return that meets your retirement goals (perhaps caused by not taking enough risk).

Alternatively, if you’re retired and drawing an income from your portfolio, extended market declines are a factor and must be managed. Market slumps can’t be predicted so you need to have secure sources of income to weather the storm. Your risk is being forced to draw on your long-term assets before they’ve had time to recover.

There’s a risk that I haven’t mentioned — permanent loss of capital as it applies to buying individual securities or pursuing specific themes. I’ve left it out because portfolios that are diversified across different industries, geographies, and asset types (cash, bonds, stocks, real estate) don’t face this risk. They don’t avoid market downturns but nor do they miss upside surprises. As a result, they’re assured of recovering to new highs. The only uncertainty is how long it will take.

So, before you assume that what others are concerned about is relevant to you, assess it against your goals, time frame, and portfolio. It may make watching the results on Nov. 5 a tiny bit less stressful.

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Thinking about who should be the executor of your will? Choosing the wrong person(s) can lead to complications for your loved ones and your estate. In Part II of our conversation with esteemed estate lawyer Margaret O’Sullivan, she highlights the biggest mistakes to avoid when selecting an executor and shares other invaluable estate planning tips.

For more of Margaret’s expert insights on the topic of executors, don’t miss Part I of our discussion!

by Scott Ronalds

Millionaire. It’s a label that evokes images of financial security and well-being. Popular culture loves it and is rife with references, from Who Wants to be a Millionaire? to Million Dollar Baby and Slumdog Millionaire. Even the west coast’s favourite hockey team was once named the Vancouver Millionaires.

Not surprisingly, the wealth management industry loves millionaires too. Seven-figure portfolios generate more fees than their six- or five-figure counterparts. So desirable is the millionaire client, in fact, that more and more investment managers and brokerages now require clients to have at least a million dollars to invest.

This trend is relatively recent, emerging over the last 5-10 years. While some firms offering investment solutions and financial advice maintain lower minimums (ours is $10,000), the industry has generally shifted towards higher thresholds.

Historically, investors with less than a million dollars could still access high-net-worth services (proprietary products, tailored advice, superior client care) through brokers or designated divisions at investment counselling firms. But today, more Canadian investors are politely being asked to find a new home if they’ve suddenly become a ‘non-profile’ client, which is industry jargon for those who don’t meet a company’s minimum investment requirements.

Other investors who have fallen below the new threshold are finding they’re not getting the service they’re used to.

There are reasons why a firm may no longer be able to profitably serve a client with less than a million dollars. Administrative, regulatory, and legal costs have risen. Salaries too. Planning services aren’t cheap, nor are upmarket offices. And half a million dollars isn’t what it used to be.

But it’s still a tidy sum. One that took time, hard work, and commitment to achieve. Regardless of the size of your financial assets or the stage of life you’re in, your money deserves a good home.

At Steadyhand, our goal has always been to offer a high-net-worth standard of investing to everyday Canadians. Indeed, we’ve built a cost-effective platform that embraces non-profile clients.

Don’t just take our word for it, though. Here’s what one of our clients has to say about their experience (via a Google Review):

I'm a pretty small investor, but I'm treated as though I have millions invested with Steadyhand. Besides the personal touch, they also know what they're doing — couldn't be happier with how my investments have done since day one. I can't recommend them highly enough. Don't think because you don't have a shed load of dough that they can't help — believe me, they can!

Millionaire or not, our door is open.

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by Tom Bradley

The headline of this column is purposeful. The idea is not to add to the noise but rather to help investors navigate through the firehose of information they face every day.

In the investing context, noise is information that will have little or no impact on long-term returns and isn’t important for making investment decisions. It may be interesting, entertaining and often have a sense of urgency, but it’s not going to affect the health of your portfolio.

I’m referring to economic statistics that bounce around from month to month, elections and political posturing in Washington and Ottawa, speculation about the next earnings report, comparisons to previous cycles, short-term market predictions and the U.S. Federal Reserve chairman’s body language. And then there’s the ‘the market was up/down today because of ______.’

You’ve probably noticed items like this fill your newsfeed. Information you won’t remember a week from now and that won’t be visible on a stock chart next month.

Of course, noise does have an impact. It increases trading. If it’s loud enough, it causes FOMO (fear of missing out), which in turn leads investors to chase past performance. And it transforms the important, lifelong endeavour of investing into a short-term game.

So, what should you pay attention to and what’s just noise? Joe Wiggins, director of research at St. James’s Place, a British wealth manager, offers valuable perspective. In a recent post on his Behavioural Investment blog, he has two key questions to help identify “harmful noise in financial markets.” Does it matter? And is it knowable?

Does it matter?

Will the information or views you’re reading have any impact on the long-term value of the companies in your portfolio?

Perhaps, but the most recent statistic or announcement carries an undue amount of influence, sometimes causing the media and stock market to overreact. New information can help analysts refine their forecasts, but is usually a single data point amongst a myriad of other factors and interactions.

There’s a good hockey analogy for this recency effect. After scoring two goals in the season opener, a left winger, who is a consistent 15-20 goal scorer, is suddenly expected to score 40 this season.

Economic statistics are a large part of the noise quotient, which makes economists rock stars in the investment world. These disciples of the dismal science are good at making short-term predictions on a variety of factors but rarely trained to link them to the stock market. They generally put too much weight on the direction of the economy, assuming a tight predictable connection for which there’s no evidence. The economy is more about this year. The market looks years ahead.

Is it knowable?

Is what someone is telling you possible to predict, and if so, is the person expert enough to do so? The investment industry is particularly prone to making confident pronouncements about outcomes that are impossible to predict. It’s particularly prevalent right now during the leadup to the U.S. election.

To many people’s surprise, long-term investment returns can be predicted more accurately than the periods just ahead. For a bond portfolio, the current yield is a reliable indicator of returns over the next 10 years. For instance, the current index yield of 3.7 per cent suggests investors can expect to earn 3 per cent to 4 per cent per annum over the next decade.

If you ask about next year, however, nobody has a clue. That’s because the other component of a bond’s return – capital appreciation or depreciation driven by changes in interest rates – is difficult to predict and at times can overwhelm the income component.

It’s similar for stocks. Of the three contributors to return, two are reasonably predictable for longer periods. Dividends are stable, and profit growth settles into a narrow range with time. The third input, however, is a wild card. Change in valuation can swamp the other two factors over shorter periods. That’s been the case in the last two years when expanding price-to-earnings multiples have been the main driver of higher stock prices.

Swings in valuation are hard to anticipate, making market forecasts suspect, no matter how reasoned they appear to be. Fortunately, like bonds, multiple expansions and contractions become a non-factor when spread over a longer time frame.

The next time you’re feeling overwhelmed by a flood of information from the media or your adviser, take a step back and ask the questions: Does it matter and is it knowable?

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by Tom Bradley

I received an email the other week from a client (who is a year shy of the 10-year club) that I wanted to share, with his permission. He describes exactly how we hoped Steadyhand would fit into our clients’ lives.

Hi Tom,

I always read your blogs, but this one particularly caught my eye. We have been "investing" for almost 50 years. When we pooled our "assets" they consisted of two cars with outstanding loans, student debt ($18/mo), consumer debt, and two good jobs. I don't remember the total except that it was bright red!

We dealt with the larger debt first and then began investing as we called it. First, the trader recommended by a work colleague; then the purchase of silver bullion when Nelson Bunker Hunt was trying to corner the market — only lost 50%; then the purchase of company shares from one of our employers — cost $8,000 to resign. Finally (or semi-finally), we landed with the brokerage arm of a bank and a long period of modest progress, punctuated by sudden lurches such as bailing out in the tech crash of 2000; did OK as far as stopping losses, but paralyzed us when it came to reinvesting.

Finally, we landed at Steadyhand in 2015 and have never looked back. We learned of you from a financial adviser/actuary friend who did extensive research on Steadyhand because, he declared to us, it looked too good to be true. Well, it wasn't, and it isn't. We now have peace of mind, decent returns and fabulous service. It's so much less effort this way.

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In this Coffee Break, we discuss the intersection of U.S. presidential elections and the stock market with Carolyn Kwan, a portfolio manager at Connor, Clark & Lunn Investment Management (the manager of our Income Fund and Savings Fund).

With the American election just three weeks away, we explore the historical patterns of stock market performance under Democratic and Republican presidents, and how different political parties influence economic trends. Carolyn also addresses the relationship between elections and market volatility, and offers practical advice for investors during election cycles.

by Scott Ronalds

It might surprise you to hear that bonds are up 13% over the past year (ending September 30). Even better, our Income Fund is up nearly 15%. To understand this welcome turnaround, a little recent history is helpful.

A rocky road post-pandemic

Bonds had a rough stretch coming out of the pandemic. Yields sat at rock-bottom levels throughout 2021 after central banks around the world aggressively cut interest rates to support ailing economies. Investors had soured on the asset class and the bond market turned in its first negative year since 2013, falling nearly 3% (as measured by the Morningstar Canada Core Bond Index).

Then, in the spring of 2022, central banks began raising interest rates to combat soaring inflation and overheated parts of the economy. The Bank of Canada increased its key policy rate from 0.25% in March to 4.25% by year-end. Bond yields rose across the maturity spectrum. The 10-year Government of Canada yield, for example, climbed from 1.5% to over 3.5%. These moves were massive in bond terms, and the market fell nearly 12% in the year, one of its worst showings in memory. It’s important to remember that when interest rates rise, bond prices typically fall (and vice versa).

But it was an extraordinary time in history. The global economy was essentially shut down for the first time, only to be supercharged by ultra-low rates. Inflation reached levels many Canadians have never seen, and central bankers were subsequently prompted to hike interest rates at a swift pace.

Stabilization and recovery

These rate increases began to slow last year, however, and bonds regained their footing. The market was up 6% in 2023, with all the gain coming late in the year (the index was up 8% in the fourth quarter) as consensus started to build that the rate hiking cycle was nearing its end.

The asset class has been solid this year too, up 4.1% so far, albeit all the gain has come in the third quarter, when the market was up 4.6%. This strong recent return, when added to the heady figure from Q4 2023, accounts for the stellar 12-month number.

The Bank of Canada cut its policy rate in June for the first time in over four years and has implemented two more cuts since (bringing it down from 5.0% to 4.25%). Bond yields have fallen commensurately. The Bank has indicated that more cuts are likely if the economy cools further and inflation continues to trend down towards its target of 2%. The U.S. Federal Reserve has indicated the same, although nothing is written in stone.

Outlook

This environment of easing interest rates bodes well for future returns. Indeed, over the medium term (five years), we expect bonds to return 4-6% per year.

With short-term rates declining, investors are earning less on money market holdings and GICs. If the fixed income portion of your portfolio is heavily weighted in these securities in lieu of bonds, it’s a good time to consider rebalancing. In our Founders Fund, we’ve increased our bond weighting in recent quarters with the improving fundamentals. Our weighting has risen from a low of 25% in early 2022 to its current level of 33%, which is just under our long-term target of 35%.

Despite the rough stretch, bonds are earning their keep again and balanced investors can feel good about the diversification and income benefits they provide.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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by Tom Bradley

In a recent Globe and Mail column titled The Loneliness of the Long-term Investor, I outlined the importance of having a strategy and routine that can be sustained for a long period of time. I suggested that it can be a lonely endeavour. The media implores you to make changes, friends boast of big stock wins, and unpredictable markets make it hard to sleep some nights.

Well, I want to clarify something. My loneliness piece was written for readers of the Saturday Globe, most of which aren’t Steadyhand clients. For you, it doesn’t have to be so lonely. Steadyhand is designed to make it much easier to execute on the four recommendations in the article that will build up your endurance and help with the loneliness. Let me explain.

Have realistic expectations. When times are good, we’re preparing clients for when they won’t be so good. We want you to be ready for the toughest time in the market cycle, when stock prices are down, and emotions are up.

Our favourite tool on the website is the Volatility Meter, which shows that every four or five years an all-equity portfolio will be down. For a balanced portfolio like the Founders Fund, it’s every 7-10 years (Founders has had two negative years since its inception in 2012).

If anything, we’re too much of a downer in our communications (me at least), which is lousy marketing to be sure, but it has kept our clients grounded and is a big reason why more top up their contributions than bail out when markets are scary.

Have a clear goal for each bucket of money. This is something our Investor Specialists do well. They know there are no right answers without understanding the purpose. Money invested to provide a retirement income decades from now is vastly different than money being set aside for a down payment.

Pursue a strategy you can sustain no matter what’s going on in your life. We only ask that you invest some time when getting started (we have lots of questions) and stay in touch with what’s going on. To help, our communications are easy to understand and have a regular rhythm; our approachable, knowledgeable professionals are available to answer questions and provide advice; and our core funds (Founders and Builders) make adjustments for you as needed.

Speaking of adjustments, we’ve done some rebalancing in the Founders Fund this year in light of the hot markets. We’ve trimmed stocks to stay close to our long-term target and edged up the bond weighting to reflect an improved fixed income outlook. We dig further into what we’ve been doing in our Q3 Report, which I encourage you to read.

And finally, make sure your support system is in sync with your approach. You want a steady hand when things are going poorly (see company name), not an easy off-ramp that throws you to the investment industry wolves. Industry studies show that investors don’t do nearly as well as the funds they invest in because they chase past performance, trade too much, and buy high/sell low. Our clients’ returns, on the other hand, closely track our fund returns. Our clients keep their goals in mind, stick to their plan, and have a shoulder to lean on along the way.

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by Tom Bradley

The stock market is doing what it does so well: climb a wall of worry. Investors have shrugged off higher interest rates, recession worries, tensions with China and commercial real estate problems. If your portfolio isn’t at a new high, it’s close.

In my last column, I talked about how tough it is to be a long-term investor, to build and maintain a portfolio through all kinds of weather. Today, the sun is shining and it’s hard to see this challenge, but perversely, it’s the best time to prepare for the not-so-good periods. You can make decisions from a position of strength, and your emotions are less likely to get in the way.

What you’re preparing for is doing the same things you always do, just in more hostile circumstances. Continue making regular contributions. Stick to the mix of cash, bonds and stocks that best fits your time frame and goals. In other words, prepare to be your average self.

It’s an important point. Doing the right thing in difficult times doesn’t require you to be brilliant, perceptive and fearless. You don’t have to be Warren Buffett and load up on stocks that are down. No, you need to do a few small things you’ve done many times before.

Even without the requirement of greatness, however, staying on course is no picnic. One of the most important things you can do to prepare is have realistic expectations of what it will be like. As a starting point, I’ve compiled a list of what you’ll be experiencing when the bear market hits (that is, when stocks are down 20 per cent).

The news will be gloomier. Earnings and economic reports won’t be mixed like they are now. They’ll all be bad. You’ll have to search for the positives because they’ll be obscured by the negatives.

Market analysis will be plentiful, but the quality will be poor. Bear markets are not a time to be definitive about anything, and yet commentators will feel the need to make predictions. The airwaves will be full of comparisons to previous cycles (all of them useless), and strategists will try to call the bottom by applying a market multiple to depressed earnings forecasts (usually overly bearish).

Valuation will be confusing. Valuation is my north star, but it too will give mixed signals. Resilient companies able to maintain their profits will see price-to-earnings multiples drop below the historical range and appear to be great buys. The best opportunities, however, may be cyclical companies that have seen their profits disappear and are trading at stratospheric multiples.

People will be swearing off stocks forever. Just as it’s hard now to see what’s going to get in the way of further gains, a recovery to new highs is equally hard to picture. Investor sentiment will be at the far end of the fear-versus-greed spectrum.

Investors will be confident in their negativity. The late Peter Bernstein said, “In calmer moments, investors recognize their inability to know what the future holds. In moments of extreme panic or enthusiasm, however, they become remarkably bold in their predictions.”

With this confidence, people around you will be taking big bets. I don’t mean buying risky stocks but rather selling and going to cash, which is the biggest risk a long-term investor can take.

You’ll be frozen. When you add it all up – the poor information, negativity and confusing indicators – it will be hard to act. The thought of buying something and losing more money will be crippling.

To be clear, doing nothing is not a bad result, and will be better than most other investors will be doing, but doing what you always do would be even better.

Bob Hager, my former partner and co-founder of Phillips, Hager & North, kept it simple. He made sure he was going back up with as much (or more) than he went down with. In other words, don’t absorb a market decline with 80 per cent of your portfolio in stocks and ride the recovery with 60 per cent.

To follow his advice, you’ll need to do some rebalancing by taking money out of things that have done well and putting it into the hardest-hit areas. You don’t have to do it all at once. There are times when boldness is rewarded, but in this case, baby steps are more realistic. To be sure, some purchases will occur before the market bottoms out, and some will be after, but success in bear markets is not about precision, it’s about getting it done.

So enjoy the sunshine, but don’t miss the opportunity to prepare for rain.

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by Scott Ronalds

At Steadyhand, we believe in investing alongside our clients — what we like to call “eating our own cooking.” We feel there’s no better way to prove a commitment to our investment philosophy and business approach, and ultimately our clients, than to put our money where our mouth is.

We go a step further by annually publishing our firm’s co-investment levels, which show how much of our personal assets we have invested in our funds. There are few firms in the business that disclose this level of transparency.

The latest figures are in, and we can report that every employee continues to have a significant portion of their financial assets invested alongside our clients. On average, the team has 82% of our financial assets invested in the Steadyhand funds (as of June 30th). In dollar terms, our employees and families have $47.8 million invested in our funds.

These figures highlight our commitment to aligning our interests with yours — we experience the same fund performance, client reporting, and fees that you do. And we receive no “insider perks” when it comes to costs; we pay the same fees you pay and enjoy the same discount program.

For a more thorough overview of co-investment and why it’s important, we encourage you to read our companion piece on the topic, Showing You the Money.

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It’s a question we get often, ‘How long will my money last in retirement?’ While there are many factors at play and an exact answer is impractical, there are some steps you can take, and forecasts you can make, to determine if you have enough. Investor Specialist Jeff Stashuk breaks it all down and introduces a simple Steadyhand calculator — aptly named Will the Money Last? — that can help you estimate the longevity of your portfolio as you approach this important life stage.

We’re excited to invite you to a special event featuring Nessim Mansoor, the manager of our Equity Fund. This “fireside chat” (minus the fireside) will take place in Toronto on Wednesday, November 13, at Queen’s University Smith School of Business’ downtown facility.

Details:

Date: Wednesday, November 13 Location: Smith School of Business (Simcoe Place; 200 Front Street West, 30th Floor) Time: Mingling and sandwiches: 11:30am; Discussion: 12:00 – 1:00pm

Our Chief Investment Officer, Salman Ahmed, will lead a conversation with Nessim, touching on a range of timely topics, including:

• The impacts of changing interest rates on stock prices 

• Reasons why Canadian stocks aren’t getting the same love as their U.S. counterparts 

• The complexities of valuing AI and technology stocks 

• Overlooked factors that investors should consider

The session will be a great opportunity to gain deeper insights into what Nessim and his team look for in a business, where they’re seeing opportunities, and areas of the market they’re approaching with caution. You’ll also have an opportunity to ask Nessim and Salman any questions you may have.

Please RSVP by November 8, as space is limited, and we will not be recording the event. Feel free to call us at 1-888-888-3147 if you have any questions about the session or would like to reserve your seat(s).

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by Tom Bradley

Investing is a marathon, not a sprint. It’s a hackneyed phrase but couldn’t be more true. What’s the good of racing past other runners at mile 10 only to hit the wall at mile 23 and stagger in.

Similarly, investing is a lifelong endeavour. It may well outlast your passion for the Canucks or Joni Mitchell. The more time I spend on investment committees and with individual clients, the higher I move the endurance factor on my list of investment criteria. Can a strategy and investment routine be sustained for a long period of time?

Morgan Housel, a partner at Collaborative Fund, says it well. Your objective shouldn’t be the highest return but rather the best return you can earn for the longest period of time.

Let me start with an example. If you’re a young investor with a multidecade time horizon, it makes sense to be 100 per cent invested in stocks. It’s undisputable that stocks provide the highest return over time. But there’s an important caveat. You must stay invested. You can’t waver, at least until you’re much older and have a need for income and stability.

Numbers are useful here. The strategy works brilliantly if you can stick to it when your $100,000 portfolio drops to $75,000 (before it goes to $200,000 and beyond). If you can’t, then another strategy with less volatility, one you can tolerate, will produce a better long-term return.

You get the picture. Being a successful investment marathoner is simple in concept but hard to execute. You need to accept some important and inconvenient truths.

For instance, down markets are the price of admission for long-term gains. Market timing and sector rotation are not viable investment strategies. Getting out of stocks at the right time is impossible to do consistently, and getting back in is even harder.

You need to do something that sometimes isn’t very appealing, namely, diversify. Owning a range of investments across asset types, industry sectors, geographies and currencies smooths the path of returns and more importantly, eliminates the possibility of capital loss. But it’s unappealing to many investors because it means owning things that aren’t doing well (but will help in other market environments) and not owning enough of what’s hot, including the stock your friend is (allegedly) making a killing on.

On that note, the amount of risk taken by that friend likely makes no sense for your retirement portfolio. A stock or fund that can double in a year, can halve just as fast.

And the news cycle is not there to help you achieve your long-term goals. It’s designed to maximize clicks from investors who are not doing it your way. Being a disciplined, long-term investor is much lonelier than going where the media is focused or buying what your friends are touting. It’s boring and dare I say, makes for dreadful dinner party conversation.

Fortunately, there are a few things you can do to deal with the loneliness and build up your endurance.

First, have realistic expectations. Know that every fourth or fifth year your portfolio will be down. On occasion, it might be down a lot. And don’t expect someone who picked a great stock or timed the market correctly will necessarily get it right next time. Luck is often disguised as skill.

Second, have a clear goal for each bucket of money. A volatile strategy doesn’t fit for funds that will be needed in the next one to three years. Conversely, a steady, GIC-like approach is inappropriate for a portfolio with an extended time horizon. Having the goal flashing in your face helps prevent you from getting distracted.

Third, pursue a strategy you can sustain no matter what’s going on in your life. Pick a provider and develop a routine that reflects your personality and lifestyle. One that fits with the amount of time and expertise you have and keeps working when you get busy at work or go on an around-the-world cruise.

And finally, make sure your support system, whether it be your adviser, friend or parent, is in sync with your approach. You want a steady hand when things are going poorly, not an easy off-ramp that takes you back into the short-term news gauntlet.

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In our latest Coffee Break, we explore the crucial roles and responsibilities of an executor with estate lawyer Margaret O’Sullivan, Managing Partner at O’Sullivan Estate Lawyers. Recognized as one of the top practitioners in her field, Margaret provides a valuable overview of an executor’s duties. She also shares insights on the qualities to look for when choosing an executor, common pitfalls to avoid, and tips on how to discuss this important topic with your family. This 20-minute session is packed with valuable information every Canadian will be glad to know!

If you’re interested in a deeper dive on estate planning tips and strategies, check out our video Covering your Assets with subject matter experts Lucy Main and Julia Chung.

by Scott Ronalds

Our industry is dominated by a few large institutions, namely the ‘Big 5 Banks’. We can’t compete with them from an advertising perspective, nor do we choose to. It would mean higher fees, and thus lower returns, for our clients. Plus, none of those expensive TV commercials are any good, right?

Most of our clients discover us through other means, including media coverage, our writing and videos, and our bold stance on various industry issues. But by far the most common way is through word of mouth.

Indeed, four out of five clients come to us through a referral. It’s the lifeblood of our business. Moreover, it’s reassuring that those who know us best feel confident enough to refer us to their friends, family, colleagues, and clients.

The following Google Review underscores this.

“I was referred to Steadyhand by a friend of mine several years ago. I cannot thank him enough. I’ve parked my ‘I-dont-want-to-worry-about-these’ investments here for long term growth. I’ve been a [bank] customer for almost my whole life and I can say I’ve received more service and information in the last 3-4 years from Steadyhand than I have from [the bank] in my whole life. I appreciate their transparency and honest, value driven attitude … I’ve put my trust in Steadyhand and it was the best decision ever.”

To make referring us easier, we’ve added a new feature on our website: the REFER A FRIEND link, located beside the login button at the top of our site.

This tool allows you to make an introduction to anyone who you think could benefit from discovering Steadyhand. We’ll reach out to them to share more about what we offer and help them explore whether we’re a good fit for their needs. Without being pushy.

And you can give yourself a pat on the back, because for every new client you refer, we’ll plant 10 trees in partnership with Tree Canada (learn more). Last year, we planted 2,000 trees through this initiative. It’s our way of saying that your referral goes a long way and is greatly appreciated.

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by Tom Bradley

This summer, I took advantage of a slow news cycle and plenty of dock time to think about bigger things. It’s a remarkable time for new and changing trends that will affect economies and markets.

I’m not one to base investment strategies on macroeconomic forecasts, so my musings weren’t tactical but rather an effort to be macro-aware. There was no expectation of precision, and little hope of getting the timing right. With that as context, here are some changes that will be important whenever they kick in.

A stretched consumer: With some trends, there’s a lag between cause and effect. For consumers, the effect of heavy debt levels and higher interest rates is playing out like a slow-moving train wreck. Spending is just starting to taper off. Retailers such as Home Depot and Canadian Tire are reporting slower or even negative sales growth, grocers are seeing shoppers trading down to cheaper brands, and banks have increased their loan-loss reserves.

The situation in Canada has the potential to be worse than that in the United States. More families are house-poor in Canada, and the mortgage renewal cycle will stretch budgets even further (most U.S. homeowners are locked in at lower rates for longer periods).

Even more stretched governments: Government debt is an example of a stress that’s been building for years, but the timing of its impact is impossible to call. Governments keep spending beyond their means, even in good times, and the debt load for future generations keeps building.

There are always predictions that governments are about to hit a debt wall, but that hasn’t happened yet. The sustainable level of debt-to-GDP keeps getting adjusted upward. When the wall is reached, however, governments’ credit ratings will drop and their cost of borrowing increase, services and infrastructure spending will be cut, and user fees and taxes will rise.

Growth challenges: One of the most remarkable trends of my career is how long the mega-tech companies have continued to grow. Apple, Microsoft, Alphabet and Amazon move from strength to strength, developing new monopolies as they go.

They’ll remain a dominant part of our lives, but the question is whether they can continue to grow fast enough to justify their premium valuations. Can their core profit drivers do it, or will they be forced to diversify into less profitable areas?

There’s an ad for that: The revenue model for many tech companies relies on advertising. Meta and Alphabet have grown to dominate the ad market, and it’s now a big part of Amazon’s growth story.

There are a few angles to explore here. First, is advertising – which has historically been tied to the economy – a limited resource, or can new delivery methods keep expanding ad budgets? The two advertising giants have grown effortlessly by taking market share from traditional media, but there’s little left in the field to harvest.

Second, will new players with unique advantages, namely Amazon and Walmart, slow down the duopoly?

And third, will advertising hit a saturation point where people stop noticing, or even rebel against logos on Springsteen’s guitars and billboards on neighbours’ lawns?

Two worlds: China has had a huge impact on investment portfolios. I’m not referring to Chinese stocks, but rather corporations lowering costs by manufacturing in China and expanding revenues by tapping into a huge and growing consumer market.

But instead of becoming a participating global citizen, China seems intent on going it alone. An antagonistic approach to trade, world affairs and human rights makes it increasingly likely that we’re heading toward two worlds – one centred around the U.S. and Europe, and the other around China.

Two worlds or not, are we reaching the point where China is more of a risk than an opportunity? Where having China exposure may mean a lower valuation, not a higher one? Where Apple and Starbucks are penalized for their China-dependence instead of rewarded?

Underestimating renewables: I’ll finish on an optimistic note. I can’t help but think experts are underestimating the growth of new power sources. Why? Because adoption of technology in general has accelerated, there’s a strong push behind sustainability, and renewable returns are attractive. The fact that businesses in Alberta and Texas are leading the charge into wind and solar tells me that the economics are undeniable.

So, do my dock thoughts suggest you sell the Magnificent Seven and your consumer discretionary stocks? Not necessarily, but you don’t want to overlook potentially powerful trends and other technologies related to health care, environment, and anything that lowers costs for large organizations, including governments.

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In Part II of our discussion with personal finance expert Preet Banerjee, we dig into the question of how to choose a good financial advisor. Preet identifies the main challenges of finding the right advisor for your needs and some of the structural conflicts of interest within our industry, namely those that arise in a commission-based environment. (Spoiler alert: one of the reasons we started Steadyhand was to address these issues).

by Tom Bradley

Ben Carlson recently posted a fun and poignant piece in his A Wealth of Common Sense blog. It’s called 15 Ways to Lose Money in the Markets. His themes, which are layered through our writing, are hard-hitting and to the point.

My favourite is number 2: "Consistently try to time the market. Think and act in extremes. Go all in when it feels like the market is in a good place. Get out of the market when things seem dicey. Keep jumping in and out until you are rich. Anyone can do it."

Enjoy.

We're not a bank. Which means we don't have to communicate like one (phew!). Sign up for our Newsletter and Blog and join the thousands of other Canadians who appreciate the straight goods on investing. Subscribe

by Tom Bradley

On Monday of the August long weekend, a friend saw me paddleboarding and took exception. He gave me a hard time for playing on the water while the stock market was melting down.

I had my retorts. I’m enjoying a gorgeous summer day, so leave me alone. Besides, what am I going to do about it? And, then, the clincher and point of this column, why didn’t you give me a hard time on days when the market was up big time?

This got me thinking about asymmetry, or, as Google describes it, a lack of balanced proportions between parts of a thing. The interaction with my friend is one example of asymmetry in the investment industry, but there are many others.

The holy grail. Investors are forever searching for an asymmetrical bet – a stock that has tons of upside and little downside. Of course, any analysis is a matter of opinion.

Gord O’Reilly, the long-time manager of our equity fund, was one person whose opinion I came to rely on. He looked at every stock in terms of upside versus downside. When, on average, the stocks in his fund were near the bottom of his range (more upside than downside), it was time to give him more money to manage. Returns were likely to be above average over the next five years. Conversely, when the portfolio was trading near the top of the range, it was time to be cautious.

Buy, buy, buy. You may have noticed that equity analysts have far more Buys than Sells on their recommended lists. There are a few reasons for this bias. First, it’s aligned with the stock market, which rises over time. Analysts are taking a career risk when fighting this trend. Clients never forget when they missed or were told to sell what turned out to be a good stock. Bad sell recommendations live on forever.

Second, analysts don’t want to jeopardize their relationship with the management of the companies they follow. I have personal experience with this. When I was an analyst, I put a Sell rating on a stock that I’d covered for years and knew well. After I did that, my access to the CEO dried up. He stopped taking my calls.

And third, sell recommendations are bad marketing. Investors are attracted to analysts (and advisers) with good stories, not bad.

Heads I win, tails you lose. “Where are the clients’ yachts?” is an all-too-accurate jibe at the investment industry. Investing in stocks is a great wealth generator, but it pales in comparison to what high-performing investment professionals make.

It’s partly because they’re good at what they do, but an asymmetrical compensation system is also a significant contributor. Top performers get huge bonuses when things go well and are still well paid when results are mediocre or even poor. Management’s desire to keep their best people means investment professionals are regularly overpaid for lacklustre results.

The proliferation of performance fees has contributed to this asymmetry. There are some fair fee structures, but the most common version – a two-per-cent fee plus 20 per cent of the profits, or 2 and 20 – equates to no downside and a ton of upside. A base fee of two per cent is more than a fair wage and the bonus, well, it’s why there are so many billionaires on Wall Street.

In versus out. You’ve no doubt experienced it. When opening an account at an investment firm, the paperwork is done immediately, and your calls are returned promptly. The money is in your account in a heartbeat. When you transfer money out, however, things grind to a halt. Answers are slower to come, and in the case of registered accounts, it can take weeks before your money arrives at the new firm. In this case, asymmetry works against you.

Good days versus bad days. Now, back to my paddleboarding experience. For many investors, good days in the markets are part of the process. They’re taken for granted. Down days should be, too, but that’s not the way it works.

Behavioral finance studies reveal that the disappointment investors feel when stock markets go down is more than twice as intense as the positive feeling they get from rising prices. For investors who check their account balance every day, this imbalance makes for challenging mental math. Stock markets trend up over time, but are only up 52 per cent of trading days.

Asymmetry is all around us. When you can, make sure your portfolio is on the right side of it.

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Renowned personal finance expert Preet Banerjee joins us in this Coffee Break to share his top 5 tips for building wealth. Preet's tips focus on the wealth accumulation period — the time when we're actively building our wealth and growing our net worth. Whether you're in your 20s, 30s, 40s, or 50s, this video is packed with expert advice on how to set yourself up for long-term financial success.

by Tom Bradley

When you call us to make a transaction in your account(s), we have to take a minute (hopefully less) to inform you of the Management Expense Ratio (MER) of the fund(s) you’re buying.

We’re required to do this by the industry regulator, the Canadian Investment Regulatory Organization (CIRO), as part of their effort to bring the industry into the 21st century on client reporting. We’re required to do this even though we report your full fee (to the penny) in every quarterly Client Statement. Even though you may already own the fund. And even though you get a Fund Facts document sent to you immediately if it’s a new holding.

The fee reported to you will cover everything you pay us. It includes investment management, advice, administration, service, account fees (there are none), and taxes. Other advisors that charge for advice, administration and service separately don’t have to report those fees when a fund is purchased.

Most of our clients don’t pay the fees published on our website, but rather a lower figure thanks to our Fee Reduction Program, so Neil (our CEO and tech guru) has enhanced our systems such that our Investor Specialists can give you the MER after all fee reductions.

As a reminder, your fee per dollar invested drops as your assets grow and the longer you’ve been a client. The average all-in fee paid by Steadyhand clients is less than 1%.

Our team isn’t happy with this regulatory requirement because it potentially gets in the way of more meaningful discussions, perhaps about your asset mix, RRIF payment, or pre-authorized contribution. But we’re trying not to make the regulation too burdensome for you. In fact, we’ve found many clients have been pleasantly surprised to hear their fee is even lower than they thought.

Now the rant.

We’re frustrated with this initiative because we’ve been leading the charge on client reporting and better transparency while many larger players with far more resources have been dragging their feet. We walk the talk (and have done so for 17 years) while industry neanderthals give the regulators no choice but to put more rules in place. Instead of being rewarded for our leadership, we’re being dragged down by the laggards.

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by Tom Bradley

There are all kinds of similarities between sports and investing. In fact, some quotes from Olympic athletes also apply to investors. “If you fail to prepare, you’re prepared to fail,” swimmer Mark Spitz said. Skiier Jean-Claude Killy remarked: “To win, you have to risk loss.” And gymnast Gabby Douglas said, “Hard days are the best because that’s when champions are made.”

But there are also profound differences between the Olympics and money matters. That’s my focus here.

Investors have different goals. Everyone running the Olympic marathon has the same objective. Get to the finish line ahead of everyone else. Investing isn’t like that. It’s deeply personal.

For instance, when your father is upset that the stock market has pushed his portfolio down, you may be ecstatic. He has a short time frame and is looking for a stable income. Conversely, you relish the opportunity to accumulate more shares at reduced prices, at least for accounts that have multi-decade time horizons.

The perfect outcome for money being set aside to buy a house is a return in excess of inflation, and the guarantee that it will be there when needed. For someone investing for retirement, that would be a poor result.

There is no end date. For me, the most remarkable part of the Olympics is how athletes can perform at their best under such intense pressure. They train for a lifetime and then have success defined by one moment.

Fortunately, that’s not investing. No one month, quarter or year-end is more significant than another, and none determine success or failure. It’s indeed a marathon, not a sprint.

It’s not about luck. Some athletes are so dominant that they can overcome anything, but for most, the difference between the podium and fourth place is minuscule. They need a break such as a good starting position, a stumble by an opponent, or a good guess by their goalie on a penalty kick.

Luck evens out when you’re playing the long game. The time you bought a stock the day before it reported poor results is offset by another time when the opposite happened.

Diversification also negates the impact of luck. A properly constructed portfolio not only provides exposure to different industries, regions and currencies, it also gives you a mix of good and bad breaks.

Passive is a winning strategy. To win a gold medal, an athlete needs to go for it. They can’t sit back and wait for things to happen. For an investor, laying low and doing little is a good strategy.

Burgundy Asset Management’s Anne Mette de Place Filippini recently reinforced this thought with a quote from the white rabbit in Alice in Wonderland. “Don’t just do something, stand there.” You don’t have to make changes just because the stock market is bouncing up and down and you’re getting pounded by a fire hose of information. Most often, the best action is no action.

Talent is overrated. Olympic athletes must be talented, disciplined and willing to make huge sacrifices. A good investor needs just one of these qualities: the discipline. A high IQ or flair for investing aren’t required, and neither is the need to make sacrifices.

Discipline, on the other hand, is paramount. You need a strategy that matches up with your goals and a routine that allows you to stick to it. The less knowledge, interest and time you have for investing, the simpler the strategy and the more regimented the routine should be.

A simple strategy can (and should) be written down in a few words. It has a clear objective, is understandable, and lays out the key elements of time frame, asset mix and active or passive management. Warren Buffett likes to point out that investing isn’t like diving. You don’t get extra returns for the degree of difficulty. “You get paid just as well for the most simple dive, as long as you execute it all right.”

A robust routine is as automated as possible, including preset monthly contributions (or withdrawals) and a thorough portfolio review once or twice a year, as opposed to daily glances.

Fortunately, in investing, unlike the Olympics, you don’t have to be the best in the world to bring home the gold.

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In our latest Coffee Break, we speak with independent financial planner Jason Evans about some of the intricacies of the Canada Pension Plan. Jason discusses eligibility requirements, the new enhancements to the Plan, and offers tips and insights on the best time to start taking benefits.

by Tom Bradley

It’s an inconvenient truth about investing: You need to take risk to generate a return in excess of government T-bills or GICs. Of the four risks investors may face, three are well known and used regularly – interest rate, credit and equity risk.

Until recently, the fourth, liquidity risk, was inaccessible to the average investor. I’m referring to private assets that don’t trade on an exchange, such as mortgages, real estate, infrastructure, venture capital, and private loans and businesses. In exchange for reduced liquidity, investors in these categories expect a premium return relative to the public alternatives.

Today, the sentiment toward private investments is running hot. It’s where the cool kids are. Publicly traded securities are so yesterday.

In State Street’s 2024 survey of private markets, 58 per cent of respondents – institutional investors across the globe – said they would be adding to private investments in the next two years.

There’s no doubt private assets can be an excellent return generator and diversifier, but there are trade-offs that all the enthusiasm usually obscures. Here are some things to consider before wading into the private asset market.

Circumstances have changed. Some private equity managers have generated excellent returns over many years. But it’s important to note that, while shrewd deal-making and excellent business management had much to do with that performance, so did some howling tailwinds.

For instance, there didn’t use to be as much competition for assets, private valuations were a fraction of public ones, valuations in general were rising, and debt – which is rocket fuel for most private funds – was cheap and plentiful.

Today, the winds are shifting. The new world for private investments is now characterized by competitive bidding, higher financing costs, more complex corporate structures with added layers of debt, and a public investor who is less willing to buy assets at the drop of a hat.

The structure of private investments has pros and cons. Private investors laud the ability of their managers to operate outside the public eye where they can use more leverage and are able to make changes to their portfolio companies without worrying about a quarterly earnings miss.

But that structure has limitations. A private fund has a defined cycle: Raise money; invest it in the first three years; take four to five years to improve the companies; and three to five years to sell assets and distribute proceeds to investors.

The structure is flexible initially but becomes increasingly restrictive as the maturity date approaches. If the buying period is characterized by high valuations, managers have no choice but to pay up. If the management magic takes longer than expected, or there aren’t ready buyers when it’s time to sell, the clock ticks louder. Managers must then get creative, either asking investors for more time or “passing the parcel” to another private equity fund who, interestingly enough, also professes to buy underexploited assets.

And private funds are expensive to manage. Investment banking and legal costs are high, and there are two layers of executive pay. Management teams at the portfolio companies must have their incentives, and it’s an understatement to say fund managers are well compensated. High fees and profit-sharing are harder to justify as the industry gets commoditized, and there are more second- and third-tier managers.

Beware of the liquidity mismatch. The investment industry has gone through contortions to bring private assets to individual investors under the assumption that for a product to sell, it must offer daily, or at least monthly, liquidity.

The drive to make private assets retail investor-friendly has resulted in a mismatch whereby funds are invested in long-term, not easily tradable assets and yet offer short-term liquidity. The problem with this liquidity mismatch is now revealing itself for some mortgage and real estate funds where investors are queueing up to exit, forcing managers to sell assets when they’d rather be buying.

If you want a avoid this issue and achieve a higher return, you need to accept an investment that has less liquidity.

Public investors rejoice. Given the momentum behind private investing, some commentators worry about the prospects for public securities. They point to the decline in the number of publicly listed companies.

The other side of the coin, however, is that the more capital private managers have to invest, the more demand there will be for companies in your portfolio. There’s still a lot to be said for keeping your costs down and letting the bidders come to you.

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by Scott Ronalds

I left the Rolling Stones concert the other week with a new perspective on retirement.

Two rock legends 30 years my senior blew the roof off a packed BC Place Stadium. Mick Jagger, who turns 81 this month, and 80-year-old Keith Richards, who by all accounts should be pickled, put on an unbelievable show. Joined by their long-time running mate Ronnie Wood, the ageless trio played for over two hours and sounded great on a memorable Vancouver night (Midnight Rambler was a highlight). Whatever the Stones are taking, I want some of it. On second thought, maybe I don’t.

Appropriately, the tour was sponsored by AARP (the American Association of Retired Persons). We all know that retirement isn’t what it used to be: a gold watch at 65, company pension, lawn bowling on Thursdays, Jeopardy at 7:30, rinse and repeat. It’s a much more dynamic, and hopefully lengthy and rewarding phase of life now.

Better medicine, advancements in artificial joints, and a more youthful mindset mean we’re living longer, more active lives. The flip side is that we need to finance it all.

Which brings me back to my first thought. The old philosophy on retirement investing is, well, old. A rule of thumb used to suggest that you should hold your age in bonds. In other words, if you’re 75, three-quarters of your portfolio should be in fixed income (and the rest in stocks). This may be suitable for some people, but for many, it’s bad math. An overly conservative asset mix runs the risk of your investments drying up prematurely.

Your retirement portfolio should reflect your individualism. If you’re in good shape and have good genes, you’ll need your investments to continue to grow well into your 90’s if you intend to rely primarily on your portfolio to provide you with an income. You’ll require a healthy dose of stocks to achieve this. Of course, you have to be comfortable with the level of risk you take on, but holding the bulk of your assets in bonds or cash could limit your returns, and the lifestyle you’re able to live.

If you’re like me and have a 15- to 20-year runway (or longer) before dialling down the day job, you should make sure you’re giving your portfolio its best shot at growth. Regular contributions and a heavy weighting in stocks is my advice (although everyone is different, and you should speak to your advisor to determine a plan suitable for your circumstances).

These are just a few things to think about if you’re planning for or are new to this phase of life. I’ll report back after Jagger and crew’s Centenarian tour.

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The first six months of the year was a strong period for stocks. That said, returns continue to be driven by a narrow group of equities, the 'Magnificent 7'. In fact, over the past 24 months, just seven tech-related stocks accounted for over half of the market's return. This has had two important outcomes: the market is not as well diversified as it previously was, and investors are facing a greater temptation to veer from their plans due to a fear of missing out (FOMO). We provide additional context on the current environment and offer advice for investors in our mid-year review video below.

by Tom Bradley

For many investors, managing their portfolio is just one of those things in life where they rely on an expert or specialist to take care of things. As for computer setup, auto repair, plumbing and insurance, if it’s Greek to you, then you’re totally dependent on someone else.

The late Glorianne Stromberg, a securities lawyer and investor advocate, referred to it as the “knowledge gap.” She said that “there are those who know and those who don’t. All the advantages go to people who know.”

When you’re going to cede power to someone who knows, the problem always is how to be sure they’re an expert and not an imitator.

Author Shane Parrish provides a great framework for this in his book, Clear Thinking: Turning Ordinary Moments into Extraordinary Results. His list provides a unique lens from which to assess where an investment adviser falls on the expert versus imitator spectrum.

Imitators can’t answer questions at a deeper level. I always recommend that people ask lots of questions when meeting with their adviser. Taking them off script reveals how much they know about a topic. A question makes it immediately clear if you’re getting a canned sales pitch instead of advice.

The best questions are the ones that pop into your head. They may include, “How will this fit into my portfolio?” or “What will it replace?” If it’s a product, “What does it cost and what are the risk/reward tradeoffs?” (there are no silver bullets in finance).

Remember, you’re the boss. The adviser is working for you. It’s never a dumb question if you don’t understand what’s being said or how something works.

Imitators can’t adapt their vocabulary. Like most industries, investing has a lot of jargon and acronyms. Again, don’t be afraid to ask what they stand for. And if you keep hearing the same hooks repeatedly, it’s time to be suspicious. There’s a grain of truth to old adages such as: you’ll never regret taking a profit; the trend is your friend; and the smart money is doing it. But an expert they don’t make.

Imitators get frustrated when you say you don’t understand. They can only change the words around and repeat what they said before. Experts react the opposite way. When I ask my tax accountant a question, he leans in and gives me a detailed answer. He’s keen to talk about what he knows.

If your adviser can’t explain something such that you understand it, then don’t invest in the product or strategy they’re recommending.

Imitators have a perfect record. You’ve no doubt heard this before. The adviser sold before the financial crisis and got back in at the lows. They got out of REITs before interest rates went up and shifted into large cap technology. In other words, they’re either the best investor that’s ever lived, or an imitator who isn’t grounded in reality. If it seems too good to be true, it is.

Experts, on the other hand, will tell you all the ways they’ve failed because it’s not “if” some strategies fail, but “when.” Investing is about managing through mistakes and learning from them.

Imitators don’t know the limits of their expertise. The investment industry is particularly prone to this. There are a lot of smart, type-A personalities who come across as knowledgeable about anything you want to talk about. Their expertise and track record in one area miraculously gets transferred to others where they don’t have the same knowledge. For instance, it’s common to see successful stock pickers delving into macroeconomic issues, and economists portraying themselves as market strategists.

It’s not always easy to determine what’s real and imitation, even with Mr. Parrish’s checklist. There are other warning flags, however, that I’ve written about previously. The person across the table is an imitator if they have a definitive explanation for why the market is up/down, if they claim to have a method for getting out of the market before a dip and back in at the right time, or if they’re basing investment recommendations on next year’s economic forecast. These are warning flags because the claims are impossible to live up to.

And if they don’t ask questions and fully understand your situation, they’re most assuredly a salesperson disguised as an investment professional. In other words, not someone you want to trust in an area you know little about.

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by Tom Bradley

It’s Wimbledon time and I’m a big fan of 8-time winner, Roger Federer. He plays a beautiful game and I count myself lucky to have seen him play.

Federer has been in the news lately. He gave the commencement speech at Dartmouth. I first discovered it in the ‘A Wealth of Common Sense’ investment letter where Ben Carlson highlighted the following excerpt.

“In tennis, perfection is impossible ... In the 1,526 singles matches I played in my career, I won almost 80% of those matches ... Now, I have a question for all of you ... what percentage of the POINTS do you think I won in those matches? Only 54%.”

Yes, 54% translated into 80%, with the difference being time. Switching to investing, Ben points out that the stock market is up 52% of trading days, but over longer periods, the percentage approaches 100%. In other words, a coin toss day to day. Highly reliable when the time frame is extended.

This is a good story for individual investors. Time is an advantage you have over virtually all other types of investors. You don’t have to pass a regulatory test every three years like pension funds do or answer to impatient Boards of Directors.

There are three key benefits to having a long-term mind set.

You can ride out short-term volatility. Stocks bounce around ... a lot ... on the way to being up 100% of the time. Most of this volatility, however, is a result of investors having different time frames, not because they have different views. A day trader interprets a press release as bad news while a buy-and-hold investor sees it as one more data point on a long journey.

You can profit from periods of heightened fear and risk aversion. You don’t need to make a brilliant (and brave) market call to take advantage of bad markets. You do that when you make regular RRSP or TFSA contributions (i.e. averaging down), rebalance back to your strategic asset mix (SAM), and/or own the Founders or Builders Funds.

And you’ll be rewarded for providing liquidity. You can capture a premium return by investing in less liquid investments, or providing capital to companies and other investors when they desperately need it.

The catch, of course, is that being a disciplined long-term investor is difficult (as I’ve pointed out in previous Briefs). The eco-system around you, specifically a sales-oriented investment industry and the media, is built on reacting to short-term news which in turn creates a need to do something.

Fortunately, that’s where we come in. As I outlined at our recent Where to From Here presentation, we’re wired to stay steady and help clients run the investing gauntlet. Lately, this has meant staying widely diversified while one sector of the market — mega-cap tech — is driving performance and once again causing FOMO for investors.

Heavy stuff for a summer that’s never long enough. Enjoy the sun, and if you get a rainy day and want to talk about your portfolio, investing in general, or even tennis, we’re here for you.

I encourage you to read the rest of our Q2 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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If you're saving for a first home in Canada, there are a few different account types you should consider, each of which offers different tax benefits, contribution limits and withdrawal rules. In this video, we walk through the option of using an RRSP for a down payment, the flexible contributions and tax-free growth of a TFSA, and the unique advantages of the new FHSA.

by Salman Ahmed

Galibier Capital, the manager of the Steadyhand Small-Cap Equity Fund, recently announced its intention to become part of Guardian Capital. The deal is expected to close later this summer.

Guardian is a Canadian-based investment manager with over $45 billion in assets under management. The company is a well-known manager of institutional assets (pensions, foundations and endowments) but might not be familiar to most Canadians.

This change will have no impact on our Small-Cap Fund or Galibier’s investment approach. Guardian will support Galibier with its larger sales and client service team and there may be some operational integration down the road.

Overall, we are comfortable with this transition. The Galibier team and name will remain intact under the Guardian umbrella, and the agreement is structured to ensure the firm’s most senior principals are aligned for at least five years. Moreover, we are familiar with Guardian and consider them astute business operators. That said, we will monitor Galibier closely to ensure they adhere to their philosophy. We have a capable bench of managers that we can tap if we conclude your (and our) money will be better managed elsewhere.

If you have any questions about this development, please contact us at 1-888-888-3147 or book a phone or video call with one of our Investor Specialists.

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by Tom Bradley

The Canada Day weekend feels like a good time to address a never-ending investment question: What is the right balance in your portfolio between Canadian and foreign stocks?

This topic usually comes up when Canadian stocks are doing particularly well or poorly relative to those in other markets. Recently, it surfaced because of the federal government’s push for large pension funds to allocate more capital to Canada (domestic stocks generally make up a tiny part of their public equity allocation).

Before exploring the question, we need some facts.

The Canadian stock market is relatively small. It accounts for 3 per cent of world indexes.

In it are many world-class companies, the largest of which are either global leaders or domestic giants operating in the friendly confines of an oligopoly.

The industry sector weightings of the S&P/TSX Composite Index are skewed toward a few industry sectors – financial services, energy and materials. Conversely, some important parts of the economy are underrepresented, namely technology and health care.

In the investment industry where products and services are largely undifferentiated, approaches to the Canada-versus-foreign issue couldn’t be more diverse. They range from individual investors who only own Canadian stocks to large pension funds that hold almost none.

According to the International Monetary Fund, 50 per cent of Canadian investors’ equity allocation is domestic. If we exclude the mega-pension funds, the percentage for individual investors is certainly higher. We’re not alone in our home country bias. It occurs in all countries, although is more pronounced in Australia, Japan and Canada.

Oh Canada

There are a number of contributing factors why Canadian investors stay so close to home.

Many like to own individual stocks. Unfortunately, this is impractical when going beyond North America because of a lack of knowledge and high trading costs. Pooled funds and ETFs are the only way to go.

Dividend investing has taken hold in Canada. I hear it regularly – banks, REITs, utilities and forget the rest. For dividend devotees, going global is a hard pill to swallow because yields are lower and capital growth plays a bigger part of the return.

And there is a psychological reason. When Canada is really humming, and/or our dollar is strong, owning foreign stocks is excruciating. There are always periods when your portfolio is out of sync with markets, but it feels worse when your own country is doing well and you’re not fully benefiting.

Now, let’s look at the question in the context of your portfolio.

Home or away

There are good reasons to go all-in on Canada. You’re investing in your own. You know the companies and their products. And there’s no currency risk or tax disadvantage.

Investing outside of Canada, however, allows you to more effectively diversify your portfolio across industries, including those underrepresented in the Canadian market, and not be tied to a single economy and currency.

This diversification translates into returns that are less volatile. You don’t avoid the ups and downs, but the highs and lows are moderated. I’ve witnessed this with our clients. When Canada is roaring, they can’t keep up with their friends who hold mostly Canadian stocks, but the rest of the time they do better.

Importantly, the smoother path doesn’t require a compromise on returns. For sure, Canada has long stretches of outperformance, but global stocks (U.S. and international) have done better over longer periods (10, 20 or 50 years).

What to do

In a recent report, Vanguard Canada recommended an equity mix of 30-per-cent Canadian and 70-per-cent foreign. I concur. In our portfolios, Canada makes up 33 per cent to 40 per cent of our stock weighting, depending on the mandate (income-oriented accounts have a higher percentage).

We’ve settled on this level for three reasons. First, we’re happy to stay in Canada for our income needs. Canada has plenty of good dividend stocks that aren’t subject to foreign withholding tax. Second, there are excellent small-cap companies and we know them well. And third, there are some high-quality growth companies that we want to own.

We can take advantage of all three categories without worrying about diversification because foreign stocks round out the portfolios. The result is a collection of companies that derive 22 per cent of their sales from Canada, 40 per cent from the United States and 38 per cent from international.

In summary, we should celebrate what we have in Canada and invest in it, but not to the exclusion of the many opportunities beyond our borders.

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by Scott Ronalds

This summer, we're bringing back our popular Transfer Fee Reimbursement Program. From July 1 to September 30, move an account to us from another financial institution and say goodbye to those dreaded transfer fees — we’ve got them covered, up to $150. And we’ve streamlined the process to make it easier than ever this year.

How it works

Existing clients: Transfer an account(s) worth $5,000 or more and we’ll reimburse the transfer fees, just like last summer.

New clients: We’re extending a warm welcome and will handle the transfer fees for you too this time around. Note that the transfer value must be $10,000 or more, as this is our minimum initial investment requirement.

All transfer fee reimbursements will be in the form of Steadyhand fund units (based on your chosen allocation) and will not impact your contribution room for registered accounts (such as an RRSP or TFSA). In other words, if you are charged $150 in transfer fees, you will receive $150 in Steadyhand fund units in your applicable account with us.

What’s more, we’ve made the reimbursement process automatic (you don’t need to send us documentation of the transfer fee, unless there is a discrepancy between the amount charged and the amount reimbursed). It’s super easy: you simply need to complete a Steadyhand Transfer Form and we’ll take care of the rest. You can complete and sign the form(s) electronically, and one of our Investor Specialists would be happy to walk you through it over a phone or video call—book a meeting here.

Why we’re doing it again

We first introduced this limited time program two years ago and received a great response, with many clients taking us up on it. We ran it again last summer and the story was no different. Reimbursing transfer fees is not a standard business practice of ours because we don’t charge exit or redemption fees on our end. Nickel and diming clients isn’t our thing. Yet, we understand how frustrating these fees can be, which is why we’re bringing back this initiative.

We have long grumbled about the dark side of RRSP transfers. The Canadian wealth management industry’s approach leaves a lot to be desired, as we noted in a blog a few years ago:

“If you move your RRSP to a new firm, they will process the paperwork and get you up and running in no time. If you transfer assets out, it can take weeks. This imbalance is appalling and reflects poorly on the industry’s commitment to clients. At Steadyhand, however, we have a different ethic that’s rooted in our most important decision-making criterion — What’s best for the client? We treat transfers ‘in’ the same as transfers ‘out’. It just makes sense and isn’t hard to do.”

We’d love to see other firms follow our lead but aren’t holding our breath. In the meantime, we’re hoping to ease the burden of moving an account with initiatives like our Transfer Fee Reimbursement Program.

The finer details

We lay out the terms and conditions of the program below. If you have any questions, please reach out to us at 1-888-888-3147 from 7:00am to 5:00pm PT Mon-Fri. We pick up our phone promptly!

• You must be charged a transfer fee from your other institution to qualify for a fee reimbursement. 

• All account types qualify (e.g., RRSPs, RRIFs, TFSAs, non-registered accounts, corporate accounts). 

• The total maximum fee reimbursement per account is $169.50 ($150 plus tax). 

• There is no limit to the number of accounts you can transfer which qualify for the fee reimbursement. For example, if you transfer five different accounts and are charged $150 for each transfer, we will reimburse you $750 (plus taxes). 

• Transfers must be initiated, and all documents signed and received by us, between July 1 and September 30, 2024. 

• Any assets transferred to us must remain in your Steadyhand account(s) until December 31, 2024, or the fee reimbursement will be fully clawed back.

Frequently asked questions

Q: If I transferred an account earlier in the year and was charged a fee from my former financial institution, can I get reimbursed? A: Unfortunately, no. Programs such as this require firm rules and regulations, and we are unable to make exceptions.

Q: What qualifies as a ‘transfer fee’? A: Any fee that you are charged for moving your account from another financial institution to Steadyhand is considered a transfer fee. It does not include trading fees or commissions.

Q: If I’m a client, can I transfer over an account type I don’t currently hold and qualify for the fee reimbursement? A: Yes. As an example, if you currently hold only one account with us, say an RRSP, and you want to transfer a TFSA, you will be reimbursed for any transfer fees (up to $150 plus tax). Note: in this scenario, you would also need to complete a TFSA Application Form.

Q: Is Steadyhand going to start charging transfer out fees in return? A: That’s a hard no.

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If you're nearing retirement or planning for this phase of your life, you're probably wondering how much you can expect annually from the CPP (Canada Pension Plan) and OAS (Old Age Security). In this video, we walk through two handy calculators on our website that allow you to explore how much you could receive in benefits from these government-sponsored plans, and whether you should consider taking payments earlier (only CPP offers this option) or later than the standard age of 65.

by Tom Bradley

Many investors are scratching their heads and wondering about the continued rise of stock prices, a run that started in the fall of 2022. Is it real or are things getting carried away?

During a cross-Canada tour last month (watch a video of the presentation here), we addressed this question. Our chief investment officer, Salman Ahmed, told clients that things are normal, more normal than they’ve been in many years. He provided a checklist.

The economy is expected to keep growing, as are corporate profits. Check. Stock valuations have risen in recent months but are still within their historical range. Check. Fixed-income securities offer yields that are in excess of inflation. Check. People are worried about politics and the next recession. Check. And three-, five- and 10-year returns for balanced portfolios are in line with long-term expectations. Check.

The one thing that is starting to be not-so-normal is the level of speculation in the market, or put another way, the enthusiasm for higher-risk investments.

Before I get there, some background.

In our client presentations, I referred to 2021 as being the most speculative time in my 40-year investment career. In the back half of that year, the steady postpandemic recovery turned into a frat party.

It was remarkable. We had the meme stock craziness. Options trading was through the roof. There seemed to be a new crypto coin (I can’t bring myself to say “currency”) every day. Anything related to electric vehicles was worth billions. Investors were excited about anything with a technology element to it, including companies in competitive, profit-challenged industries. And there was a buzz about NFTs (despite them being a mystery to most people, including me).

The party was fuelled by a wave of exciting new technologies and extremely cheap money. Interest rates were near zero in North America and negative in some parts of the world. It was a great time to borrow and risk-taking was encouraged. I’ll never forget meeting with a well-to-do retired client who desperately wanted to use his line of credit so he could join in the fun.

Fortunately, or unfortunately, depending on your perspective, rising interest rates wrecked the party and caused a nasty hangover in 2022. I like to think of it as a much-needed period of normalization.

Which brings me to today. With interest rates holding at much higher levels and the go-go investments mentioned above having crashed, I would have bet my mortgage that another speculative rush was years away, but I would have been wrong.

Meme stocks are back with a vengeance. Based on a few Reddit posts, two unremarkable companies, GameStop and AMC Entertainment Holdings have seen their stock prices gyrating like it was 2021 again.

Stock and option trading are up significantly, with penny stocks making up an increased percentage of the volume. Bitcoin is on a roll and valuations on AI-related companies, many of which don’t yet have a revenue model, assume they’re all going to be successful.

Some of these strategies have investment merit but, as in 2021, what’s noteworthy is how many high-risk, high-volatility, high-valuation things are raging at the same time.

To be clear, this isn’t nearly as wild a party as 2021, at least not yet. There are some elements missing. The market for initial public offerings is still dead, despite a long list of companies that private equity firms want to list.

Measures of sentiment – how bullish or bearish investors are overall – are in neutral territory. Indeed, I’m finding that many investors don’t seem to appreciate how good a year their portfolios are having.

So, is excessive speculative behaviour something to be concerned about? The answer is yes. It rarely produces lasting returns and often leads to disappointment. It can also reflect more broadly a complacency in the market toward risk and unrealistic expectations.

If you’re part of the party, make sure the risk you’re taking is appropriate in the context of your overall portfolio. It’s one thing to play with some fun money, but quite another to bet your retirement savings.

For me, elevated risk-taking is on the radar screen again although, as my partner says, the investment landscape is normal for most of the important factors we care about. Business fundamentals are going in the right direction and valuations are reasonable outside of a few areas of extreme enthusiasm.

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We spoke with Vancouver mortgage specialist Ray Macklem last month about the ins and outs of mortgages in Canada. In part two of our discussion on mortgages, we ask Ray about mortgage life insurance and property title insurance, two features that tend to be poorly understood.

by Soctt Ronalds

A client told me the other year that right after we publish our summer reading picks, she goes out and buys every book on the list (if she hasn’t already read it). I loved hearing this. But talk about pressure. With her words in mind, I had a nervous feeling as I canvassed our team this year for recommendations: we better not disappoint.

I’m confident this year’s list delivers. As usual, it covers a wide variety of topics, spanning business, investing, culture, health, and the great outdoors. There’s sure to be a title that piques your interest — read one or read them all!

Same as Ever: A Guide to What Never Changes, by Mogan Housel. Our Chief Development Officer, David Toyne, recommends this book by the bestselling author of The Psychology of Money. Housel is a great storyteller and showcases his talents again in his latest collection of short stories about what never changes in a changing world. He suggests there are timeless lessons from human behaviour that are some of the most important lessons we can learn. In his usual style, Housel writes about the intersection of money and psychology with unique insights and wit.

Future Tense: Why Anxiety is Good for You, by Tracy Denis-Tiwary. Our CEO, Neil Jensen, applauds this radical reinterpretation of anxiety. The author, a professor of psychology and neuroscience, argues that “anxiety is an evolved advantage that protects us and strengthens our creative and productive powers. Although it’s related to stress and fear, it’s uniquely valuable.” Dennis-Tiwary suggests that we view anxiety as a tool, rather than something to be feared, and provides insights and a framework to support this new way of thinking. Anxiety impacts an increasing number of us every year and this fresh take on it is a great read in Neil’s view.

Chip War: The Fight for the World’s Most Critical Technology, by Chris Miller. This one is my pick. The world is run on microchips, including the increasingly important field of artificial intelligence. Chip War is an account of how these small wafers came to play such an important role in everyday life and how America, the once-dominant designer and manufacturer, is in danger of losing its edge to Taiwan, Korea, Europe, and China. The stakes are huge, from economic success to military dominance. With companies like Nvidia and TSMC seemingly in the news every day and America emboldening its efforts to cut off China from leading-edge chips, the chip war continues to play out in front of our eyes.

Astor: The Rise and Fall of an American Fortune, by Anderson Cooper and Katherine Howe. Paul McCrossan, one of our Operations Specialists, praises this story of the Astor family. If you’re not familiar with the name, the family first made a fortune in the beaver trapping business before building a real estate empire in New York (the Waldorf-Astoria hotel is one of their famous namesakes). The Astors were prominent figures in New York society, particularly during the Gilded Age, and extended their influence into American politics as well. A real-life soap opera of sorts, Paul couldn’t put the book down.

Knowing the Score: My Family and Our Tennis Story, by Judy Murray. Our CFO and avid tennis fan, Elaine Davison, picks this memoir by the mother of Scottish tennis champions Jamie and Andy Murray (Andy has won two Wimbledon titles and one U.S. Open while Jamie has won 37 doubles titles). Along with raising two exceptional athletes, Judy coached the Scottish national team, was Great Britian’s Fed Cup captain, and overcame a desperate financial situation and deep-rooted sexism to become a key figure in the tennis world. As the mother of a budding tennis star herself, Elaine found Murray’s personal story and insights especially compelling.

Three Worlds: Memoirs of an Arab-Jew, by Avi Shlaim. Our Chief Investment Officer, Salman Ahmed, endorses this memoir. Shlaim, an Oxford historian and professor, was forced into exile as a young child and fled Iraq with his family to the new state of Israel. The author draws on his experiences and research to provide readers with context of the world and influences around him that led to his family’s decisions. Many people may be surprised to learn that the Jewish community once flourished in Iraq, numbering over 150,000, but has essentially vanished today. The book “celebrates the disappearing heritage of Arab-Jews – caught in the crossfire of secular ideologies.”

John Clarke: Explorer of the Coast Mountains, by Lisa Baile. Chris Stephenson, one of our Investor Specialists, recommends this story about the remarkable life of a modest mountaineer who dedicated his life to exploring B.C.’s many peaks. Clarke, who was awarded the Order of Canada in 2002, has a mountain named after him near Powell River (at the head of Jervis Inlet), which I’m told offers stunning views. In Chris’ words, “I loved reading about some of the peaks in my backyard and this particular climber’s passion for getting out there.”

The Artist’s Way, by Julia Cameron. Lori Norman, another one of our Investor Specialists, puts forward this decades-old international bestseller that’s been touted as the seminal book on the subject of creativity. The Artist’s Way has helped millions of people unlock their creativity, whether in art, at work, or in life. We’ve all got a creative side; Lori feels this book can help you make the most of yours.

Happy reading!

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Earlier this month, we visited seven cities across the country to present our thoughts on the current investment landscape, share our outlook on the economy and interest rates, discuss a handful of portfolio holdings, and provide an update on our advice offering.

A recording of the Toronto session is available below for those who missed the live experience or would like to revisit any of the insights shared.

If you have any questions about any of the topics discussed, or your portfolio in specific, we’d love to hear from you. Simply call us at 1-888-888-3147 from 7am to 5pm PT or book a meeting with one of our Investor Specialists.

While inflation is easing, it continues to be higher than many Canadians are accustomed to and impacts us all. In our latest Coffee Break, we dive into the rising cost of living, and its impact on financial planning and expense management, with Christine White, a Certified Financial Planner with Money Coaches Canada. Whether you're planning for retirement, currently retired, or inflation has caught you by surprise, this video is full of valuable insights.

by Tom Bradley

Let me guess. When your portfolio returns are positive, your adviser points out the good moves they’ve made. When returns are negative, it’s because of the market.

Do you ever wonder why your portfolio is doing well, or poorly? Is it because of your adviser’s brilliance (or ineptitude), the oil or bank stocks you bought, or what the overall market did?

There are many factors that fuel returns, although the importance of each varies with time. One quarter, it might be those oil and bank stocks doing well, another the telcos dragging everything down. Over time, however, these period-specific reasons, as important as they seem, matter less.

If you, like most investors, have a time frame measured in decades, the explanation of how you did is driven by a consistent list of influences, and the pecking order is pretty much carved in stone.

Here’s what drives your long-term returns in order of importance.

Markets: Your adviser has it half right. The direction and magnitude of your returns are overwhelmingly driven by the overall direction of bond and stock markets, no matter whether you’re indexing your portfolio or pursuing an active strategy. Nothing else comes close.

Stock market returns have three components to them: dividends, earnings growth, and changes in valuation. Dividends are steady (currently in the 2-per-cent to 3-per-cent range) and grow over time. Yearly profit growth is more cyclical but still reasonably stable in the neighbourhood of 4 per cent to 7 per cent a year. The big swing factor, and the one that causes most of the market volatility, is the expansion or contraction of valuations (what investors are willing to pay for a dollar of earnings). In recent months, expanding price-to-earnings multiples have pushed stock prices higher despite little change in the growth outlook. In 2022, it was the opposite.

Asset mix: You can’t control markets, but you can make sure your portfolio fits with your objectives, time frame and personality. Your strategic asset mix, which is the blend of cash, bonds and stocks, is the best tool you have for finding the right balance between reward and risk.

For example, a portfolio fully invested in stocks had annualized returns of 8 per cent to 10 per cent over the past 20 years, with plenty of ups and downs along the way. Over the same period, a five-year GIC ladder generated a predictable return in the low single digits.

Cost: Portfolios with a lower cost, assuming they’re properly diversified, will generate higher returns. There’s no ambiguity about this.

If you’re able to manage investments on your own, you can keep your costs very low these days. If, like many investors, you need help, you’re going to pay more. Professional investment management and counsel costs money to deliver, whether it be simple advice or total delegation.

The key is only paying for what you need.

Security selection: As a former equity analyst and portfolio manager, it pains me to say this, but security selection is down the list of what drives long-term returns. As noted above, there will be periods when it makes a big difference (for example, if you were loaded up with Magnificent Seven stocks over the past few years, or owned none of them), but the good and bad streaks tend to balance out over time.

You: Now the wild card – your own investment behaviour. If you have a plan, are good at sticking to it, and keep your costs down, then the "you" factor is at the bottom of the list of return factors.

Call it neutral to slightly positive.

If you aren’t any of these things, and instead make frequent changes, get in and out of the market, don’t have a plan or know your costs, then you may be the biggest factor in how you do, and it’s most likely negative. I’m generalizing of course, but evidence shows that investor returns are less than those of the funds they invest in because they trade too much, chase past performance, and too often buy high and sell low.

So, the next time you’re reviewing your returns, keep this list in mind. Accept that it’s hard to buck the trend of what the market is doing. Have a plan that aligns your portfolio with the task at hand. Don’t pay for anything you don’t need. And make sure you take a good hard look in the mirror.

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Today, we're demystifying the process of securing a mortgage in Canada, a crucial step towards achieving the dream of home ownership. Whether you're a first-time buyer or looking to refinance, you'll find this discussion invaluable.

Our subject matter expert Ray Macklem brings over 16 years of experience and starts by explaining his journey into the mortgage industry, followed by a deep dive into how mortgages work, their benefits, and pitfalls. Whether you're looking to secure your first mortgage or considering your options for renewal, this comprehensive guide offers valuable insights to help you make informed decisions and achieve your homeownership goals.

by Tom Bradley

The quarterly reporting period is just winding up. It's the time when investment managers tell us what's happened in the market, how the funds did, and provide some insights into their strategies.

Our company uses outside fund managers, so my inbox was full of reports from companies that work with us – or hope to. The good news is that everyone has access to this information online (with a few exceptions).

Below are some themes from the first quarter, along with tips on how to read the reports.

Context

Most managers start with a review of how markets did and what was particularly strong or weak. In the first quarter, equity markets were up, led by dramatic moves in commodity producers and a few mega-tech stocks. Bonds had a small negative return because of an increase in interest rates.

Market overviews provide context for looking at your own portfolio, but keep in mind, a quarter is a short, arbitrary period that will have a tiny effect on your long-term return. And they're all the same, so read one and skip the rest.

How did I do?

Next comes fund performance. The commentary here is also short term in nature and may be accompanied by detailed attribution showing which stocks and sectors contributed and detracted from returns. It's overkill to analyze such a short period, so I suggest looking for any detailed reviews of stocks that have broken out or broken down. This provides a better window into the manager's thinking.

Fortunately, every report includes a table showing long-term returns. This deserves more of your attention. In recent years, the dominance of the Magnificent Seven stocks has made it difficult for active managers to beat the indexes. For reasons of diversification and risk control, it's been almost impossible to own enough of these stocks.

Periods of poor performance like this are painful but useful. They reveal just how committed a fund manager is to their philosophy and process. I learn the most about a manager when they're getting pressure from clients and are on their heels.

For instance, my antenna goes up if they start buying stocks that don't fit their philosophy. I learned this in the late 1990s when some underperforming value managers bought high-flying Nortel and JDS Uniphase. It was their death knell.

What's economics got to do with it?

Economics is a staple in quarterly reports. Clients like to read about economics, so managers dutifully provide charts and commentaries, even if GDP and inflation forecasts don't factor into their investment decisions.

This quarter, most managers highlighted the increasing likelihood of a soft landing. One manager put a 50-per-cent probability on it, which reflects the current consensus. Inflation was also a common topic. Over the past year, it has trended down toward the central banks' target range, but the last per cent or two is proving to be sticky. Managers who are less optimistic about interest-rate cuts pointed to rising wages, which ripple through the economy, as a reason why the last mile will be challenging.

Regarding interest rates, some managers made the mistake of talking about when they come down, not if. This sends up red flags because, as I pointed out in a recent column, declines are far from a certainty. Does the manager need lower rates for their strategy to play out, or are they anchored on the abnormally low rates of two years ago?

Price paid

Most equity managers acknowledged that valuations are getting stretched. Price-to-earnings multiples have increased in recent months. One British manager went so far as to say, “Markets look as stretched as they did back at the end of 2021.”

Fixed-income managers are saying much the same thing about corporate bonds. The reward for owning a riskier corporate bond as opposed to a government bond is as small as it ever gets. In other words, credit spreads are narrow by historical standards.

On a more optimistic note, several global managers pounded the table about opportunities in emerging markets. Smaller companies from Asia or South America always trade at a discount to large U.S. companies but the gap is wider than normal. EM has been an underperformer for a dozen years now. Managers of North American small-cap funds also pointed to a significant valuation gap.

A quarterly report has a short shelf life. But there are important nuggets to be found if you're mining for insights into the investment manager and their long-term approach.

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A key concern for investors in or nearing retirement is the question of how to best draw a reliable and steady income from your portfolio. In our latest Coffee Break, we're joined by Janet Gray, an advice-only financial planner with Money Coaches Canada, to dig into the topic. From addressing the complexities of decumulation to navigating the sequence of returns risk and minimizing taxes, this discussion covers it all.

We also explain how our new Steadyhand Retirement Withdrawal Program is a simple and effective solution designed to mitigate market risks and provide peace of mind for retirees.

by Tom Bradley

This column often focuses on valuation because the price you pay for an investment is the single most important factor in determining your return. It’s not the only factor, but the most dependable one.

To quote Howard Marks of Oaktree Capital Management, "No asset can be considered a good idea (or a bad idea) without reference to its price."

My purpose here is to drill into how valuation works and why it’s important.

The first thing to understand is that valuing fixed income is different than valuing equities.

It is all about yield

The price tag on a bond, or other fixed-income vehicle, is its yield, which to be useful, must be compared with something. I’ll focus on two key relationships.

The first assesses how appropriate the current level of interest rates is. Is the yield on a bond or GIC attractive? For this, we look to the real yield, which is the nominal yield minus the expected rate of inflation.

High-quality bonds are expected to provide an income and return the capital at maturity.

When they have a positive real yield, which is the case today, investors are rewarded for tying up their capital for a period. Currently, government bond yields are above expected inflation, which suggests interest rates are in a normal range.

This is in contrast with the three years prior to interest rates normalizing in 2022. During that period, real rates were negative, and investors were losing ground to inflation. They were destined to have less purchasing power at maturity than at time of acquisition.

The other comparison relates to corporate bonds, including high-yield bonds and private debt. Corporates have a higher risk of default and therefore must offer extra yield over and above government bonds. This premium is referred to as the spread. The riskier the bond, the wider the spread.

Spreads expand and shrink depending on how confident investors are about the future. Today, they’re skimpy relative to history, as corporations are doing well, and investors seem less worried about the potential for rising default rates. The news is good, but narrow spreads tell me that corporate bonds are fully priced relative to more secure government bonds.

In summary, yields on fixed-income products are attractive again (positive real yields) but the reward for taking additional risk is more modest than usual (narrow spreads).

Profits tell the story

When valuing stocks, the yield is of little use, although many investors mistakenly base investment decisions on the dividend. Rather, the stock market is driven by corporate profits, specifically the expectation of future profits. The link between a company’s profit outlook and its stock price is the price-to-earnings ratio (PE). A company that trades at $20 and is expected to earn $1 per share next year has a PE of 20.

There are different PE’s based on different market indices and earnings calculations. For instance, many investors look at the Shiller Cyclically Adjusted PE Ratio, or CAPE, to lessen the influence of short-term results. It’s based on average, inflation-adjusted earnings from the previous 10 years.

My favourite PE is calculated by the Value Line Investment Survey, a U.S. research firm, which is the median PE for 1,700 companies. By using the median, every company in the sample has an equal impact, whether it’s Microsoft or Auto Trader Group. The PE is less influenced by a few large corporations and provides a better overall view of the market.

Why does valuation matter?

The past year demonstrates why valuation is important. Stock markets have been strong, driven partly by solid earnings results but mostly by an increase in valuations. Simply put, investors are willing to pay more for a dollar of earnings today than they were a year ago. The Value Line PE increased to 18.3 times from 16.5 (its long-term average).

Contrast this with 2022, a tough year in the market, when valuations plummeted from unrealistically high levels and brought stock prices down with them. The tech wreck in 2000-2003 was also a valuation meltdown.

Current PEs are nowhere near 1999 or 2021 levels, although they’re starting to test the upper end of their historical range.

It’s important that investors correctly assess a corporation’s ability to make interest payments and grow their earnings, but it also matters what they pay for that outlook. As Mr. Marks alludes to, overpaying for an asset will portend poor returns. Paying a reasonable price, or even a historically cheap price, is much preferred.

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by Scott Ronalds

Electric vehicles are the future, despite a recent slowdown in sales. They’re better for the planet, have fewer parts and lower maintenance costs (no oil changes, less brake wear), and offer excellent performance. Governments are also mandating their increased adoption.

To no surprise, they’ve piqued the interest of investors in recent years. Tesla has a legion of fans and has generated enormous returns for early shareholders. Yet, many investors have also been burned. Indeed, the stock is still down more than 50% from its 2021 high. The same can be said of Rivian (the high-end maker of trucks and SUVs) and BYD (the Shenzhen-based firm that for a brief time overtook Tesla as the world’s top-selling battery electric vehicle manufacturer).

To say that EV stocks are volatile is an understatement. Because of the excitement and hype around the prospects of an enduring shift towards electrification, there’s been speculation around the stocks at times that has led to big share price swings. Investing in the sector is made more challenging by the fact that the manufacturers require significant amounts of capital, profit margins are erratic, and demand has shown signs of inconsistency (Tesla and BYD recently reported disappointing sales figures).

Yet the EV story is compelling, nonetheless. Many investors are focused on picking the company that will win the race (Tesla, Rivian, BYD, Hyundai, or one of the other emerging players), hoping their bet will pay off. But there’s another, arguably safer, way to participate in the industry’s growth: seek out best-in-class suppliers of parts and components.

One such company is Michelin. The French firm with the famous mascot is the technology leader in tires for electric vehicles, and is consistently recognized as one of the world’s most reputable brands. EVs are more demanding on tires because of their heavier weight and faster acceleration. Michelin has developed solutions to address these issues (its tires offer a high load capacity, the lowest abrasion rates, and low rolling resistance) and 8 out of 10 EV manufacturers use its tires as a result.

Michelin stands to benefit from the overall growth in the EV market, regardless of which firm comes out on top. It’s a more stable business (than the EV makers) and has a 135-year history of innovation and profitability. Granted, it’s not going to grow at the pace of a Tesla or BYD, but it’s a steady cash generator with a lower level of risk.

We own Michelin in our Global Equity Fund, which means you also own it if you hold our Founders Fund or Builders Fund. The EV race is sure to be a fascinating one, with more twists and turns to come, and we’ll be watching with interest. (As a side note, 20% of our staff own an EV.) Our money, though, is on the wheels that make it go round.

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In our latest Coffee Break, we tackle Canadian taxes with host David Toyne and CPA Joe Collins from Avalon Accounting. With the tax filing deadline fast approaching, Joe shares his top 10 tips to optimize your return, covering everything from RRSPs to investment losses to medical expenses.

by Tom Bradley

When my wife and I are surprised or confused about something, Lori has the habit of saying, "What’s going on?" Rather than wondering or speculating, she gets to the bottom of it.

When it comes to the stock market, a lot of people are asking just that question these days. It’s been on a tear over the last six months, regularly hitting new highs. Not surprisingly, the answer is a combination of things, many of which overlap and fuel each other.

History. First of all, it’s what markets do. A long-term chart of the overall market trends up and to the right, with a steady diet of new highs along the way.

Starting point. I don’t like to assess the sustainability of any trend without first identifying where it started. Often, a large part of a market surge is simply a recovery from an unusually weak period. Indeed, the current run started last fall when investors were worried about inflation, interest rates, and recession.

Fundamentals. Companies are doing well in the absence of a full-on recession. They’re growing sales and reporting solid profits. There are exceptions of course (commercial real estate being the extreme), but our fund managers see a broadening of the market. There’s less dependence on the mega-tech stocks and more recognition of good news in other sectors. Fundamentals matter again (they always do in the long term).

Valuations. Rapidly rising markets are invariably fueled by an increase in valuations. That’s certainly been the case in recent months. The price investors are willing to pay for future profits has increased. It’s not universal but many sectors are now being priced more fairly than a year ago when AI was getting all the attention.

These factors help explain why markets have been doing well but tell us little about where they’re going (we’re a broken record on this, I know). With that in mind, the Steadyhand approach entails sticking to a long-term plan (staying steady!), giving our fund managers the scope and time to do their thing, and avoiding big mistakes at market extremes (i.e., when investors are euphoric or despondent). And when prudent, taking advantage of those extremes.

At present, fundamentals, valuations, and investor sentiment are telling us to not get carried away, but rather keep the Founders Fund’s asset mix close to its long-term target. For clients who know they’ll need money for something in the near term, our advice is to set aside what’s needed in the Savings Fund. For everyone else, keep it simple. Make regular contributions and follow Charlie Munger’s first rule of compounding – never interrupt it unnecessarily.

I’ve just scratched the surface here on our approach and advice. We’ll go further at our Where to From Here? presentations coming up in May, taking place in seven cities across the country. Covid interrupted our annual investment forum for a few years, but I’m looking forward to seeing our clients in person again and hope you can make it!

I encourage you to read the rest of our Q1 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

We're not a bank. Which means we don't have to communicate like one (phew!). Sign up for our Newsletter and Blog and join the thousands of other Canadians who appreciate the straight goods on investing. Subscribe

by Tom Bradley

There’s plenty of talk about how concentrated the U.S. stock market has become. The top 10 stocks account for 31 per cent of the S&P 500 Index. This has happened because a handful of companies have built powerful and enduring businesses that disrupted incumbents or created whole new industries, including what’s dubbed the Magnificent Seven: Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla. The current level of concentration is well above normal. The previous peak of 27 per cent was reached near the end of the tech boom in 2000. When this latest surge started in 2017, the weighting was 17 per cent.

Concentration is relevant to investors because many portfolios are designed to either passively replicate the market (indexing) or actively try to beat it. The former look exactly like the indexes, and the latter, while intentionally different, are managed by portfolio managers who are fully aware of the index weightings. Their portfolios may not be exactly the same, but they often rhyme.

The Magnificent Seven have grown so big, and the trend has gone on for so long, that their influence has played an important role in how investors’ portfolios performed. Those well represented in these generational companies did extremely well.

There are a few important things to know about the top 10.

Count on change

First, it’s a revolving door. It’s hard to believe the Magnificent Seven will ever be dislodged, but change is the only consistent pattern around the top 10.

If we go back a decade to 2014, the top seven were Apple, Exxon Mobil, Alphabet, Microsoft, Berkshire Hathaway, Johnson & Johnson and Walmart. Amazon, Meta and Nvidia weren’t anywhere close, and Tesla wasn’t yet in the index.

In 2004, Microsoft was at the top, but the group behind it was quite different: Exxon Mobil, Pfizer, Citigroup, General Electric, Walmart and Intel.

And in 1994, 30 years ago, the S&P 500 had little technology at the top: Exxon Mobil, Coca-Cola, Walmart, Raytheon, Merck, Proctor & Gamble and General Electric.

You get the picture. Staying at the top of the cap tables isn’t easy. The companies on the list are there because everything is clicking, their products are loved and their valuations have expanded beyond the historical range.

The math would suggest, however, that the largest can’t continue growing at the pace that got them there, nor can they hold a premium valuation forever. Slowing growth and a shrinking valuation are a double whammy that’s hard to overcome. Of the Magnificent Seven, Apple’s sales are no longer growing, and all the companies are running into anti-trust issues as they try to expand.

It wasn’t always this way

Riding the largest stocks has been a good strategy in recent years, but that was not always the case. GMO, a Boston-based asset manager, points out that, historically, the top 10 stocks have done worse in the following year than the S&P 500 overall. Since 1957, the return shortfall for the top 10 versus the other 490 has averaged 2.5 per cent a year. There were only two partial reversals of this trend: the tech boom in the late 1990s and the past six years.

Another way to look at today’s concentration is to compare returns from capitalization-weighted indexes (which are quoted every day) and equal-weighted indexes (every stock makes up an equal proportion of the index). Aristotle Capital Management, manager of our Global Equity Fund, points out that this comparison has gone through two distinct periods since 2000.

For the first 12 years, the equal-weighted version of the MSCI All Country World Index consistently and convincingly beat the conventional cap-weighted index. Since then, the trend has been exactly the opposite, as the mega tech stocks have grown and the market has become more concentrated.

Eyes wide open

I’m not calling for the demise of the Magnificent Seven, but history tells us that some of this group will be surpassed by other companies in the coming years, and likely all of them will fall off the list in the coming decades. In other words, the group will change, and we’ll be subjected to other catchy names and acronyms.

As investors, we need to ensure we’re not managing our portfolios while looking in the rearview mirror. Rather, we need to look forward and assess two things: the outlook for a company’s profits and sales growth, and the price we are paying for it. That’s what will determine which stocks and strategies are magnificent in the future, not who is at the top of the standings right now.

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If you're a Canadian living in the U.S. or an American working in Canada, you're bound to run into some financial and tax planning complexities. While the topic can seem daunting, it's important to understand what your responsibilities are and who you can turn to for help. In the video below, we chat with Andrea Thompson, a cross-border planning expert and founder of Modern Cents, an advice-only financial planning firm. Andrea shares valuable insights into navigating these challenges and ensuring financial peace of mind.

by Tom Bradley

The business media is obsessed these days with the possibility (or hope) of interest-rate cuts, the depth and timing of the next recession, the U.S. election and artificial intelligence. Of these, only AI, which has the potential to change how business is done, will have an important impact on long-term portfolio returns. For investors, the other topics are short-term noise.

Unfortunately, the noise obscures important trends and innovations that will have a greater effect, even if they don’t move markets tomorrow or next week. I’m talking about trends that are progressing slowly and thus garner little attention. Things that you want to get on board and ride with, as opposed to fight against.

Some themes are durable, inevitable and highly visible. Things such as demographic shifts and the electrification of the economy. The impact that aging baby boomers will have on health care, consumption and pickleball equipment is undeniable. And the energy transition will lead to lasting and profound change, no matter what form it takes. There will be companies left behind, perhaps even some big ones such as the incumbent auto companies, but also many exciting investment opportunities.

Some underlying themes can’t be fully assessed until years later. The most powerful and enduring trend of my investment career was the 40-year decline in interest rates, from the high teens to almost zero. Few anticipated that globalization and digitization would have the lasting impact on inflation that they did. There were investors who rode the trend for periods of time, but I can’t recall anyone correctly calling the length and magnitude of the decline.

The adjustment to more normal interest rates that the economy is going through now won’t last 40 years, but this week Brian Moynihan, the chief executive officer of Bank of America, described the required restructuring in commercial real estate as a “slow burn.” It will take time for the refinancing cycle to play out and the price gap between buyers and sellers to narrow.

Higher rates don’t just hit real estate. All businesses are affected, particularly those being funded by private equity and/or selling products that require debt financing (for example, appliances, home renovations, automobiles).

Mirroring the interest rates cycle was a massive buildup of debt, which is a trend that may be about to pivot. Governments everywhere have had their foot on the stimulation gas pedal (spend now, pay later), but there’s now little fuel left in the tank and the brakes will need to be used. We should be prepared for higher taxes and user fees, less government largesse, even during economic slowdowns, and more private funding of much needed infrastructure.

While debt-related trends are slow moving train wrecks and should be avoided, there are others that you want to be onside with.

Consolidation is a long-standing trend that will continue to benefit investors. The mega firms are starting to run into antitrust issues, but most industries have decades of consolidation ahead of them.

Supply chain resilience is the new catch phrase. Companies are diversifying their sources of production away from China. Smaller Asian countries and Mexico stand to gain from this shift.

And then there’s AI (and other technological innovations). The excitement about AI has been likened to the hype around the web in the late 1990s. In hindsight, the web far exceeded expectations. We won’t know whether AI will live up to the hype until years from now, but the early indications are impressive.

The second and third order effects of AI will allow non-tech companies to lower costs and redefine customer service. Perhaps the most exciting outcomes will be in health care where a rapid acceleration of drug discovery is already evident.

Suffice it to say, we’re going through a fascinating time when massive economic and technological trends are starting, ending, and pivoting. I’ve just scratched the surface here.

We have a front-row seat to watch it all unfold, so perhaps it’s the time to put on your noise cancelling headphones and spend more time thinking about the long-term drivers of investment returns and less on idle speculation about rates, recessions and elections.

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by Scott Ronalds

Some people love shopping at Costco, others hate it. I fall more into the latter camp. Crowds, lineups, and parking battles aren’t my thing. But two things keep bringing me back: the unbeatable prices, and the hot dog.

That fresh, soft bun and seasoned-just-right sausage is an absolute steal at just a buck fifty (not to mention it comes with a drink). Sure, it’s far from a healthy nosh, but after you’ve logged a few thousand steps in a colossal warehouse you deserve a salty snack.

Costco has been dishing up the meat in a bun combo for nearly 40 years. Remarkably, the price hasn’t changed. Surely, it’s part of the reason why Americans ate more than 200 million of them last year, according to an article in The Economist on why Costco is so loved.

The piece addresses the reasons for the big-box retailer’s enduring appeal — among customers and investors — including its focus on stocking quality products at the lowest prices, incredible buying power, high return on capital, and 90%+ membership renewal rates. It’s for these reasons, too, that Steadyhand clients own a piece of the company (through our stock holding in the Equity Fund and in turn, the Founders Fund and Builders Fund).

But back to the dog. Because the price of Costco’s iconic red hot combo has remained unchanged, its “real” cost falls every year when factoring in inflation — making it the epitome of a good deal that only gets better over time. We take the concept to heart with our fee structure.

Our Fee Reduction Program rewards commitment and loyalty: as your portfolio grows and your relationship with us matures, your fee (as a percentage of total assets invested) goes down, enhancing the value of your investment. All portfolios over $100,000 qualify for a reduced fee, which is lowered even further after you’ve been a client for five years (and lowered again after 10 years). Check out our Fee Calculator to see the fees on any given portfolio.

Here’s an example of how the program works.

• Initial investment: Let’s say you opened an account with us 10 years ago for $100,000 and held our Founders Fund. Your initial all-in fee would have been 1.34%. 

• Year 1: If your investment grew by 7%, to $107,000 (the fund’s actual return in 2014 was 7.1%), your fee would have fallen to 1.32%. 

• Year 5: Fast forward four more years, with your portfolio now at $200,000 from a combination of investment returns and contributions. At this milestone, your fee would have dropped to 1.12%, reflecting the growth of your portfolio and your first tenure discount of 7% (applied annually hereafter to your total fee). 

• Year 10: Jump ahead another five years and assume your portfolio has grown to $400,000. Your fee would now be 0.94%. This is thanks to the size of your account and a tenure discount of 14% after a decade of partnership with us.

Our structure is counter to the industry standard where fees typically remain static, meaning that as your portfolio grows, so does your investment firm’s take — not a great value proposition in our view. Perhaps a trip to the Costco concession is in order for the industry’s fee setters.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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by Salman Ahmed

OpenAI's ChatGPT has made artificial intelligence, or AI, mainstream. AI has long been used by companies such as Amazon and Netflix to make personalized suggestions. Now it's being employed across a variety of industries. Microsoft has embedded its Copilot feature in Excel and Word. GitHub allows subscribers to build code using AI. And further advances will likely make personalized medicine and autonomous vehicles a reality.

In this video with Aylon Ben-Shlomo, managing director at Aristotle Capital (the manager of our Global Equity Fund), we explore the history and future of AI. Specific to investing, we discuss why stocks of microchip producers like Nvidia have been the main benefactors and how other stocks like Samsung, Qualcomm, and even gravel company Martin Marietta stand to gain. Aylon also weighs in on AI's impact on power consumption and the labour force.

by Tom Bradley

It’s a good time to be an investor. Stock markets are on a roll. The MSCI World Index is up 9 per cent year-to-date and more than 40 per cent since September, 2022.

Nobody knows what’s going to happen going forward. There are plenty of cross-currents. Depending on whom you ask, there’s going to be a soft or hard landing, interest rates are going back down or are now in a normal range, and valuations are just fine or historically high.

This combination of good markets and not knowing the future makes it a good time to do some work on your portfolio and set yourself up for the next few years. There are three reasons why I say this.

First, your process is less emotionally charged when things are going well. You have time to make rational decisions based on your long-term plan.

Second, you’re operating from a position of strength. You’re less likely to agonize about selling something that’s down or making a change to your asset mix because you’re not already behind the eight ball.

And third, it’s a time when investors go to sleep. It’s working, don’t fix it.

To be clear, I’m not a proponent of doing a lot of trading or fiddling with your portfolio. As the saying goes, a portfolio is like a bar of soap: The more you touch it, the smaller it gets. But there may still be a few things you can do to improve your chances of success.

Accumulating

If you are young and building your wealth, you have the least to do. You’re in the simplest stage of the investment cycle. You have time on your side, so the goal is to invest as much as you can, as early as you can. Automatic monthly contributions are your most effective investment tool.

The asset mix should be heavily equity-oriented because your portfolio has a multidecade time horizon. Without the ability to time the market, there’s only one thing to do: keep your foot on the gas.

Still, you may want to use contributions to reset the industry and geographic mix of your portfolio, especially given how well U.S. tech stocks have done.

Late career

If you have a balanced portfolio and are seeking steadier returns, you may have more to do. Your goal is to participate in strong markets while holding up better during the downdrafts.

While stocks have been good, bonds have lagged, which may have caused your asset mix to get out of whack. If your target mix calls for a certain percentage in bonds and you’re not there, then it’s time to make an adjustment.

Bonds inject income into the portfolio and, importantly, are great diversifiers. When stocks are dropping and sentiment is overwhelmingly negative, interest rates tend to drop, which causes bond prices to rise. For this reason, government and high-quality corporate bonds provide more downside protection than cash or GICs.

Keep in mind that current yields have historically been a reliable indicator of bond returns for the following 10 years. For that reason, we’ve increased our return expectations for bonds to 4 per cent to 6 per cent a year.

As for stocks, don’t make the mistake of extrapolating recent trends and increasing your return expectations. If you look at a long-term stock market chart, it trends up and to the right. There are periods when it runs hot and rises above trend, effectively borrowing returns from future years, and other times when it drops below trend, setting up supersized returns. The point is, through these ups and downs the trend line changes very little.

Retired

If you’re relying on your portfolio for a regular paycheque, you have the toughest job. You have two conflicting objectives. For a portion of your wealth, you must generate a steady income that isn’t dependent on market returns. Call it a spending reserve. With the other part, you need to earn a good long-term return to fund your retirement 10 to 20 years from now.

At Steadyhand, we have a Retirement Withdrawal Program that helps clients manage this balance. At its core is a simple premise: When markets have been good, we top up the reserve (typically two years of spending); conversely, when the long-term portfolio is down, we draw down the spending reserve (which is what it’s for). We’re not trying to be too precise, just approximately right.

Whatever stage you’re at, taking a little time to review your portfolio now, when you have the time and temperament, will help you fully benefit from the zigs and zags ahead.

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by Salman Ahmed

The Bank of Canada does more than just monitor inflation to make interest rate decisions. It helps oversee the financial system, manages the Government of Canada’s foreign exchange reserves, supervises payment providers and decides what our currency looks like. It’s even researching digital currencies.

In this interview with Carolyn Kwan of Connor, Clark & Lunn (the manager of our Income Fund and Savings Fund), we discuss Canada’s interest rate outlook in 2024 and many of the other things the Bank of Canada does to support the Canadian economy. Carolyn also provides insights into how Canadians can use the Bank’s resources in their lives.

by Tom Bradley

Risk is a loaded word. It has negative connotations for most people, and is something to be avoided.

Unfortunately, it’s an essential part of investing. It’s embedded in the math – risk plus time equals return. If you want returns in excess of the risk-free rate, which for most investors is a government bond or GIC, you need to take risk.

I want to explore three important aspects of risk, but I’ll start by defining the four types of investment risk.

When you seek a higher yield by buying a bond with a longer term to maturity, you’re taking interest-rate risk. The longer the term, the more sensitive it is to changes in interest rates. A long-term bond with a fixed yield becomes less valuable when rates go up, and vice versa. This risk was obscured for 40 years by steadily declining yields, but it reared its ugly head in 2022.

To gain more yield, investors can also take credit risk, which means accepting a higher chance of default – owning a corporate bond instead of a more secure government bond, perhaps.

Number three is the biggest risk in most portfolios – equity or ownership risk. If you hold a stock (or fund that holds stocks), you’re a partial owner of a company, which may deliver dividends and growth, but may also result in a loss if things don’t work out.

And number four is liquidity risk, which involves accepting limited liquidity in exchange for a higher potential return. For example, investors should expect a higher yield on a mortgage fund that only allows redemptions once a year.

All these risks contribute to returns in different ways at different times, and each can be dialled up or down.

Of course, you never know all the risks at work in your portfolio. Carl Richards, author of The Behavior Gap, said it well, “Risk is what’s left over after you think you’ve thought of everything.”

Now, let’s drill into how you interact with risk.

It’s different for everyone

Risk is personal. It’s your very own, based on your financial situation, personality, and goals for the money.

The media tends to assume that everyone has the same risk profile, but volatility isn’t bad for everyone, nor is a weak stock market. For money set aside for a short-term purpose, such as a trip or kitchen renovation, a down market is a risk that needs to be protected against. For money being invested for retirement decades in the future, a dip is a blessing. It’s an opportunity to make contributions when stocks are on sale and potential returns are better.

Paying for protection you don’t need

The wealth management industry is very creative. Overwhelmingly, structured products are designed to reduce volatility. The focus is not on maximizing return but rather attaining a reasonable return with smaller declines. That’s the holy grail for index-linked notes sold in bank branches and liquid alt funds deploying hedge fund strategies (Note: higher fees, including profit sharing, also moderate returns).

These products can be good diversifiers because their returns tend to follow a different pattern than bonds and stocks, but for portfolios with a multidecade time frame, where zigs and zags are unimportant, they make less sense. These investors want to fully benefit from the compounding effect of owning good companies for a long period of time. Sacrificing returns to reduce a risk they don’t care about is a bad tradeoff.

Divide and conquer

Most investors have more than one goal. Young families are investing for retirement and setting money aside for short or medium-term needs like down payments or kids’ education. They have multiple pots with different risks, each requiring a different approach.

A retired investor needs a steady income in the next one to five years but also must invest money that can grow and provide an income in 15 to 25 years.

Whether you’re young, old, or in between, risk is something to be managed, not avoided.

That means dividing your portfolio into separate pots, based on time horizon and return objective, and then deciding what risks you need to guard against in each.

It means building a portfolio that’s diversified across a variety of risks so you can reap the rewards without letting one misfortune take you off course.

And when consuming investment information, or getting a tip from a friend, determining if it’s appropriate for any of your pots. Are you playing the same game as a buddy who’s looking for moon shots, or conversely, your grandfather’s conservative dividend stocks?

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In our latest Coffee Break, we're joined by Julia Chung, an advice-only planner and President of Financial Planning Association of Canada (FPAC), to discuss the evolving landscape of financial planning and why you might consider working with an AOP.

by Tom Bradley

I’ve been using the phrase “normalization of interest rates” in recent communications with clients because rates are closer to normal today than they were two years ago when homeowners could get a five-year fixed-rate mortgage for less than 2 per cent.

Of course, the risk of using the word “normal” is that readers think I know what normal is. At this juncture, I can’t say I do. It’s open for debate, with a wide range of possibilities. Perhaps I should have said that interest rates are less abnormal than they were two years ago.

I’ll use my personal history to explain the difficulty of declaring what normal is.

When I started in the business in the early 1980s, interest rates were in the high teens. Generations older than me still love to tell stories of buying Canada Savings Bonds that paid 19.5 per cent interest. As it turns out, that was the starting point for a 40-year bull market in bonds. From that point on, yields steadily dropped until they approached zero in 2021. (Reminder: Bond yields are inversely related to bond prices – when yields decline, prices rise.)

It was a remarkable run. Bonds were like my favourite hockey player, Bobby Orr, who was great at everything (if only his career had lasted 40 years). They provided steady income (defence), spectacular total returns (offence) with the help of capital appreciation, and were a great diversifier when stock markets were weak (Orr was at his best at crunch time).

The point of the history lesson (and sports reminiscence) is that it’s impossible to say what “normal” is. Interest rates have been in flux for well more than 40 years. Even if we look at a chart of real interest rates, which are adjusted for inflation, no clear pattern emerges.

What we can say confidently, however, is that near-zero interest rates, which every borrower is hoping to see again, were not normal. Money was almost free for highly-rated borrowers, while lenders (the holders of bonds and GICs) were losing ground to inflation. The money they got back at maturity bought less than the amount invested years before.

In Howard Marks’s latest memo from Oaktree Capital Management, he refers to a quote from the 17th-century that describes interest as “a Reward for forbearing the use of your own Money for a Term of Time agreed upon.” In 2021, it wasn’t sustainable for lenders to be receiving little or no reward for forbearing.

I have a rule of thumb that is far less elegant than Mr. Marks’s phrase – if it’s a great time to be a borrower, it’s a lousy time to be a lender.

If I were to take a stab at what normal interest rates are, a minimum of two conditions need to be met. First, bond yields must be higher than inflation over the term of the security (based on inflation expectations at the time of purchase). In other words, a positive real yield.

And second, for corporate bonds and mortgages, there needs to be a reasonable amount of extra yield compared to government bonds to compensate for the possibility of default. This extra yield is referred to as a spread.

Currently the first box is ticked. Rates are bouncing around but generally running above inflation expectations. The second box is up for debate. The extra yield for taking more risk is small by historical standards. Spreads are on the narrow side.

I’m not here to make a call on interest rates (if I was any good at it, I’d have owned more real estate in the past 20 years). Bond yields have already come down from the highs of last fall and may go lower, but we should be careful what we wish for. A decline to 2021 levels wouldn’t be a return to normal but, rather, a monetary response to a cripplingly weak economy.

And of course, interest rates could even go higher if inflation proves to be stubborn and/or governments need to offer higher yields to entice investors to fund their never-ending deficits.

The point is that I see many people basing their financial and investment decisions on the hope that interest rates will go back down. Hope is not a strategy, especially when it’s for a return to highly abnormal conditions.

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by Scott Ronalds

We often say that we have the best clients in the business. It may sound like a throwaway line or marketing-speak, but we can back it up.

From a numbers perspective, we measure things like client retention rates, redemptions during market downturns, and our ‘behaviour gap’ (the difference between the returns that our funds produce and those that our clients actually earn). The hard data shows we have a committed group of investors who stick to their plans, in good times and bad.

Then there’s the human side. From beekeepers to anesthesiologists to marine pilots, we’ve got a diverse and fascinating group of clients for whom we’re fortunate to manage money and advise on financial matters. Through it all, we get to learn about their lives and goals.

A case in point is Hélène. When we set out last year to produce a testimonial video, Hélène keenly accepted our invitation. We were hoping to find a client who would share their unique journey and discuss their investing experience with Steadyhand. Hélène did that and more, and we want to share her story.

Like I said, the best clients in the business.

You’ve worked hard to accumulate your retirement nest egg and want to enjoy the fruits of your labour. But you don’t want to pay more taxes than you need to — which is why you should know about three key tax credits.

In our latest Coffee Break, Owen Winkelmolen, an independent advice-only financial planner, shares some valuable insights on how to lower your tax bill in retirement by focusing on, and planning around, three key tax credits: the (1) basic personal amount, (2) age amount, and (3) pension income tax credit.

In addition to these tax credits, Owen also offers tips on how you can use your TFSA for added tax-free income.

by Tom Bradley

I’ve been advocating for better client reporting for more than 15 years. To me, talk about financial literacy and investment education rings hollow if investors can’t determine with confidence how they’re doing and what they’re paying – that is, after-fee returns and total cost.

The industry has made progress in providing this basic information, thanks mostly to the efforts of securities regulators and noisy investor advocates, but we have further to go.

A growing number of investors see return and fee numbers on their regular account statement (perversely, discount brokers do a better job of providing this information than more expensive, full-service advisers). For the rest, this basic information is revealed only once a year in an unappealing document entitled something like “Annual Report of Investment Returns and Fees” (the words “compensation” and “charges” may also be in the title).

For these investors, the annual report is the most important investment document they’ll read all year. For clients of advisers, it can anchor the next review meeting, triggering a discussion about returns and fees. For do-it-yourselfers (DIY), it’s a starting point for assessing how their approach is working. Do their returns stack up against index or actively managed funds with a similar mandate (such as equity or balanced).

Fees

Years ago, I saw Vanguard refer to investment fees as “lost return.” It’s an apt description. Fees are one of the few controllable factors in investing and have an undeniable impact on long-term returns.

The rebuttal to this view – the only thing that matters are after-fee returns – is absolutely true, but doesn’t go far enough. The chance of getting good after-fee returns goes down commensurately as fees go up.

Fees are the area where disclosure needs the most improvement. That’s because not everything is included. Regulators are working on this but in the meantime, the annual document only shows charges for administration, trading and advice. It doesn’t include fees imbedded in ETFs, mutual funds and managed products, which can be significant.

I hear it often, “My adviser charges me 1 per cent.” Technically, that’s correct. The adviser’s firm is charging 1 per cent annually for advice and service, but the total cost could be as much as double that if the portfolio is invested in products that charge an additional fee. (My guy charges me 2 per cent?)

Sadly, the only way to know if you’re being charged these fees is to ask.

If you have an adviser, ask them to calculate the total fee. If they dodge the question or say they can’t do it, it’s likely you’re paying too much. Ask again.

Investment returns

Performance reporting is better than fee reporting. You might need to fight through pages of a wordy document to get to the numbers, but at least the returns reported are after all fees (including those not shown in the fee section).

Your eyes will naturally gravitate to the one-year and three-year numbers, especially after the wild ride we’ve had since the start of COVID-19, but the longer-term returns are a better match with your long-term goals. They include all types of markets and are less affected by current events.

At the risk of getting too technical, the numbers in the report are money-weighted rates of return (MWRR), which take into consideration two things: how your holdings did in the period (funds and stocks), and the timing of any contributions or withdrawals. MWRR is a more accurate portrayal of your investing experience than non-personalized measures. If you need further explanation, your adviser should know this cold.

You’re the chief executive of your portfolio

The wealth management industry has vigorously pushed back on any and all client-friendly initiatives. Many firms seem intent on keeping clients in the dark. Investors need to advocate for themselves in this regard, and the performance and fee report is a good place to start. Make sure you understand it.

If you have an adviser, let them know that you’re bringing your annual report to the next meeting and want an explanation of the returns and a full accounting of the fees, including those not listed in the report.

If you’re a DIY investor, use the data in the report to determine if you’re on the right track. Don’t be like most DIYers I meet who say they’re doing well but don’t have the numbers to back it up. There’s really no excuse for not knowing.

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No explanation required.

Note: The above table shows the returns of our five long-standing funds: Steadyhand Savings Fund, Steadyhand Income Fund, Steadyhand Equity Fund, Steadyhand Global Equity Fund, and Steadyhand Small-Cap Equity Fund. The Steadyhand Founders Fund is not included in the table, as it was not launched until 2012. The Global Small-Cap Equity Fund and Builders Fund are also not included, as they were launched in 2019.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

by Tom Bradley

“I will be a steady, long-term investor.”

It’s easy to say and difficult to do. Particularly in the past few years. Think about what we’ve been through. In 2020, markets plunged when the pandemic hit and then quickly recovered, finishing the year well into positive territory.

2021 was the most speculative year I’ve seen in my 40 years in the investment business. It was hard not to suffer from FOMO as exciting growth – profits be damned – was the order of the day.

2022 was the opposite. Reality set in and investors prioritized profits and strong balance sheets. It was a down year but had a few positive runs, including a strong finish.

And then last year, the rebound continued, but again, it wasn’t a straight line. The stock market bobbed and weaved as expectations for inflation and interest rates flipped back and forth.

The swings were enough to make your head spin but they weren’t unprecedented. There are always risks to worry about. Stocks regularly zig and zag on their way to higher levels. And sometimes, there’s a bright shiny object that captures investors’ imagination and lures them in another direction. I’m referring to trends and products such as cannabis, crypto, AI, and more recently, higher-yielding GICs.

The point is that there’s a big gap between talking about sticking to a plan and actually doing it. Indeed, Joe Wiggins, a keen observer of investor behaviour and regular blogger, says “taking a long-term perspective is the most severe behavioural challenge that investors face.” Meeting the challenge means “frequently ignoring issues that we and everyone believes – at that moment – are absolutely critical. No wonder so few investors can do it.”

In this vein, I’d like to offer a few suggestions that will improve your chances of being a disciplined, long-term investor.

Pick a destination. You can’t stay on track if you don’t know where you’re going. Every decision should be made in the context of a plan that clearly defines the purpose of the money and when it will be needed. This helps determine what risk is to you. If the money is for near-term spending needs, then a weak stock market is a risk. If you’re making contributions to build your wealth for retirement, that same weak market is a godsend.

SAM is your friend. A strategic asset mix, or SAM, is a key part of any plan. It defines the mix of stocks, bonds and cash that best fits your goals and personality. SAM should encompass all your financial assets – TFSAs, RRSPs, company or government pensions, income properties, emergency reserves. It gives you a framework to act or, in most cases, not act, as you run the investing gauntlet.

Zoom out. You’re barraged with stock charts that go back five days, a month, or a year. None of them align with your investment time frame. Take a moment to go online and look at the path of a diversified portfolio, or the market indexes, over 10 years and longer. You’ll find that the critical issues Mr. Wiggins referred to disappear into a general trend that goes up and to the right.

Prepare to be contrarian. You know your portfolio will go through both wonderful and dreadful periods. You know it will be difficult to do the right thing in the heat of the moment. And you know what decisions you’ll need to make, perhaps topping up a spending reserve when markets are strong or sticking to your contribution schedule and averaging down when they’re weak. To do what you want to do, you need to prepare ahead of time when urgency is low and you’re feeling calm.

What’s love got to do with it? Emotion is an investor’s worst enemy, so instead of agonizing over where the market is going (which is impossible to do consistently), put your investment process on autopilot. Set up automatic monthly contributions and establish a routine to review your portfolio quarterly and meet your adviser annually.

K.I.S.S. According to Mr. Wiggins, simplicity reigns. “The idea that adopting a long-term approach to investing can have a profound positive impact on our results can seem perverse. How can something so easy – doing less/paying less attention – lead to better outcomes?”

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by Tom Bradley

Our clients know that investment returns come with surges and dips. To get the good, you need to accept the bad. But WOW, that wasn’t easy to do in 2022 and 2023. There were more surges and dips than usual, and a lot more noise. The volume was turned up to 10 on issues like recession, inflation, central banks, AI, and global tensions. And then there were what Salman and I call the ‘bright shiny objects’ – trends, stocks and products that capture investors’ imaginations and cause them to change strategy. Things like crypto, AI, and more recently, good old money market funds and GICs.

I’m happy to say that our clients did remarkably well in running this gauntlet, but I know it wasn’t easy. Indeed, my biggest takeaway was just how hard it is for investors to stay steady and invest for the long term. It’s easy to say (my part) and hard to do (your part). Really hard.

Joe Wiggins, a keen observer of investor behaviour, said, “… taking a long-term perspective is the most severe behavioral challenge that investors face.” Meeting the challenge means “frequently ignoring issues that we and everyone believes – at that moment – are absolutely critical. No wonder so few investors can do it.”

Of course, it goes beyond the last couple of years. Consider that the S&P 500 has had a positive return in 33 out of the last 44 years. In those 33, the average intra-year drop was 14.2%. Even good years like 2023 have significant setbacks built in.

At Steadyhand, we’re wired to invest for the long term. We make our share of mistakes, but never waver on this. Our hope is that if we walk the talk, you’ll have a better chance of doing the same.

We believe that stocks will continue to be the most reliable source of returns over time. Using my favourite tool on our website, the Volatility Meter, you can see that stocks earned an average return of 9.6% over the last 63 years. You’ll also see there were some gut-wrenching down periods along the way.

What will ‘steady’ mean to our investors in 2024?

• We won’t try to predict the markets. Rather, we’ll be prepared for anything to happen. 

• We’ll always be diversified and buy companies that are strong enough to be held for many years.

• We’ll listen to our fund managers. If they’re enthusiastic about the opportunities available, we’ll give them more money, and vice versa. 

• In turn, our managers will care about what they pay. Valuation is still the most reliable indicator of future returns (i.e. lower leads to higher). 

• We’ll make deliberate but modest adjustments to the Founders Fund’s asset mix. They will reflect the outlook for 5-year returns, not what’s in the headlines. 

• We’ll use investor sentiment to keep our enthusiasm or despair in check. How bullish or bearish investors are, is a contrarian indicator that helps us avoid big mistakes at market highs and take advantage of opportunities at market lows.

• We’ll always be accessible to advise clients on determining the best portfolio for their goals and situation, and then help them stick to it.

Nobody knows what 2024 will bring but you can be assured that, no matter what comes our way, we’ll stay steady. Cue the flashy animation.

I encourage you to read the rest of our Q4 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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by Tom Bradley

As 2023 comes to an end, there is no shortage of negatives to focus on. The wars in Ukraine and Gaza have no end in sight. China is getting ever more isolated from the West. Governments are assaulting bond investors with a constant supply of new issues to fund their deficits. And Canada’s mortgage refinancing cycle, which will be painful for many households, is accelerating.

While these risks dominate the business news, it’s important to remember that capital markets are a synthesis of all types of factors – positive, negative, short term, long term, transitory and enduring. All come into play.

A former business partner used to say to me that “when the news is bad, you have to look harder for the positives.” In that vein, my focus here is on what happened in 2023 that could be good news for your portfolio in 2024.

Inflation is reasonable again. We don’t yet know how low inflation will go, or how stable it will be, but the battle has largely been won. The Consumer Price Index is back close to the Bank of Canada’s target and still dropping, which should allow interest rates to sustain recent declines, or even extend them.

More normal rates have made some financial products great again. Namely, money market funds, GICs and annuities. Also improved is the outlook for Canada’s most popular portfolio – 60% stocks and 40% fixed income. Expected returns for both the 60 and 40 are attractive.

Valuations on non-magnificent stocks are reasonable. The Magnificent Seven – Apple, Amazon, Alphabet, Nvidia, Meta, Microsoft and Tesla – carried the stock market in 2023 and have been accorded magnificent valuations to match. Meanwhile, the other stocks grinded out a modest return and carry more subdued expectations. The market is now trading at a median price-to-earnings ratio of 15-16 (by definition, half the market is below that multiple), which reflects limited growth and an uncertain profit outlook.

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We enter 2024 with a more appropriate level of skepticism. This is particularly the case with China, Canadian banks and private assets. Analysts’ estimates for China-related businesses no longer assume rapid economic growth and a benign business environment. Nor do estimates for Canadian banks. The Big Five are as powerful as ever, but investors are increasingly aware that their most important customer, debt-laden Canadians, have overindulged. Growth and dividend increases will come less from growth and more from cost cutting. And 2023 took the shine off private assets. Values were reduced, new funding became harder to come by, and some funds were forced to close for redemptions.

Every company is a technology company. Artificial intelligence has sucked most of the air out of the technology conversation, but there’s exciting progress being made by ordinary companies (and governments) as they digitize with more established technologies. Product quality and customer service are improving, and costs are coming down, both of which are good for profit margins (and deficits).

Alternative energy is more competitive. It may not feel large enough or fast enough, but immense amounts of capital and brain power are being dedicated to inventing and building clean energy solutions. Corporations are ahead of governments on this, and venture capitalists are ahead of corporations. If you’re disappointed with the progress being made, just wait a few minutes and you might revise your view.

The Canadian investing ecosystem will be better than it was last year. The annual contribution limit for the Tax-Free Savings Account was increased to $7,000, and most dealers now offer the First Home Savings Account, which capture the best aspects of TFSAs and RRSPs. There’s progress on industry plumbing, too. Provincial regulators are pushing ahead with more disclosure requirements around fees, and the federal government is requiring that all banks use the Ombudsman for Banking Services and Investments for dispute resolution, as opposed to doing it internally.

There’s no doubt that 2024 will be an eventful year, with plenty of positives and negatives, and a few big surprises. If you’re not prepared, all have the potential to take you off course on your investing journey. So, make sure you go into the year with a plan that you’re committed to, and don’t forget to look for the positives.

by Scott Ronalds

As we step into a new year, it’s timely to highlight a few important financial numbers for 2024.

First, the TFSA limit. The maximum annual contribution for Tax-Free Savings Accounts has increased this year to $7,000 (from $6,500 last year). This means the total lifetime cumulative contribution room for these accounts is now $95,000 (for investors who meet all eligibility requirements). TFSAs offer a rare tax break that all investors should take advantage of.

Next, the RRSP contribution limit. The max you can add to your Registered Retirement Savings Plan this year is the lesser of 18% of your 2023 earned income or $31,560 (unless of course you have unused contribution room from previous years).

If you’re not sure which account is best for you, our TFSA vs RRSP Calculator can help.

The extra contribution room for both account types can have a meaningful impact on the growth of your portfolio over time. To put it in real terms, adding an extra $500 to your TFSA each year (i.e. contributing $7,000 instead of $6,500) can add up to roughly $30,000 in additional growth over 25 years, assuming an after-fee return of 6%. Explore our Savings Growth Calculator to run some numbers on your own.

As a reminder, you can contribute to your accounts with us by simply calling 1-888-888-3147 between 7am to 5pm PT Monday to Friday (we can electronically transfer money from the bank account we have on file to your Steadyhand accounts).

Happy New Year!

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by Scott Ronalds

There are four days left in 2023 and the scramble is on. You need to figure out New Year’s Eve plans, work off that extra helping of turkey, and get Mariah Carey’s Christmas lyrics out of your head. The pundits, on the other hand, are feverishly putting together market predictions for the year ahead.

But be careful what you read. As Tom pointed out in his last Globe and Mail article, there’s no accountability around these forecasts, no intellectual honesty, and for every prediction that’s right, there are 10 that are way off.

Rather than trying to forecast an unpredictable future, it can be helpful to reflect back on some of the year’s biggest stories and events when thinking about the outlook for your portfolio.

Below are some of the key happenings in 2023. We’ll be talking more about the impacts they had on the capital markets and your portfolio in our Q4 Report and year-end video, which we’ll be releasing the weeks of January 8 and 15, respectively.

Interest rates

Following seven interest rate increases in 2022, the Bank of Canada raised its key lending rate three more times this year, by a total of 0.75%. It currently sits at 5.0%, a level not seen in over 20 years. The U.S. Federal Reserve upped its benchmark rate four times, to its current range of 5.25% - 5.5%.

The higher rates have had the intended impact of slowing the economy and bringing down inflation. They’ve also put consumers in a tighter spot, as mortgages, car loans and lines of credit have higher payments attached to them.

Both central banks signaled in their latest announcements that the hiking cycle is likely over. Investors embraced this sentiment, pushing stock and bond markets meaningfully higher in the fourth quarter in anticipation of lower interest rates ahead. While this may be the case, it is by no means a given. The timing of any cuts is uncertain, and things can change quickly. As bond investors have come to know, interest rates are fickle.

War

Ukraine continues to put up a valiant fight against Russia, but Putin has vowed to carry on his destructive campaign until Russia’s “goals are achieved”, i.e., Ukraine surrenders. As the war nears its two-year mark, tens of thousands of lives have been lost and countless households destroyed. The economic consequences endure, with the flow of energy disrupted, prices of commodities impacted, trading relations and routes redrawn, sanctions stepped up, and the geopolitical divide between West and East growing.

The world was dealt another blow in October when Hamas attacked Israel and the latter retaliated against Gaza. Both conflicts (Russia-Ukraine and Israel-Gaza) are testing the West’s resolve and financial support. I heard a sobering stat at a Remembrance Day ceremony this year: over 3,500 years of recorded history, there have only been 230 years with no war(s). Peace should be on everyone’s wish list this season.

Artificial Intelligence

The rise of artificial intelligence was arguably the biggest business story of the year. Its use is being implemented across all industries, and investors rushed to companies positioned to benefit from its growing adoption. Some big questions are also emerging. What guardrails and/or regulations are necessary? What impact will it have on jobs? To what extent will it improve productivity? Are any risks being overlooked? We’re likely to start seeing some answers next year.

The Magnificent Seven

Tech stocks took a beating in 2022. Their rebound this year has been profound. Seven of the biggest U.S. companies, coined the ‘Magnificent Seven’, drove much of the American market’s gain this year (accounting for roughly three-quarters of the S&P 500 Index’s rise).

Apple, Microsoft, Nvidia, Meta, Amazon, Alphabet, and Tesla saw their share prices soar, due in part to the excitement around artificial intelligence and the opportunities it presents for their respective businesses. With the renewed enthusiasm around the tech sector, investors are well advised to remember the virtues of diversification.

Medical breakthroughs

Ozempik became a household name this year. Sales of the drug, which was developed to treat diabetes but has also proven effective at helping weight loss, are projected to surpass $US13 billion this year. Other similar drugs designed specifically for weight loss (known as GLP-1 drugs) have skyrocketed in popularity. Novo Nordisk, the Danish maker of Ozempic and its sister drug Wegovy, is now the most valuable company in Europe based on market capitalization.

If the world indeed gets leaner, the impacts on global health and the economy at large could be far reaching, from a reduction in heart attacks and obesity-related diseases, to lower fast food sales (some investors are already expressing concern about the sector), to fuel savings (one Wall Street analyst has suggested that United Airlines would save $80 million a year if the average passenger weight falls by 10 pounds).

A lesser talked about breakthrough came this month when the FDA approved the first gene-editing therapy for the treatment of sickle cell disease using CRISPR technology. Like the mRNA vaccines developed in 2020 to combat the coronavirus, these latest drugs and therapies serve as a reminder of progress and innovation.

Final thoughts

2023 turned out to be a good year for investors, which probably comes as a surprise to many. Balanced portfolios are up 8-10% in the face of decades-high interest rates, a regional banking crisis, an ongoing war in eastern Europe, a new conflict in the Middle East, a slowing global economy, and worries around next year’s U.S. election.

It was a year that underscored the importance of a steady hand on your portfolio and proved once again that stocks are highly unpredictable in the near term, the correlation between the market and the economy is sloppy at best, and forecasting is a mug’s game.

Nonetheless, if I had to make a prediction for 2024, here goes: Taylor Swift and Travis Kelce will part ways. You heard it here first.

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by Neil Jensen

We’re pleased to announce that our Chief Investment Officer, Salman Ahmed, has been recognized by Business in Vancouver as one of B.C.’s top ‘Forty under 40’ executives.

Salman plays a key role at Steadyhand, overseeing our investment process and subadvisor relationships. He sits on our management committee and is a mentor to many on the team. He is also President of the CFA Society Vancouver’s Board of Directors and sits on the Board of FAIR Canada, the leading advocate for the rights of individual investors.

The distinction is well deserved, in my humble opinion, and is a reflection of Salman’s passion for investing and tireless efforts around improving and advancing the investment landscape in Canada.

Business in Vancouver recently published a Q&A piece with Salman that touches on some of his career highlights and business lessons learned. The full list of recipients is also available on BIV’s website, and the group will be recognized at a gala event in February.

Well done, Salman.

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by Tom Bradley

Investment professionals are a confident lot. They have a view on everything. The words, “I don’t know” are not part of their vocabulary.

This trait is problematic for many reasons, but particularly when it comes to market forecasting.

This is the time of year when clients are asking what’s going to happen in 2024, and advisers and portfolio managers are all too willing to provide an answer.

It goes something like this: “The market is in an up/down trend and there’s lots/little cash around.” Or “Technical indicators are saying stocks have peaked/bottomed.” Or the most common answer, “The economy is strong/weak therefore the stock market will be strong/weak.”

The problem is that nobody knows what the market is going to do in the short to medium term. Nobody. Ever. It’s totally unpredictable. And yet, strategies are formulated, investment decisions made, and portfolios traded based on these meaningless views.

Consider what forecasters are up against. First, stock prices are influenced by a myriad of economic, political, and social factors, all of which weigh on the outcome at different times and to varying degrees. Some are in plain view, such as current hot buttons like inflation and AI, but most are playing out in the shadows, only appearing on the radar after they’ve had their effect.

There are always crosscurrents, despite what commentators lead us to believe. If an issue really is clear-cut, be assured the market has already adjusted to the new reality.

Not only do the known factors come and go, but new ones emerge for which there’s no historical context (think Brexit, COVID and ChatGPT). A well-reasoned forecast can quickly be sideswiped by something that wasn’t contemplated or even known.

Adding to the challenge is the fact that variables interact in unexpected ways. For every action, there’s a reaction. Too many economic and market forecasts focus on a few key factors but don’t go far enough in assessing the second-order affects.

Then there’s the biggie – human behaviour and emotion. Investor sentiment, how bearish or bullish investors are, is a prime reason why stocks are so volatile and short-term moves are impossible to model.

If previous years are any indication, 2024 forecasts for gains in the Canadian stock market will fall into the well-worn range of 7% to 9%. This might seem reasonable given the average annual return over the last 60 years is 9%, but the data suggests otherwise. Over those six decades, the annual market return fell within that range exactly five times. Yes, five out of 60. Meanwhile, it was in negative territory 16 times and up over 20% on 18 occasions.

You get the picture. There’s no accountability around market forecasts, and certainly no intellectual honesty. For every prediction that’s right, there are 10 that are way off.

So, why is this important? Well, to truly understand how investing works, you must accept that stock prices take a totally unpredictable path. When you do, it will have a profound effect on how you manage your portfolio, and in all likelihood, make it easier. Doug MacDonald, a pioneer in the financial planning community, once said to me, “it became much easier to do our job once we realized that nobody, including us, knows what is going to happen in the future.”

Here are some handy rules of thumb for short-term market forecasts.

Don’t try to time the stock market. Your portfolio will move up over time, with plenty of surges and dips along the way. You don’t know when they’ll come, so stay invested. An average 7% to 9% return over five, 10 or 20 years is what you care about, not one year.

Always be diversified. It’s a consequence of not knowing where things are going. You need to own a mix of assets that are driven by different economic factors, geographies, and currencies. If you’re properly diversified, you’ll never have everything working, or lagging, at the same time.

Put as many of your investment decisions on auto pilot as you can. Making automatic monthly contributions eliminates the temptation to market time and takes the emotion out of investing. Averaging in (or out) puts market forecasts in their proper place, a needless distraction.

And remember the wise words of John Kenneth Galbraith, “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” Follow economists and strategists for perspective and education, maybe even entertainment, but not for making investment decisions.

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by Scott Ronalds

We’ve all had the email from a prince in a faraway land asking for help in transferring his money to Canada, for which he’ll reward us handsomely. It was easy to pick off as a scam. But fraudsters have become much more sophisticated. Voice cloning, fake QR codes, and home improvement scams are just some of the cons these days that have a very professional look and feel. Needless to say, the consequences of taking the bait can be severe.

Thankfully, there are tips you can follow and measures to take to recognize scams and protect yourself and your family from being a victim. In our latest Steadyhand Café, we spoke with subject matter experts Graham Webb (Executive Director of the Advocacy Centre for the Elderly) and Rob Paddick (Deputy Ombudsman of the Ombudsman for Banking Services and Investments) for their insights on this important topic. Watch the session in its entirety below.

Additional resources:

• Presentation slides

• Advocacy Centre for the Elderly (ACE)

• Ombudsman for Banking Services and Investments (OBSI)

by Tom Bradley

Nvidia Corp. reported its results recently and the numbers were eye-popping. Revenue for the third quarter was up 206 per cent to US$18-billion, and earnings per share were up more than 12 times, year-over-year. It was one of the most remarkable earnings reports I’ve ever seen from a large, established company.

So, what did the stock do? Well, it went down. I’m the first one to say that short-term squiggles in a stock price are meaningless, but this reaction was telling. It indicated that investors are factoring in even higher numbers in their valuation models and expectations for the company are sky-high. Nvidia shares are up more than 220 per cent year-to-date.

The stock’s reaction reinforced one of investing’s core principles: valuation matters. As Howard Marks, co-founder of Oaktree Capital Management, puts it: “No asset can be considered a good idea [or a bad idea] without reference to its price.”

There’s no doubt that what Nvidia is doing is remarkable. The question is, how much of its future success is already baked into the cake as far as its share price goes.

The link between how a company does and how its stock does is the price-to-earnings multiple (P/E), which is what investors are willing to pay for a dollar of expected future earnings. It’s the price tag on a stock.

The multiple paid will determine whether the stock price does better or worse than the underlying company. There are exceptions, but paying a multiple that is below a stock’s historical range may allow you to do better than the company. Paying above what it and other comparable companies normally trade at may lead to a disappointing outcome. Two examples from the technology sector, Apple Inc. and Cisco Systems Inc., illustrate this point.

At the end of 2019, Apple stock was trading at a multiple of 12 to 13 times earnings. The company was doing well, but investors worried about what would drive growth in the future. Fast forward to today, Apple’s earnings have doubled (although they’ve been flat for the last three years) but the stock is up over five times. The difference is the P/E has more than doubled to 30 times. It appears investors are rewarding Apple for its profitability and commanding market position, and worrying less about growth.

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Cisco investors had the opposite experience. In 2000, the company was the dominant provider of plumbing for the internet (switches, routers) and the stock was trading at over 100 times earnings. Since then, Cisco has been immensely profitable (earning per share have grown 12 per cent a year on average) and the company has continually bought back its shares. The stock, on the other hand, is 40 per cent below its 2000 high. The multiple has been compressed to the mid-teens, overwhelming all the success the company has had.

As you can see from these examples, the link between a company’s fundamentals and its stock price is like an accordion. It expands and contracts, and is the reason why stock prices are far more volatile than earnings and dividends.

There are many factors that drive a stock’s return, but valuation is the most reliable one. Some may question this when looking at rocket ships like Nvidia, Apple, or Canada’s very own Constellation Software Inc. Why care about the P/E multiple when these companies regularly blow through their growth estimates? There are two problems with this perspective.

First, in your investment career, you, or your investment manager, will buy many stocks over many years and unfortunately, the Nvidias are few and far between. Most often, you won’t know which ones they are until later. Second, when the growth comes back to earth, investors care a lot about the multiple.

Valuation is the closest thing we have to gravity in investing, but it’s not a tool for timing when to buy or sell a stock. Stocks can stay above or below their historical P/E range for many years. And there’s no doubt, being too stringent on price can cause you to miss a stock or wider trend that is in the early stages of a growth spurt. But valuation needs to be part of every investment decision. If you read a glowing report about a company that’s doing well, it’s incomplete if there isn’t a thorough analysis of how it’s being valued.

Think of valuation as a gut check. How much of the excitement you’re feeling is already reflected in the stock price? Is it reasonable to expect that the company can live up to the market’s expectations? Am I buying the next Apple or Cisco?

by Scott Ronalds

The year-end distributions for all our funds (with the exception of the Savings Fund) will be declared on Monday, December 18th and paid on Tuesday, December 19th. The Savings Fund will pay its regularly scheduled monthly distribution on Friday, December 29th.

As a reminder, distributions represent the mechanism whereby mutual funds transfer to unitholders any interest income, dividend income and realized capital gains that have accrued over the course of the year. Most investors choose to re-invest distributions into additional fund units, but clients can also opt to receive them in cash.

Remember that immediately following a distribution, the price of a fund drops by an amount equivalent to the payment. However, you will receive additional units in the fund which are equal in value to the amount of the distribution. The result is that the value of your investment doesn’t change, you just own more units in the fund at a lower unit price.

For example, assume you own 100 units in a fund that is valued at $10.00/unit (your investment is worth $1,000). If the fund pays a distribution of $0.10/unit, its price will drop to $9.90 following the distribution. However, if you follow the common practice of re-investing your distributions, you will receive an additional 1.01 units in the fund ($10.00/$9.90), so the value of your investment remains unchanged (101.01 units x $9.90/unit = $1,000).

The estimated distributions for our funds (to be declared on December 18th) are as follows:

• Income Fund: $0.15/unit (bringing the year-to-date total to $0.34/unit)

• Founders Fund: $0.27/unit (bringing the year-to-date total to $0.40/unit)

• Equity Fund: $0.78/unit

• Global Equity Fund: $0.02/unit

• Small-Cap Equity Fund: $1.73/unit

• Global Small-Cap Equity Fund: $0.01/unit

• Builders Fund: $0.34/unit

Please note that these are only estimates and are subject to change.

An important note:

Investors considering purchasing units in the funds in non-registered (taxable) accounts may wish to defer any purchases until after the distributions have been declared. Fund units purchased on December 19th or later will not receive distributions.

If you have any questions about distributions, feel free to give us a call at 1-888-888-3147.

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by Scott Ronalds

First Home Savings Accounts (FHSAs) are a great tool for young Canadians saving for a home, and for parents wishing to help their adult children get into the housing market. Indeed, parents can gift money to their children which can then be invested in an FHSA account in the child’s name. We’ve had several clients use them in this way.

FHSAs were introduced by the federal government earlier this year as a means of helping prospective first-time buyers save for a home. The FHSA shares attributes of the Tax-Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP): any growth in an FHSA is tax-free, and eligible contributions can be deducted from your income when filing your tax return. We reviewed the key features of these plans in a previous post.

The annual contribution limit is $8,000, and any unused FHSA room at the end of the year can be carried forward. (Note: the maximum amount you can contribute in any given year is $16,000.) Yet, to be eligible to carry forward unused contribution room, you must have an open FHSA — thus, the benefit of opening an account before the end of the year, even if you do not plan to contribute the maximum amount.

This may not be the right approach for everyone, however. For example, if your expected home purchase date is well into the future, you may want to put off opening an account, as you can only hold an FHSA for 15 years. Another consideration is if your income is low, you could be better off investing in a TFSA, even if only for an interim period, as you won’t benefit much from a tax deduction (although you can claim the deduction in a future year when your income may be higher).

So, while FHSAs are valuable in many ways, the answer is not always a clear ‘yes’ as to whether you should open one. It’s highly dependent on your personal situation. We encourage you to speak to one of our Investor Specialists if you’re looking for advice. But don’t wait, as there can be real benefits to getting the clock started.

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by Scott Ronalds

Gord O’Reilly, a senior Portfolio Manager at Fiera Capital (the manager of the Steadyhand Equity Fund) and the key decision maker for our fund, will be retiring from Fiera at the end of the year. He has been at the helm of the Equity Fund since its inception in 2007.

Gord was a founding partner of CGOV Asset Management, the firm we first hired to manage the fund. CGOV was acquired by Fiera in 2018, with Gord staying on as lead manager of our fund since the acquisition.

Effective January 1, Nessim Mansoor will take over as the lead manager. Nessim is head of the Fiera Canada Large Cap Equity Team, which Gord is a senior member of. The two have been working closely together over the past few years and share a like-minded investment philosophy. The rest of the team includes two other portfolio managers, Nicholas Smart and Tony Rizzi, and five equity analysts. Nessim, Nicholas, and Tony all joined Fiera in 2016. They previously worked together at Empire Life and have built a successful track record as a team.

The mandate for the fund will not change. As a reminder, its long-term investment parameters are as follows:

• North American focused. Emphasis is on Canadian and U.S. stocks, complemented by some overseas equities. 

• Position sizes typically range from 3% to 6%.

• Annual portfolio turnover is anticipated to be less than 20%.

The fund is expected to hold 20 to 30 stocks going forward. This is a slight deviation from Gord’s approach, whereby he wouldn’t own more than 25 securities.

A transition plan has been formalized between Gord and Nessim and will be executed in a way that considers the tax ramifications of any portfolio turnover. To be clear, we don’t anticipate an overhaul of the fund. Gord and Nessim have a similar view on many of our existing Canadian holdings, and we expect this part of the portfolio to remain largely intact. We do expect some changes, however, on the foreign equity side. Nessim likes a few U.S. and global businesses that we do not currently own, and we anticipate they will replace a few existing holdings.

With the collaboration that already exists between Gord and Nessim and the established investment process of the broader team, we believe this transition will be seamless and will continue to provide investors with attractive returns going forward.

We have come to know Nessim and his philosophy well over the past five years (since Fiera’s purchase of CGOV) and believe he and his team are talented investors. Salman (our Chief Investment Officer) and Tom (our Chair) continuously evaluate other investment managers to ensure that we have world-class investors overseeing your money, and they are confident that Nessim is the right manager for the Equity Fund.

Gord has been a great partner of ours since we launched Steadyhand. Under his leadership, the Equity Fund has achieved a first quartile return over the past 15 years (meaning it ranks in the top 25% of its peer group). We wish him the best in retirement. At the same time, we’re excited about the skill set that Nessim and his team bring to the table.

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by Tom Bradley

In my last column, I talked about investors getting distracted by bright, shiny objects and falling off their investment plan. I was referring to products or trends that are making people money and perfectly fit the economic and political narrative of the day. Things such as commodity super cycles, crypto, cannabis, meme stocks, FAANG stocks and focused strategies such as dividends only, Canada only and U.S. only. Things so compelling that investors go all in, leaving behind the notion of a diversified portfolio.

Right now, the bright shiny object is not nearly as sexy as the ones I’ve listed. It’s the safe, reliable, readily available GIC, Canada’s favourite financial product.

GICs faded from view when short-term interest rates dropped near zero. An astute GIC shopper could at best find yields equalling the rate of inflation. Investors were more inclined to hold bonds and stocks, which were providing a much higher return.

That’s changed of course. GICs and money market funds have attractive yields again and are allowing Canadians to earn a return on money they’ll need in the next few years for a trip, kitchen renovation, college education or emergency fund.

So, what does the return of GICs have to do with investors deviating from their investment plan?

Well, many are also shifting money that’s earmarked for their retirement or legacy into GICs. This is a mismatch. Savings yields shouldn’t be confused with long-term investment returns.

Historically, returns from rolling GICs have lagged bond and stock portfolios, and there’s no reason to believe this will change. Stocks, which carry a risk premium to compensate for added volatility, will beat bonds over time, and bonds, which earn extra yield from taking term and credit risk, will beat secure, short-term vehicles such as GICs.

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Indeed, returns expectations for bond and stock portfolios over the next 10 years look attractive.

Bond yields, which are a reliable indicator of future returns, point to a range of 4% to 6%. Likewise, there’s no reason to believe stocks won’t be in their traditional range of 7% to 9%. The price-to-earnings multiple on a diversified stock portfolio is now back into the mid-teens, which is well within the historical range.

People will point to the uncertain economic and sociopolitical outlook, but there are two things to remember in this regard. First, there are always uncertainties. As the expression goes, markets regularly climb a wall of worry. And second, there are positive factors in the mix, too, particularly when it comes to the benefits of innovations and the deployment of existing technologies.

Of course, there’s no way of knowing when the market surges and dips will occur, but the chart of a fully invested portfolio will move up and to the right over the next 10 to 20 years and will be taxed at a lower rate.

Investors opting for the comfort and certainty of GICs are likely to achieve a lower return and expose themselves to a different set of risks. Risks that will assuredly make the next decision a tough one. What if yields are lower when it’s time to roll the GICs? What if inflation heats up and purchasing power is eroding? And the killer, how do you get back into stocks if you need to?

I say killer because reinvesting after getting out of the market is the most difficult decision in investing. It’s loaded with emotion and dissonance. It’s hard if the market is down and the news is bad, and even harder if stock prices are higher than when you sold.

Clearly, higher rates require different strategies for parts of your financial plan. For the money being set aside for future spending or an emergency, higher money market and GIC yields are a godsend and should be taken advantage of. There’s now no excuse for leaving excess money in a chequing account earning next to nothing.

But for money that has a longer-term purpose and needs to achieve a return well in excess of inflation, no change is required. It still needs to be allocated to higher-returning, long-term assets.

by Scott Ronalds

If Steadyhand were a tree, it would probably be a spruce. You know, sturdy, protective, patient. Or maybe a jack pine. These are known to grow in conditions where other trees struggle, and they’ve got a catchy name.

But enough about us. The purpose of this post is to recognize you, our clients and supporters who have helped us grow from just a budding sapling 16 years ago to a seasoned conifer today.

A significant driver of our growth has been the introductions and referrals from existing clients to friends, family, and colleagues. We’re thrilled to see Steadyhand investors so supportive and enthusiastic about our business, and this show of confidence is a cause for celebration!

In recognition, we’ve partnered with Tree Canada to plant 10 trees for each new investor that is referred to us by an existing client. Tree Canada is the only national non-profit organization dedicated to planting and nurturing trees across the country. We’re kickstarting the program by celebrating the 200 new clients who joined us last year with the planting of 2,000 trees in 2023.

Why trees? I could go on with the investing analogies, but I’ll spare you. We all know the devastation our forests have suffered in recent years, with this year’s widespread smoke a vivid reminder. The loss of natural resources and a vibrant tree canopy impacts us all.

Planting trees is an important and timely commitment to Canada’s economic and environmental health, and our climate future. We hope to plant even more in 2024 and look forward to reporting on our plans next year.

Thank you to all those who have introduced friends and family to Steadyhand. Your trust in our business is greatly appreciated. And by passing along our name, you’re now helping to sow more than just the seeds to someone else’s financial future.

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by Scott Ronalds

We all know someone who’s been scammed. They may have provided a piece of financial information to a convincing impostor, or clicked a seemingly harmless link and had their computer and personal information hacked.

Financial frauds and scams are prevalent and increasingly sophisticated these days. Indeed, some of the latest ploys use phony QR codes and AI-generated fake voices in an attempt to swindle you. The consequences of taking the bait can be severe. Consider the numbers from the federal government:

• Canadians lost over $530 million to fraud last year. That’s almost $1.5 million a day.

• There were over 92,000 reports of fraud last year and 57,000 victims.

• 1 in 6 people reported being a victim of fraud in the previous five years.

And keep in mind, these are only the reported numbers. Many incidents go untracked due to victims being embarrassed or not knowing where to turn for help. In fact, Statistics Canada’s latest General Social Survey (which measures Canadians' experiences with certain crimes, whether or not they were reported to the police) indicated that only 1 in 10 victims reported fraud to the police, and only 7% reported it to the Canadian Anti-Fraud Centre.

Thankfully, there are tips you can follow and measures to take to recognize scams and protect yourself and your family. In our November 23 Steadyhand Café (webinar series), we welcome Graham Webb, Executive Director of the Advocacy Centre for the Elderly (ACE), and Rob Paddick, Deputy Ombudsman of the Ombudsman for Banking Services and Investments (OBSI), for a discussion on this important topic.

Register for the webinar today! (A video of the session will be made available to all registrees following the event and will be posted on our YouTube channel.)

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by Tom Bradley

Canadian investors recently lost a great advocate. Glorianne Stromberg passed away in Toronto on October 15th.

Glorianne was a corporate and securities lawyer who penned two seminal papers on the mutual fund industry in the 1990’s. Her work has influenced regulatory policy ever since, albeit with unnecessary delay. People who worked with her said she was always interested in investor protection and knew mutual fund regulation as well, or better, than anyone. She was a good listener, always hearing people out, and never said anything she hadn’t thoroughly thought through.

To learn more about this forward thinker, I’d suggest you read this excellent article by Melissa Shin on Advisor.ca.

A quote in the piece from my friend, Dan Hallett of Highview Financial Group, perfectly captures our relationship with Glorianne:

“I feel like I knew her better than I really did because of her many years of very public advocacy. She was warm and soft-spoken. Unlike her physical stature, her presence in — and impact on — our industry were enormous ... The industry listened when she spoke — even if they didn’t like what she said. One of the things I most admired about her was her will to stand up for investors because that often meant standing up to a lot of industry pushback.”

To Dan’s point, Glorianne’s influence on me, and the firms I worked for (PH&N and Steadyhand), far outweighed the time I had to spend with her. I didn’t know her well, but when we talked, we were on the same page on the issues of transparency, client reporting, and conflicts of interest. My partners and I have tried to walk her talk ever since her reports came out. What she proposed just made sense.

Glorianne will be missed but her legacy lives on.

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by Tom Bradley

The name of this column, Cutting through the Noise, refers to the information that seems urgent, like news, headlines and what’s being talked about. Things like the political follies in Ottawa and Washington. Monthly economic statistics that bounce around like a three-year-old (and are revised a month later). The reporting of the U.S. Federal Reserve’s every word (and Chair Jerome Powell’s facial expressions). And of course, the speculation in advance of all these things.

There’s no question they’re urgent, but are they important? Will they make a difference to your investment returns?

In this column, I’ll sift through the urgent in search of the important. In doing so, I’ll lean heavily on investing principles that are as relevant today as when I started 40 years ago. I’ll use concepts like diversification, time frame, and valuation to provide perspective on current events.

I’ll also replace overused industry jargon like tactical, structured, enhanced, smart beta, sector rotation and index weight with words like objectives, asset mix, compounding, routine, fear, greed, and plenty of “I don’t know.”

There are three reasons for dusting off the trusty, old principles.

First, too many investors are picking products and advisers without an understanding of how investing and markets work. I’ve spent a good part of this year researching this topic, talking to people in all parts of the investment industry – advisers; planners; executives; regulators; educators; bloggers; and investors of all shapes and sizes. I asked them what the biggest impediment is to investors generating better returns.

There were recurring themes in the answers (no plan; performance chasing; FOMO; thinking their adviser knows more than they do), which led me to my overall conclusion that the wealth management industry, with all its sophistication, innovation, and size, has a serious problem. It’s built on a weak foundation.

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Too often, investors are basing decisions on unimportant and/or unknowable factors, without appreciating what the tradeoffs are. They’re skipping over the basics and going straight to the good stuff – what’s new, what’s been working recently, and what’s urgent.

Second, even investors well versed in financial fundamentals are prone to what Morgan Housel of Collaborative Fund calls, “cyclical learning.” Unlike the medical profession that builds on past successes and failures to improve treatments and medications, it seems investors must relearn lessons each cycle. As Mr. Housel says, “Every five to seven years people forget that recessions occur every five to seven years.”

Wealth management is unusual in this respect. Mr. Housel again: “Cyclical knowledge, and the inability to fully learn from others’ past experiences, means you have to accept a level of volatility and fragility not found in other fields.”

The third reason is more optimistic. As an individual investor, you have a unique and valuable advantage. Your time frame is longer than any institutional investor. Longer than fund managers who have to cater to impatient clients and marketing departments. Longer than pension funds that must pass a solvency test every three years. Longer than endowments that have Donor and Board pressures. The investment committees making the decisions experience regular turnover which leads to changes in strategy and personnel. By having the same decision-maker and a longer time frame, you have a continuity that institutions can’t match.

This edge comes with caveats of course. To utilize it, you need to have a plan, and the patience and fortitude to stick to it. That’s the hard part and where this column comes in. You may need help staying steady when other aren’t. Doing what’s right for you when everyone else is heading in another direction. Sticking to the plan when you trust it the least.

This column won’t always say what you want to hear, and might even make you squirm or curse. For instance, I’ll be writing soon about a bright shiny object that’s taking some investors off course. I’m not referring to the next cannabis, crypto, or option strategy, but rather, Canadians’ favourite financial product, GICs.

Setting up and maintaining a simple investing strategy is mechanically easy but psychologically hard. My hope is that by cutting through the inevitable noise that goes along with it, you’ll be a little more disciplined and a lot more successful, which is compounding at its best.

by Scott Ronalds

After writing a bi-weekly investment column in the National Post (and related papers) for the past six years, Tom Bradley is returning to the Globe and Mail.

Tom first started writing for the Globe in 2006 and penned over 200 articles for the paper over the course of 11 years before moving to the Post in 2017.

While both national newspapers have a stable of talented writers and provide valuable content for investors, Tom felt the timing was right to come back to the Globe, which has been expanding the investing and personal finance sections of the paper.

His new column will be titled “Cutting Through the Noise” and will follow the same format that regular readers have come to expect. In other words, he’ll address timely and important topics and bring them back to key investing principles that never go out of style.

Watch for his first piece in tomorrow’s print edition of the Globe, and every other Saturday thereafter (the articles are typically made available to online subscribers earlier, on Fridays). We’ll also continue to republish all his articles here on our blog.

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by Scott Ronalds

With the significant climb in interest rates over the past 18 months, you can now get a yield of 5% or more on your cash by investing in a GIC (guaranteed investment certificate) or money market fund. You have to shop around a bit, but it’s not hard to find products offering mid-single digit rates.

The current yield (pre-fee) on our Savings Fund, for example, is 5.19% (as of October 27)*. A quick survey of the GIC landscape reveals a range of rates between 4% to 6% at the banks and credit unions, depending on terms and features.

Keep in mind, comparing GICs and money market funds is an ‘apples-to-oranges’ exercise. I won’t get into the weeds here, but a key benefit of money market funds is their flexibility (you can buy and sell any time without incurring penalties). GICs may offer a higher rate but your money is either locked in for the term of the certificate or there are penalties if you need to redeem prior to the maturity date.

Regardless of your product of choice, it’s been a while since we’ve seen rates this high.

Cash is king ... or is it?

The current environment has some investors wondering whether it still makes sense to invest in riskier assets like stocks and bonds, given their inherent volatility. Cash is king, in other words.

An all-cash portfolio can be a good option for people with a short time frame, ultra-low tolerance for risk, and/or more money than they’ll ever need. For most of us, however, stocks still represent the most effective growth engine in our portfolios. Investing in corporate America (and Canada and Europe) has proven to be a winning strategy over time, significantly outpacing the returns provided by cash. And bonds, despite their recent weak performance, offer diversification and stable income, as well as a winning record over cash.

Put more simply, long-term investors should expect stocks to beat bonds, and bonds to beat cash. The relative return outlook for these asset types hasn’t changed.

Ben Carlson (an American portfolio manager and writer) provided a good visual of this relationship earlier this year, which I’ve recreated below. Over the past 95 years, stocks returned 9.6% on average, bonds 4.6%, and cash 3.3% (as measured by the S&P 500 Index, 10-year U.S. Treasuries, and 3-month U.S. T-Bills, respectively). Cash, while much less volatile, has clearly been an inferior investment over the long haul.

Further, if interest rates turn course and start to decline, bonds will enjoy a favourable tailwind (when rates fall, prices rise) and stocks will benefit from a lower discount rate (which means future earnings are more valuable in today’s dollars). Cash-like investments, on the other hand, will see their yields squeezed.

To be clear, we’re not saying interest rates will decline. They’re more normal today than they were two years ago, and the current consensus is ‘higher for longer’. If inflation continues to come down and the economy cools, however, lower rates are certainly possible. And in the meantime, a mix of government, corporate, and high yield bonds provide a much better income stream today than over the past several years.

A final consideration if you’re thinking that cash is the place to be for the time being: getting back into the market is extremely difficult. Indeed, it’s the hardest decision in investing (as we point out in this report).

Final thoughts

Today’s yields on savings products are attractive and welcomed by savers who have endured a decade and a half of measly returns. If you need to hold some cash in reserve, you should be sure to take advantage of the competitive GIC rates and money market funds available to you.

But while princely, the return on cash is still no substitute for assets better geared to provide your portfolio with long-term growth — namely stocks, and yes, bonds.

*Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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by Scott Ronalds

The Canada Pension Plan (CPP) is our nation’s collective retirement plan. All working Canadians contribute to it (with a few exceptions), yet many know little about it. And a fair amount like to groan about the Plan, thinking it will dry up by the time they retire. In fact, the CPP’s website states that a majority of Canadians believe the CPP won’t be there for them.

Well, groan no more. As the website bluntly puts it, “people’s perceptions remain 20 years behind the times.” The public’s view still appears to be framed by the state of the CPP in the mid 1990’s, when it was reported that the fund was in danger of being depleted by 2015. Following a series of reforms, however, the CPP is now well funded and remains on track to provide a steady source of income to retired Canadians today and well into the future.

The Plan is monitored by the Office of the Chief Actuary, an independent federal body that gauges its long-term financial sustainability. Every three years, the Chief Actuary issues a report on the financial health of the CPP, which takes into consideration future changes in demographics, the economy, and the investment environment. The latest assessment, published at the end of 2022, confirmed that the pension plan is financially sustainable for the next 75 years.

There have been rumblings recently around Alberta’s talk of leaving the CPP and creating its own provincial pension plan, but the idea is still in the early stages. It would involve a referendum (to let the people of Alberta decide whether they want to leave the plan or not) and would require the federal government to agree on a transfer sum. An early figure proposed by Alberta is being hotly debated. Moreover, the process could face a years-long battle in the courts. But I digress. Regardless of Alberta’s decision, the CPP is on solid footing.

You might be surprised at some of the investments the fund holds. Along with publicly-traded stocks, it owns private equity, real estate, commodities, bonds, private debt, farmland, and infrastructure (toll roads, ports and airports), among other assets. Fun fact: the Plan owns 50% of Highway 407, the electronic toll highway that traverses the Greater Toronto Area.

If you’re interested in how the CPP invests, we offered a look under the hood the other year that highlighted some of its holdings and general features.

Currently, the Plan’s assets total $575 billion (as of June 30). A huge number, and all the more impressive considering its size was $36 billion just over 20 years ago. By 2050, the fund is projected to exceed $3.5 trillion.

The investment team has done an excellent job managing the fund’s assets. Over the past 10 years, it has achieved an annualized return of 9.8% (as of June 30), and earlier this year, the CPP was named one of the top-ranked global pension funds by Global SWF (an industry specialist focused on sovereign wealth funds and public pension funds).

I know what you’re thinking at this point: how much will I receive in retirement?

For 2023, the maximum payment is $15,679 ($1,306 a month) for a new recipient who starts collecting the pension at age 65. Your specific payments depend on your lifetime contributions and your average annual earnings. Our CPP & OAS Benefits Calculator shows the maximum and average annual payments, as well as projected benefits. The payments are indexed to inflation, so they increase every year.

A valuable feature of the Plan is that you can elect to take benefits earlier (60 is the earliest age) or defer them until you’re older (until age 70), in which case your payments will be lower or higher, respectively. Once you start taking CPP, however, you can’t reverse your decision (the one caveat is that you can cancel your CPP pension up to 12 months after you start receiving it, but you have to pay back all of the payments you've received). We have a tool on our website, CPP Benefits — Take Early or Later?, that can help you decide the best option for you.

The CPP isn’t going to make you rich, but it can provide a nice supplement to your RRSP/RRIF income or company pension plan — and you can be sure it will be there for you when you retire.

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by Scott Ronalds

At Steadyhand, investing alongside our clients—or eating our own cooking—is one of our key business tenets. We believe there’s no better way to prove a commitment to our investment philosophy and business approach, and ultimately our clients, than to put our money where our mouth is.

We take it a step further by publishing every year the firm’s co-investment levels, which show how much of our personal assets we have invested in our funds. There are few firms in the business that show this level of transparency.

The latest figures are in and we can report that every employee continues to have a significant portion of their financial assets invested alongside our clients. On average, the team has 85% of our financial assets invested in the Steadyhand funds (as of June 30th). In dollar terms, our employees and families have $43.3 million invested in our funds.

These numbers are worth highlighting because they mean our interests are well aligned—we’re experiencing the same fund performance, client reporting, and fees that you are. Yes, we receive no “insider perks” when it comes to costs, we pay the same fees you pay, and enjoy the same discount program.

Note: For a more thorough overview of co-investment and why it’s important, see our piece Showing You the Money.

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by Tom Bradley

In a speech at the Investment Hall of Fame dinner last year, I referenced my good fortune to be mentored by so many skilled, experienced and giving people. One such person was Tony Hamblin, who I described as "a little-known giant in our industry."

Tony passed away this month to the sadness of those who loved him, including many in the investment field who were influenced and helped by him.

A little history from his obituary: "Tony started his career as an Investment Analyst with Confederation Life and worked there for eighteen years, reaching a pinnacle role as President of Confed Investment Counsel. An entrepreneur at heart he left Confederation life in 1984 to co-found Hamblin Watsa Investment Counsel with Prem Watsa."

Confederation Life (Confed as it was known) produced more great investment managers than any firm in Canada, by a mile, and Tony was at the center of it. Under his early leadership (followed by other strong leaders), many greats emerged including the aforementioned Prem Watsa, Robert Tattersall, and my former colleague, Tony Gage (the Dean of bonds for many years).

But Tony’s influence extended far beyond the team at Confed and Hamblin Watsa, and beyond the investment industry. Again, from the obituary: "Generous to a fault, he never hesitated to take those in need under his wing. He was always supportive of his extended family, nieces, nephews, close personal friends, and their children — mentoring dozens of them. He lent an ear when they were struggling to achieve their goals and a space in his home when they needed a place to live and prosper."

When Neil and I got together to start Steadyhand in 2006, we met with people all over the street. I talked to Tony numerous times, often for wisdom and experience, but just as often for inspiration. He was passionate about entrepreneurs. If you wanted to start something, he was there for you.

Tony said that if we started the firm, the greatest joy would be the "independence". I’ll never forget the sparkle in his eyes when he said independence.

He told us to focus on what we could control: people, philosophy, and business practices (ethics). The rest would take care of itself.

He was unequivocal in his hiring philosophy, which clearly worked. He didn’t hire to fill a position but rather looked for drive, curiosity, and positive energy (he differentiated between people who brought energy versus those who used energy). He wasn’t worried about technical skills. They could be taught.

Of course, my description of Tony as an investment icon is far too limiting. "Tony was an avid adventurer and aviation enthusiast since his teenage years, receiving his private pilot’s license through the Air Cadet Program. He dipped his toes in every ocean in the world and was thrilled to take the opportunity to fly Migs in Russia with his two sons. Never one to be afraid to take risks, and not being satisfied with just flying planes, he became involved in the resurrection of the iconic Found bush plane, becoming Owner and President of Found Aircraft. In his spare time, amongst several other hobbies, he built and flew amateur aircraft, including a scale replica of the P51 Mustang."

I feel privileged to have known Tony, and to have him take an interest in what we were doing. He had a lasting impact. He will be greatly missed.

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by Tom Bradley

Interest rates mean different things to different people. If you own a home, or want to buy one, mortgage rates are the focus. If you’re retired and looking for income, you care about yields on bond funds and other fixed income products. But the impact of interest rates goes far beyond these two scenarios. They are a key variable in how the economy works and investments are valued.

If rates are stable or declining, we take them for granted and tend to overlook the positive impacts. When they increase meaningfully, we notice. The effects are far reaching and play out over many months.

Think about what we’ve experienced since early 2022. When rates jumped, the first order effects were felt immediately. Higher yields translated into lower bond prices which led to negative fixed income returns. The impact on stocks was less precise, but just as immediate and decisive. Equities were down significantly in the first half of 2022.

As a reminder, stock valuations are based on the expectation of future earnings (and dividends). The interest or discount rate is a key variable in determining what those earnings are worth in today’s dollars. The lower the rate, the more valuable future profits are. An extreme example of this occurred in 2021 when near-zero rates benefited unprofitable companies that might eventually be profitable. The time value of money was low. Now, with the discount rate higher, the focus is on current earnings and less on what might be.

But fully transitioning to higher rates takes time. Private investments, including real estate, are adjusting in slow motion. Transaction volumes are low and the gap between sellers and buyers is wide, such that re-pricing assets is taking time. And we’re just starting to see the impact on parts of the economy, particularly those sensitive to borrowing costs including consumer spending and capital investment (housing; infrastructure; mergers and acquisitions).

Nobody can be sure where interest rates are going from here. The search for stability, and possibly lower rates, will likely have more twists and turns as the narrative on inflation and rates swings back and forth. What we can say with some confidence, however, is that today’s rates are more ‘normal’ than they were two years ago. Perhaps the often-used expression, ‘higher for longer’, which implies rates will eventually go back down, should be revised to ‘back to normal’ (or something cleverer).

The ‘normal’ comment relates to my first piece of advice. Don’t make decisions based on the hope that rates will return to 2021 levels. They may go down, but returning to those levels is not the most likely scenario.

Second, pay attention to the debt side of your family balance sheet. We always encourage clients to look at their overall financial situation when making decisions in their Steadyhand portfolio, and that is more relevant than ever. You should try to stick to your long-term investment plan, but the priority may need to be paying down consumption-related debt (credit lines and credit cards) and reducing mortgage payments.

And finally, expect us to take advantage of opportunities that may arise from any financial dislocation. If there is a recession and/or debt crunch (I emphasize ‘if’, as this scenario is by no means a given), your portfolio is well positioned to provide liquidity and take advantage of higher bond yields and lower stock prices. You can be sure, too, that we’ll live up to our name and be here for any advice, explanations, or assistance you may need.

I encourage you to read the rest of our Q3 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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by Scott Ronalds

There are conflicting views around corporate videos and whether they still serve a purpose today. Beware the rabbit hole on the topic, it’s a deep one. At their core, though, they can help tell a story, explain a product/service, and bring you inside the tent. There’s value in that, in our opinion, so we set the gears in motion earlier this year.

Our search for a videographer had a caveat: they should know nothing about us. We wanted them to discover what we’re all about by talking to key stakeholders and clients, reading investor reviews, and learning about our industry firsthand. And then tell our story and bring to light our value proposition from their eyes … in two minutes or less. We felt this process would bring a unique perspective on the aspects of our business that resonate with Canadians discovering us for the first time.

We’re excited to introduce the finished product, courtesy of our partner on the project, Nathan Skillen. All of Nate’s legwork led him to a key message that underpins the story: At Steadyhand, we’re right there with you on the same side of the table.

Pull up a chair and hit play, we hope it strikes a chord.

We’re pleased to announce that we now offer First Home Savings Accounts (FHSA)!

The new account type was introduced by the federal government earlier this year as a means of helping prospective first-time buyers save for a home.

There are several requirements and rules governing FHSAs which interested investors are encouraged to learn more about. Here’s a quick 10-point summary of how the plans work.

1. You must be of legal age (18 or 19 depending on the province you live in) and a resident of Canada to qualify. 

2. You must be a first-time home buyer. For the purposes of opening an FHSA, this is defined as someone who did not live in a qualifying home (that you owned, jointly owned, or that your spouse/common-law partner owned) as your principal residence in the current calendar year or anytime in the preceding four calendar years. 

3. You can contribute a maximum of $8,000 per year and invest it in a broad range of eligible investments (all Steadyhand funds qualify). 

4. You can carry forward your unused FHSA room at the end of the year, up to a maximum of $8,000, to use in the following year. The maximum amount you can contribute in any given year is $16,000, factoring in unused contribution room. (Note: you must have an open account to be eligible to carry forward unused contribution room.) 

5. Eligible contributions can be deducted from your income tax (similar to RRSP contributions). 

6. The lifetime contribution limit is $40,000. There is no limit as to how large your account can grow. 

7. You can transfer money from your RRSP to your FHSA as long as it does not exceed your allowable contribution room (such contributions, however, are not tax deductible). 

8. You can hold an FHSA for 15 years or until you turn 71. The account must be closed the year following your first qualifying withdrawal. 

9. You can withdraw all the money in your account (contributions and growth) tax-free to purchase or build a qualifying home in Canada (e.g., single family home, townhouse, condo, mobile home). However, you must occupy or intend to occupy the home as your principal residence within one year after buying or building it. 

10. If you do not use the account to purchase a qualifying home, you can generally transfer any investments to your RRSP or RRIF (without using any of your RRSP contribution room). If you withdraw money from your account for a purpose other than buying or building a home, you must include it as taxable income (on your income tax return).

We posted a video on FHSAs a few months ago that provides further details on the ins and outs of these plans. We encourage you to watch it if you’re considering opening an account.

We also recently posted a video with advice-only financial planner Owen Winkelmolen, where we discuss how parents can help their adult children purchase their first home through an FHSA, how the account can be helpful for Canadians buying a home later in life, and other tax planning opportunities that FHSAs offer.

While our minimum investment requirement at Steadyhand is $10,000, we have reduced our minimums for FHSAs as follows:

• New clients: $8,000 per fund. 

• Existing clients: $8,000 per fund (or $1,000 per fund if you have $50,000 or more invested with us).

• Children of existing clients: $1,000 per fund (where the parent has $50,000 or more invested with us. Further details here.).

If you have any questions, or if you’re ready to open an account and would like some assistance with the paperwork, please call us at 1-888-888-3147 or book a meeting with one of our Investor Specialists.

by Neil Jensen

We’re pleased to announce that Evan Parubets has been promoted to the role of Head of Advisory Services Team.

Evan has been an Investor Specialist in our Toronto office since 2016. He has over 20 years of advisory experience and has worked with many of our clients, providing guidance on asset mix, portfolio construction and monitoring, and related investment issues.

Evan will be leading our advisory services team, which has grown this year to eight Steadyhanders, and will be steering our advisory services going forward. As a reminder, advice is an important part of our offering (and is included in our all-in fund fees) and we encourage you to take us up on it.

Congratulations Evan!

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by Scott Ronalds

From a business point of view, it was an email we love to see. From a senior looking out for his spouse perspective, it was even better.

The note went something like this (I’m paraphrasing the actual email).

I’m in my mid-80s and in good health. My wife is a few years younger and wants to hand over our investments to a reputable organization in case something happens to me. We have several portfolios, factoring in accounts I handle for children and grandchildren. Including RRIFs, TFSAs and non-sheltered investments, we have close to $1 million. We want to preserve and grow our capital to continue to finance our lifestyle. Is this something you can help with, and if so, how?

The short answer: Yes, we would love to discuss how we can help you.

I’ll get to that, but first, a little about Phil (not his real name).

After reaching out to him, we learned that Phil has always managed his own investments and has done an admirable job of it. Following the market is something he enjoys, although the last few years have been a wild ride. Phil’s looking for a firm he can trust to manage his portfolio and provide his wife and children with peace of mind, both while he continues to lead an ‘85 is the new 75 lifestyle’, and after time catches up with him.

Although he’s still very capable of managing his own money, Phil has come to the realization that his wife would be in a challenging situation from an investing perspective if something were to happen to him. She’s aware of their financial picture at a high level but isn’t well informed about their individual holdings and wouldn’t have anyone to turn to for help (who's abreast of their investments). Moreover, she’s not interested in managing a portfolio.

Their situation is not unique. There are many households in Canada where one partner is the point person for financial decisions, and the other is in the dark (or uninterested). It can lead to a lot of anxiety and frustration when the “numbers person” passes away or loses their capacity to make decisions.

On this last point, studies have shown that financial literacy declines with age, suggesting it’s sensible for seniors who are DIY investors to seek to work with a trusted adviser or firm. One such study from Texas Tech University in 2016 stands out:

“Financial literacy declines at a consistent rate after retirement. This is worrisome because households aged 60 years and older control more than half of the wealth in the United States … What was even more concerning, however, is older respondents didn't report a loss of confidence in their ability to make financial decisions.”

Whether Phil decides to make the move to Steadyhand or another firm, it’s great to hear that he’s turning over the keys to a group of professionals to do the heavy lifting, and that he plans to involve his wife in the investment conversation. It’s a responsible financial decision that will go a long way in making life easier for his family.

Turning back to his question of whether we can help, here’s how we’d be a good fit for Phil, and other retired Canadians looking for professional oversight of their investments.

All accounts under one roof, with Powers of Attorney

We can handle all of Phil’s various account types (RRIF, TFSA, non-registered) and can set up his wife or one of his children as a Power of Attorney for each account, if desired, so that she/they can act on them if he becomes unable to (we would offer any investment advice she requires; more on this in a minute). They’ll receive consolidated reporting on their portfolio, making it easier for Phil and his wife to see what they own, how they’re doing, and what their all-in fee is.

An aligned investment approach

Preservation of capital along with some growth is Phil’s stated mandate. Our investment approach is well suited to his objectives. We focus on building well-diversified portfolios comprised of best-in-class businesses that trade at reasonable prices. This means we stay away from speculative areas of the market and avoid hyper-volatile stocks. Likewise, we do not take undue risks in our management of bonds. We also offer a savings fund with an attractive yield for investors choosing to hold cash.

Advice and conversations involving both partners

Phil is an experienced investor and probably doesn’t need a lot of advice. Nevertheless, we’re here to help. We can assist him in determining a suitable Strategic Asset Mix (breakdown of stocks, bonds, and cash), and suggest a combination of our funds that best fits with his objectives. We would also encourage him to include his wife in all conversations, including an annual portfolio review, so that she has a good grasp of their investments. In the event that Phil pre-deceases his wife, we would guide her through the estate process.

A retirement withdrawal strategy

Our Retirement Withdrawal Program was designed for investors like Phil. It would help him draw a steady income from his portfolio without having to worry about selling his investments at the wrong time (i.e., when markets are down).

A team to handle multi-generational accounts

We’ve been around long enough to see multiple generations of families invest with us, which I have to say is very cool. Phil could open accounts for his children and grandchildren, providing they’re of legal age (the accounts would be registered in the family members’ individual names).

We have a team of eight Investor Specialists who service our clients, each with a different background. One of the benefits of this is that multi-generational clients can choose to work with the same Specialist if they like, or work with someone closer to their demographic. And because we have a team-based approach to servicing clients, any one of our Specialists can help at any time (within business hours).

Low all-in fee

Given the size of Phil’s portfolio and his investment objectives, his all-in fee with us would be less than 1.0%. For context, a client with three-quarters of a million dollars in our Founders Fund would pay 0.97%. If they held our Income Fund, the fee would be 0.76%. The fee on a blend of the two funds would fall somewhere in between (check out our Fee Calculator for details).

As Phil ponders his decision, he should consider that the switch of hats, from picking his own investments to relying on a firm to do it for him, is also sure to relieve him of some stress and second guessing. Just another reason we think he’d look particularly good in a Steadyhand hat.

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by Scott Ronalds

China’s real estate and finance sectors are under stress. Exports are falling. Relations with the West are on poor terms. Youth unemployment levels are troubling. And the U.S. is trying to hamper the country’s technological progress by cutting it off from leading-edge semiconductors. Confidence in the country’s stock market, in turn, is eroding.

Witness the numbers: the Chinese market is down 5% this year (Morningstar China All Cap Index) while global stocks (Morningstar Developed Markets Index) are up 15% (as of August 31).

It has some of our clients asking how much exposure they have to China.

The short answer: our exposure is modest. We do not hold any Chinese stocks in our funds. The country’s lack of transparency, governance issues, and the heavy hand of its government make it a challenging place in which to invest directly. That said, China’s enormous economy and rapidly growing middle class cannot be ignored. We gain our exposure indirectly through foreign companies that sell goods and services to Chinese consumers and businesses.

Our focus is mainly on multinational corporations that have exposure to the Chinese consumer but are not overly reliant on sales in the region to sustain their growth and profitability. Examples include Coca-Cola, Sony, Procter & Gamble, Samsung Electronics, Danaher, and Michelin. We also own businesses with no revenue ties to China, such as Telus, Metro, Aritzia, and Casella Waste Systems.

In addition, however, our funds own a small group of companies that generate a sizeable portion of their revenues in the country. AIA Group (Hong Kong-based insurance company), for example, derives roughly three-quarters of its revenues from the mainland, and Qualcomm (American designer of chips for smartphones) generates nearly two-thirds of its sales there. Chinese tourists also represent an important source of revenue for French luxury giant LVMH (Louis Vuitton Moet Hennessy) and Japanese retailer Pan Pacific International Holdings.

And it’s hard to avoid companies that are important customers of China’s vast manufacturing complex, although this dynamic is slowly changing. Businesses are diversifying their supply chains to other Asian countries and nearshoring (bringing manufacturing back home).

When evaluating a company, one of the things our managers consider is its supply chain and related risks. Businesses that are wholly reliant on Chinese manufacturing (or any one emerging market country for that matter) are deemed unattractive.

When we break out our funds' overall revenue exposure by region (e.g., where the companies we own generate their sales), the Founders Fund has 10% of its equity holdings’ revenues coming from “Asia-Emerging”, which includes China as well as other emerging markets in the area. For perspective, the Founders Fund’s biggest area of revenue exposure is the U.S., at 39%, followed by Canada (22%). The Eurozone (8%), Latin America (5%), Japan (5%), and the U.K. (3%) make up the rest. The Builders Fund’s component companies generate similar amounts of revenues from these regions (calculations are done by Morningstar Direct, an investment research service).

While China is currently in the hot seat and has some governance and credibility challenges to overcome, it still holds intrigue and opportunity from a long-term investment perspective. We believe our exposure is well measured in this regard.

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The Canadian Guaranteed Income Supplement (GIS) can provide over $12,000 per year of tax-free retirement income in addition to other government retirement benefits like Old Age Security (OAS) and Canada Pension Plan income (CPP). Yet many Canadians don’t realize they’re eligible.

In this video, Steadyhand's David Toyne talks to Owen Winkelmolen about the eligibility requirements, clawbacks and tax considerations involved in planning for GIS. Owen is a Certified Financial Planner and founder of PlanEasy.

by Scott Ronalds

In his latest Financial Post article, Tom Bradley (Steadyhand Chair and Co-founder) highlighted Nvidia as a company that is constantly in the headlines and has become the poster child for a trend that’s changing the economy — artificial intelligence (AI).

Nvidia is the dominant designer of leading-edge semiconductors that power machine learning and AI models. The stock has more than tripled in price this year and is now the fifth most valuable company in the world. As Tom mentions in his article, fund managers who own it have a great story to tell and those who don’t have had trouble keeping up with the market and may be fielding some questions from clients.

We fall into the latter camp; we don’t own the stock in any of our funds. While Nvidia is a great company, it has always seemed too expensive in our fund managers’ eyes. Whether based on price-to-earnings, book value, sales, or other measures, its valuation has continually exceeded our comfort level. Admittedly, we’ve been wrong (judging by the stock’s massive rise).

As we look forward, though, our managers believe the stock is not compelling from an upside/downside perspective for reasons that have to do with many of the uncertainties Tom identifies in his piece. Let me elaborate.

First, the stock’s valuation remains very high, implying that everything will continue to go Nvidia’s way. As the tech industry has taught us repeatedly, this is rarely the case.

Further, while demand for Nvidia’s products seems endless right now, the semiconductor industry is still cyclical and it’s not a given that tech companies will be buying chips at today’s pace. Moreover, there are deep-pocketed competitors that want some of the market share.

Then there’s the geopolitical angle. Nvidia relies solely on Taiwan Semiconductor Manufacturing Company (TSMC) to manufacture its advanced AI chips. Tensions between China and Taiwan have been escalating, and any invasion or attempted expropriation of facilities would create havoc for the company and industry (the manufacturing process cannot be easily switched to another plant or country, as the factories take years to build and cost billions of dollars).

There are other reasons for caution, but perhaps the lead manager of our Equity Fund, Gord O’Reilly, best sums up why we don’t own the stock today: “Nvidia carries a whole bunch of risks that we simply choose not to take on.”

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by Tom Bradley

Every once in a while, a stock comes along that defines who you are as a fund manager. The company is the poster child for a trend that’s changing the economy and constantly in the headlines. The stock is rocketing upward, which means it’s extremely hard to keep up with the market if you don’t own it.

We have one such stock today: Nvidia. The stock is up 240% this year and is now the fifth most valuable company in the world. The company has pulled away from the competition in high-performance computer chips used for, you guessed it, training artificial-intelligence models.

If such a stock is based in Canada, it has an even bigger impact. Our stock market is relatively small, so a successful global company can dominate the returns of the S&P/TSX Composite Index. Nortel grew to be one-third of the Canadian index at its peak. Valeant Pharmaceuticals and Shopify came from nowhere to become the biggest stock on the board (albeit, briefly), moving past financial giant Royal Bank.

To be clear, this isn’t like being on the right or wrong side of BCE versus Telus, or Canadian National Railway versus Canadian Pacific Kansas City. Clients don’t often look for those or ask their manager about them, but they absolutely ask about stocks such as Nvidia. Every meeting.

If you own Nvidia, you’re delighted. The company just reported blowout earnings. Its sales doubled in the second quarter and earnings were up more than eight times compared to the same period last year. And management’s guidance calls for more of the same. The story just keeps getting better.

Owning Nvidia means you can proudly tell the story about when and why you bought it. The only challenge you have is a rather pleasant one: should you trim the position or let it run?

The trim-or-hold decision is a piece of cake compared to the one you have if you don’t own the stock. You likely missed it because it seemed too expensive and, even though the outlook kept improving, the stock price was always ahead of itself. Comparable companies traded at lower price-to-earnings multiples.

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For a long time, it didn’t matter. Missing Nvidia didn’t define you as a portfolio manager, but that’s not the case now.

So, what’s holding you back? Well, like any stock decision, there are cross currents and uncertainties. Will the current demand surge for AI chips slow and settle at a lower level? It’s not yet clear what normal volumes will be.

Is this the big inflection point that many experts claim, or just a cyclical surge driven by customers aggressively stocking up? Remember, the overall chip shortage of a year or two ago quickly turned into a glut as customers ran down inventories.

Part of the uncertainty is because there’s no clearcut revenue model for AI businesses. Is it a new product that will generate additional revenue, or just an enhancement to existing products?

Then there’s the competition. Nvidia’s position seems unassailable at this point, but there are other big players with even bigger research budgets working on high-capacity chips.

Meanwhile, the valuation you found challenging has only become worse. There are studies showing that companies trading at more than 25 times sales turn out to be poor investments. Certainly, Nvidia will need a near-heroic performance to justify its current price (that is, sales continue to multiply while maintaining industry-leading profit margins).

There are many potential outcomes to unique situations such as Nvidia’s. The first is winning the day right now. That is, Nvidia proves to be a great company and keeps growing. The stock continues to rise even though it always seems expensive. Think Amazon.

There are other possible scenarios though, such as it’s a great company and keeps thriving, but the stock stagnates for years while catching up to its P/E multiple. Think Cisco, which is still well shy of its 2000 high despite gushing profits for more than two decades.

Or it’s a good company, but its competitive advantage is overstated. Future sales and earnings disappoint and the valuation declines. Shopify is an example of this deadly combination.

Or the really scary scenario: the company isn’t what it seems and eventually proves to be mostly smoke and mirrors. It goes from a high-flying company that’s changing the way business is done to the junk heap. Nortel and Valeant were in this category.

You see the fund manager’s dilemma. Nvidia is a stock that can’t be ignored because it’s impacting performance and regularly being asked about it. But what to do?

by Scott Ronalds

Summer viewing tip: cue up The Bear on your streaming playlist. It’s a show about a young chef trained in haute cuisine who returns to his hometown of Chicago to run the sandwich shop his deceased brother left him. The ‘Feast of the Seven Fishes’ episode, chock full of guest stars and centered on a dysfunctional holiday dinner, is fascinating (and will make you feel a whole lot better about your next family gathering).

The series also provides a riveting, behind-the-scenes look at all the prep work, slang, and drama that goes down in a restaurant kitchen. I bring it up because I noticed the commercial ovens in several scenes. They’re made by RATIONAL, a German leader in multifunctional appliances for professional kitchens. The company, which touts its ‘100% Made in Europe’ quality, has an impressive pedigree, with over 600 patents, 1.2 million appliances in the market, 50 years of experience, and a 50%+ global market share. We own the stock in our Global Equity Fund (and correspondingly, our Founders Fund and Builders Fund).

RATIONAL isn’t a sexy business, nor is it a hot stock. That label today belongs to the likes of Nvidia, Tesla, Apple, and anything artificial intelligence. Rather, it’s a steady compounder. The kind of company that:

• Produces consistent revenue and earnings growth over long periods

• Has little debt and stable operating margins

• Makes a best-in-class product 

• Has a proven and resilient business model.

With parts of the market once again seeing dramatic moves (seven tech-related stocks have been driving the U.S. index), steady companies are increasingly the focus of our funds.

Not to say that such stocks won’t see swings, but they tend to be less volatile than those with high levels of debt, erratic profits, promises of lofty future growth, or ultra-high valuations. Companies that fall into the steady category also typically offer products or services that people and businesses need; things that make the world go round. And these characteristics often lead to strong long-term returns. Knowing this, they allow you to sleep better at night.

A few of our new purchases this year help to add a little colour to our investment focus.

Canadian Pacific Kansas City is a transnational railroad born from the merger this spring of Canadian Pacific and Kansas City Southern. The company operates the only network that spans North America and offers access to key ports in Canada, the U.S., and Mexico. Its trains carry commodities, industrial goods and other freight. As more companies nearshore manufacturing to Mexico, CPKC has a compelling advantage.

Costco is a name we all know. The warehouse retailer has over 800 stores worldwide and an annual membership renewal rate of 90%. Costco has enormous purchasing leverage, a growing ecommerce division, and a solid history of revenue growth and profitability. Plus, a great hot dog at an unbelievable price.

Rohto Pharmaceutical is a Japanese maker of high-quality skincare products and cosmetics, eye care products, over-the-counter drugs, and functional foods (formulated foods that offer additional nutrition and benefits). The company’s history dates to 1899 and its products are sold in more than 100 countries around the world.

The stock market is known to cause some restless nights, but hopefully you can sleep a little more soundly knowing where our investment focus lies. And if you do find yourself with a bout of insomnia, at least you’ve got a new show to watch now.

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by Tom Bradley

I had the pleasure of speaking with a group of young investors last week. One of the lessons I tried to impart was that investing is different from almost every other aspect of their lives. It’s unpredictable and often counterintuitive, which makes it more difficult to be successful. Let me explain how investing differs.

Short-term feedback means little

In real life, immediate feedback is everything. Your behaviour is impacted by praise or criticism from your boss, hints from your spouse and constant input via emails, texts and notifications.

In investing, short-term feedback is usually meaningless. What the market did today, or even this year, has little to do with how successful you’ll be. Indeed, it can inhibit your progress by prompting you to make needless changes or veer off course.

At Steadyhand, we have an expression: “Last quarter’s returns are a good indicator of ... last quarter’s returns.”

There's no app for that

If you want to stream music, keep track of household expenses or check your sleep patterns, there’s an app for that. There are many investment apps, too, but they generally don’t line up well with the long-term nature of investing.

Market updates and stock quotes are about right now, not 10-plus years from now. They shorten your view when ideally you should be looking further ahead and giving your strategies time to play out.

The best action is no action

Indeed, reading business news and checking apps increases your desire to act. You’re compelled to make something happen. But in most cases, the best action is no action, particularly if you have a diversified portfolio that matches well with your objectives.

Acting on news that’s urgent, but not important increases costs and distracts from your plan. Warren Buffett has said, “Wall Street makes its money on activity. You make your money on inactivity.”

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If everyone is doing it, don't

If five people tell you to buy a Hyundai Ioniq 5, you can be assured it’s a good car. If those same five tell you to buy a stock, you should be wary.

When everyone is on the bandwagon, it means the good news has been widely disseminated, expectations are high and you’re most likely paying a premium to participate. Conversely, if everyone hates a stock, it’s likely that most of the bad news, and risk, is already baked into the price.

Investor sentiment is a useful tool, but like so many things in investing, it runs counter to human nature.

More features, less return

It’s easy to be dazzled by fancy features when buying a new car or phone. The more the better. Fancy investment products can also be intoxicating, but the impact on your portfolio is not usually as positive.

Generally, the more complex the product, the lower the return. There are two reasons for this. First, most structured products are designed to make investing more palatable by reducing volatility and/or eliminating the downside. Second, they’re more expensive. Strategies such as dynamic trading, leverage and currency hedging bring with them more mouths to feed in the form of product designers, investment bankers, options and futures traders, and prime brokers.

An example of this is index-linked notes sold by the banks. Because they’re guaranteed to not lose money, their stock market exposure is greatly reduced. There’s more sizzle than steak.

Forest versus the trees

It’s easy to research products you want to buy. It takes just minutes to know exactly what you’re getting. Industrious investors also have an incredible amount of information at their fingertips.

Assessing a company to invest in, however, involves all the unknowns that go with looking into the future. Decisions must be made on incomplete information because if you try to unearth every little fact, you’re likely to miss the stock’s big move.

No price tags

Normally, the things you buy have a price on them. The retail price, perhaps a sale tag, and the cost of shipping. Investors don’t have the same transparency. If you look up the word “opaque,” you’ll see a picture of an investment adviser. The investment industry seems committed to making it difficult to determine what your total cost is.

Likewise, it’s often difficult to determine how you’ve done. Some firms put returns on their regular statements, but most bury them away in year-end regulatory documents.

I’m hopeful that the next generation of investors has a better understanding of markets and develops disciplines that embrace the peculiarities of investing. Getting it right early will be very rewarding.

by Tom Bradley

We’re in the depths of summer and the business news cycle is slow. It’s a good time to step back and assess the current investment landscape. As I camp out at our Crystal Lake office — a.k.a. the cottage — here are my observations about trends being overlooked, misunderstood, or in transition.

Last fall, I wrote that “finding pricing power today is like shooting fish in a barrel.” With inflation soaring, investors were focused on finding companies that could pass higher costs on to their customers while still maintaining sales volumes. Many companies were able to do that then.

It's a different story now. As companies report second-quarter earnings, it’s becoming apparent that volumes are being impacted by repeated price increases. Heineken, the world’s second-largest brewer, saw its beer volume drop 7.6% in the second quarter. Grocers and consumer goods companies have noted that customers are trading down to cheaper brands. It appears customers are hitting their limit, even beer drinkers.

Interest rate impacts

The U.S. Federal Reserve is so yesterday. Central bankers have facilitated a return to more normal interest rates and can now put their feet up on the desk, at least until the next recession. Their job is done.

What deserves more attention is the slow-moving but powerful impact that already higher rates are having on the economy. I say slow-moving because it’s taking time to play out. Mortgage renewals are spread over a few years. Higher financing costs for companies, particularly those with floating-rate debt, are currently being absorbed, but will become increasingly hard to manage.

Commercial real estate, which was a huge beneficiary of low rates and easy credit, will see cap rates (their valuation metric) move up (a bad thing) in line with higher financing costs. So far, this harsh reality has been delayed by rent increases (in some sectors) and a dearth of transactions.

Cheap debt and lots of leverage have also been a key part of private equity’s success. The cheap part is now gone. As for leverage, the financing tap is still open because fund managers haven’t stumbled yet but, like real estate, valuation multiples on existing holdings will need to come down to reflect the new rate reality. This is confirmed in the secondary market, where sellers of private funds are accepting larger than usual discounts for their units.

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In contrast, higher interest rates have been good for the banks for reasons we’ve all experienced. They’re quick to raise loan and mortgage rates and take their time increasing interest rates on chequing and savings accounts. This too will change, grudgingly. With better yields available, bank customers are incented to switch into high-interest accounts, GICs, money market funds and short-term investment products. Technology makes this move easier than ever. The percentage of bank assets that pay little or no interest will come down over time, and their funding costs will go up.

The missing recession

Many commentators are marvelling at how well the economy is holding up. The recession that seemed imminent is no longer a sure thing. Meanwhile, others are questioning deficit levels at the government and household level.

Both views are old hat now, but for some reason, few are putting the two together, which is curious given that the second observation partly explains the first.

Consumer spending is hanging in because we’re living beyond our means. Government revenue doesn’t come close to paying for the services it provides. My rough calculation suggests that an Ontario household is receiving $4,000-5,000 of services each year (based on their share of the federal and provincial deficits) that they’re not paying for — at least not yet. It’s being put on their tab. Buy now and a future generation will pay later.

China? What risk?

It continues to amaze me that the risk of China further isolating itself is not a bigger focus for investors. To me, previous economic disruptions that spooked markets, such as the European banking crisis (Greece), various U.S. budget standoffs, Brexit and the war in Ukraine, pale in comparison.

The likelihood of serious economic dislocation may not be high, but if it happened, the consequences would be off the charts, and devastating for many global companies. Suffice to say, Apple, Tesla, Volkswagen, and Starbucks desperately need China and the West to get along.

Urgent headlines may be missing, but it remains a fascinating time to watch the economy and businesses in transition. The most interesting developments are the ones not yet in the spotlight.

If you're a soon-to-be empty nester, or if your children have recently left the house, some changes are knocking on your door. In the below video, Investor Specialist Jeff Stashuk shares some of the most talked about emotions and offers some financial tips to consider during this major life event.

by Tom Bradley

Speculating about something can be entertaining. Debating how the Jays will do, or the number of goals Connor McDavid will score, is fun and totally harmless. Everyone knows there’s no way of determining what will happen. Any outcome is possible.

The investment industry’s preoccupation with predicting the stock market is another matter. The people making the forecasts actually believe what they’re saying. Their seemingly well-reasoned projections also have entertainment value but, unfortunately, lead to poor investment decisions.

In my last column, I said that nobody can predict, with any precision or consistency, what the stock market will do in the next few months or years. Let me explain why.

The main reason is that stock prices are impacted by a multitude of factors, involving millions of participants. A few market forces are in the spotlight at any one time (i.e., inflation, growing demand for copper, aging baby boomers), but most stay in the shadows, only appearing on the radar after they’ve already had their effect.

Not only do overlooked factors reappear unexpectedly, but new ones emerge for which there’s no historical context, such as Brexit, COVID and ChatGPT.

And, of course, none of these factors move in isolation. For every action there’s a reaction that is equally hard to predict.

You get the picture. The reasoning behind a market forecast can be quickly overwhelmed by something that wasn’t contemplated or even known.

And then there’s the perilous connection between the economy and stock prices. I say perilous because the linkage is predictable only in its unpredictability. Investor emotions and changing expectations can take valuations from gloomy lows to euphoric highs, and all points in between. Indeed, stocks are volatile, not because of changing fundamentals, but rather the price investors are willing to pay for those fundamentals.

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The Financial Times’ Robert Armstrong said it well: “You try to understand markets as best you can, but you are surprised every day. Any intelligent and conscientious person who spends time in markets is humbled by how complex they are and how unpredictable they are.”

Yogi Berra put it more simply: “It’s tough to make predictions, especially about the future.”

Most commentators and strategists use economic data as a starting point for their market calls. It sounds logical but, while extrapolating current growth and inflation trends into the next year works most of the time, it doesn’t help investors make money. As I noted earlier, the linkage between the economy and stock prices is sloppy at best. Some of the best market runs occurred during periods of slow growth, and conversely, there have been severe corrections when the economic outlook was strong.

Anticipating a change of trend can be extremely rewarding but, you guessed it, it’s hard to do, and rarely is the timing accurate enough to be useful.

Listening to a big thinker justify their market call can be intoxicating. You want to believe they have a crystal ball, and the media can usually oblige by finding someone who got the call right (it doesn’t seem to matter if they’d been predicting it for 10 years, or that the prescience came after a series of miscalculations).

Why do I obsess about the forecasting fallacy? Because it reduces investor returns. It creates needless trading activity and prompts investors to deviate from their long-term plans, all in hopes of catching a market upturn or avoiding a downturn.

Investing isn’t about timing the market but rather time in the market. Look at any long-term stock market chart and you’ll see that it trends up and to the right, with lots of zigs and zags along the way. The more time you can ride the wave, the better off you’ll be.

When people ask me about the stock market, I tell them it’s like a bad girlfriend or boyfriend. Unpredictable, overly dramatic, irrational at times and totally insensitive to your needs.

That’s not something I want to bet my financial future on. I’ll stick to my much more reliable and diversified long-term plan.

When I agreed to do this, I thought I’d reflect on my 40 years in the investment trenches. I’m hitting that milestone next month and have been keeping a list of lessons learned. It seemed like the perfect time to do a “40 lessons from 40 years” type of thing.

But as I thought about who would be here, I realized there was a particular theme I wanted to talk about more. One that I’m focusing my attention on these days.

We’re all trained to look for inefficiencies in the market so that we can take advantage of overlooked stocks, structural dislocations and underappreciated trends. We’re like heat-seeking missiles in this regard.

Well, I’m here to tell you about one of the biggest inefficiencies there is, and one that’s not easily arbed out and is staring us in the face. I’m talking about investor behaviour: the actions taken by regular Canadians, the end users of investment products many of us manage.

When I say ‘inefficiency’, I mean the biggest cause of slippage to client returns. I’m talking in the broadest sense. Mrs. and Mr. Smith earning a net return of four per cent a year instead of six per cent, and therefore accumulating $1 million for retirement instead of $2 million.

Providing great investment management is important. Charging reasonable fees is a given. But it all goes for not if the ultimate consumer uses our products and skills incorrectly.

The penny dropped for me when I saw a study of returns for the clients of an eminent U.S. money manager. The firm had an excellent record and at one point was named Investment Manager of the Decade, but the study showed that the clients of the firm hadn’t done nearly as well. Indeed, they’d done poorly.

I think you know why. Money flooded into the firm when results were good and flowed out just as quickly when they were bad.

When studying history, what’s consistent through all market cycles is the part that human emotions and behaviours play. It’s a reliable and recurring inefficiency and is the biggest swing factor for investor returns. And yet, somehow, it’s mostly ignored by more talented investment professionals than me.

This was reinforced a few years ago when I was serving on a regulatory committee. Around the table were most of the big manufacturers in the country: fund companies, ETF sponsors and banks. I had a chance to ask the group what work they were doing to assess how the investors, the buyers of their products, were doing. In other words, the money-weighted rate of return (MWRR) of their funds as opposed to their published time-weighted return (TWRR). The reality versus the promise.

It was comical. There was silence. A wall of blank stares. Some didn’t even know what I was talking about; as if I was talking another language.

This revealed a serious industry shortcoming, and the opportunity we all have.

If you’re not yet clear what I’m referring to, let me give you some examples. I’ll start by going back 25 years. You’ll remember how investors jumped on the tech bandwagon. Most got on it late and rode it down, but it wasn’t just chasing past glory and being undiversified that caused the damage.

Just as big an issue was the hangover of the tech wreck. People were disillusioned and, as a result, were underinvested for years. They went up with substantially less in stocks than they went down with. As you know, that’s a bad formula.

Similarly, after the financial crisis, many investors were out of the market for years, if not forever. BlackRock did a survey a few years later and the cash and GIC levels were remarkable. Cash-like investments were over 60 per cent of investment assets.

Think about the impact of that.

Contrast that with the post-pandemic period: 2021 was 1999 on steroids. In my 40 years, I can’t recall a period with such rampant speculation. People rolling the dice. Shooting for the stars. In the matter of 12 to 18 months, we had manias around cannabis, crypto, meme stocks, non-profit tech stocks, short-dated options and SPACs. All part of a bigger trend towards day trading on an app.

There were investors who made money doing some of these things, but most didn’t, and some got killed.

But the slippage comes in many forms, not just during these remarkable periods. We see it all the time. Investors sell their stocks because they’re spooked by U.S. politics or, as mentioned earlier, go all in on a new trend.

In the latter case, some portfolios have done quite well. Dividend portfolios that only owned Canadian banks, utilities and REITs, or ones focused solely on the FAANG stocks, benefitted from declining interest rates over many years. But not all undiversified portfolios do.

I’ll never forget meeting a new client in 2013 or ’14 who came to us with two-thirds of her portfolio in precious metals. The percentage was that high even though the stocks had fallen dramatically from their highs.

These kinds of things have a big impact on returns and in most cases, overwhelm the impact of an investor picking a first-, second-, third- or even fourth-quartile manager.

Where am I going with this? We need to do a better job of building the foundation on which our wonderful profession is built on. This is an exciting opportunity.

For instance, before we claim victory because we’re in the first quartile, we need to check to make sure our clients are also in the first quartile.

Rather than puff out our chests and tout our skills when our numbers are good, we need to use that glorious moment to help educate clients on how investing works. Why then? That’s when we have a halo over our heads and clients are hanging on our every word. Bob Hager was the master of using periods of strong performance to talk about the warts in the portfolio and the challenges ahead.

What’s in it for you by doing this? It’s an investment in the future. Clients will be easier to serve in the years ahead. They’ll trust that they’re getting the straight goods and be less prone to crippling mistakes. And, dare I say, they’ll be stickier.

Let me go on. I want to make it real.

We can improve client behaviour by being disciplined about reporting returns, focusing on the long term and doing it the same every time. This, opposed to jumping around and picking the number on the page that makes us look best.

Before we say “if the market goes down,” we need to catch ourselves and say “when the market goes down.” I learnt this from Dan Richards. Substituting that one word makes a world of difference in setting expectations.

We need to align our advertising and product launches, both of which send a huge signal, with what’s best for the clients. Think about it. In weak markets, what gets promoted? It’s safe products with limited downside. They’re featured at a time when, in all likelihood, the firm’s investment team is buying stocks at reduced prices and dialing up risk. Is this good for client returns? I don’t think so.

And, finally, before we make a market call, think about what it’s doing to our client relationships. Holding ourselves out as knowing where the market is going feels good for about 30 seconds, but sets unrealistic expectations for years. Clients need to know the market is like a bad boyfriend, or girlfriend. It’s unpredictable, overly dramatic, irrational at times and totally unresponsive to our needs.

This applies to the media in the room, too. I implore you to stop publishing short-term market calls. It’s hurting Canadian investors.

In conclusion, let me say that we can’t know what the market is going to do, but we can make sure our processes and client interactions reinforce sound investor behaviour. It puts our clients, our businesses and our profession on a better footing.

That means not portraying ourselves as knowing more than we do.

Not promoting market timing, sector rotation and frequent trading.

Providing clear, consistent, jargon-free reporting that tells clients what they need to know.

And aligning promotion and product launches with what our portfolio managers are doing, not what clients are feeling.

I saw a quote last weekend, which I’m guessing relates to Father’s Day, from an Italian philosopher and novelist, Umberto Eco. He said, “I believe that what we become depends on what our fathers teach us at odd moments, when they aren’t trying to teach us. We are formed by little scraps of wisdom.”

We need to operate our businesses knowing that everything we do, everything, even the scraps, impacts client outcomes.

I want to thank Katie and the PMAC team for giving me this soapbox today. PMAC is an organization we should all get our shoulder behind. It needs our support because regulators, governments and our friends in the media need to hear that there’s more than just 10 mega firms in this industry.

Thank you for listening.

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by Salman Ahmed

Investors might be surprised to learn that their portfolios have likely grown during the first half of 2023 despite the negative news dominating headlines. In this mid-year review, we provide some highlights on how the Founders and Builders Fund have performed, our returns outlook and how we're positioned in a period of inflation, rising interest rates, a European war and general market uncertainty. We also provide suggestions for what retired investors and savers should be doing with their portfolios in this environment, including those enrolled in our newly launched Retirement Withdrawal Program.

In general, it's a good time to rebalance your portfolio and top up any reserves you’ve set aside for emergencies or spending in retirement. It's also important to take account of any cash you might have in your bank and trading accounts. Cash loses value to inflation, so keep cash to a minimum.

We end with an update on Steadyhand. We've got many initiatives underway and our team has been growing too.

by Tom Bradley

Our chief investment officer Salman Ahmed is good at asking the hard questions. One he often grinds me on is: “Is there a good reason to deviate from our long-term asset mix?”

He’s referring to the mix in the Founders Fund, our largest fund. There needs to be a compelling reason to deviate from the fund’s target for cash, bonds and stocks. For instance, for the stock weighting to be more than 60%, valuations must be pointing to above-average returns over the next five years (we don’t make forecasts shorter than that), investor sentiment needs to be bearish (a contrarian indicator) and our portfolio managers are chomping at the bit to buy stocks.

You get the idea. Stay glued to the target mix unless there are good reasons to do otherwise.

Of course, Ahmed’s question assumes two things. One, that nobody can precisely and consistently time the market (the evidence is overwhelming), and two, that the strategic asset mix, or what we refer to as SAM, is appropriate for the fund’s objective of growth and capital preservation.

You, too, should have a SAM that fits your goals, situation and personality. Before making any moves, you need a solid base to work from. Think of it as your default position; your starting point for everything.

Determining an appropriate asset mix isn’t as exciting as picking a tech or mining stock, which can come later, but it will have a bigger impact on long-term returns. Below are some examples of where SAM proves invaluable.

Account management

SAM helps determine where the money will come from when you want to buy a stock or fund. For that tech stock, it’s the equity bucket. A guaranteed investment certificate (GIC) would be funded from your fixed-income allocation.

People who inherit money or receive a big bonus often think they should do something new with the money. In most cases, the easier answer is the best answer. You’ve already thought about what your portfolio should look like, so build on it by following your SAM.

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A place to hide

You need the most help when markets are in decline and your portfolio is taking a hit. You don’t want it to go down further, and commentators are talking about places to hide. Indeed, many people shift their portfolios into money market funds and GICs. But wait. Think about what this move to “safety” does.

Let’s assume your portfolio is funding retirement years in the future and your SAM calls for 70% in stocks. Moving into a savings vehicle puts you 70 percentage points off track, which is a huge bet. It implies you’re supremely confident about what you’re doing.

Default to your SAM when you don’t know what to do. It’s your hiding place.

Do something

SAM also helps when you feel the urgency to act. When markets are volatile, up or down, it’s likely your portfolio has drifted away from its intended mix, so you should take steps to get back on track unless you have special insight into where the markets are going, which is unlikely in emotional, turbulent times.

SAM provides the action plan. You don’t even have to think about it. Rebalance your portfolio back to target, either by trimming and adding to positions, or using regular contributions and withdrawals to make adjustments.

Remember, you’re not making a call on the market or the economy. You’re just getting back on plan and, in so doing, are buying when prices are down (not necessarily at the bottom) and ensuring you’ll go back up with at least as much in stocks as you went down with.

Getting back into the market

If you’ve already made the move to get out of the market, you’re faced with what I’ve dubbed the Hardest Decision in Investing. SAM helps here, too. It’s step one.

Before you determine when and how you’re going to invest, which is step two, you need to reaffirm that your long-term mix balances growth with your tolerance for periods of negative returns. If you’re out of the market, the previous mix was clearly too aggressive.

People get obsessed with the second step without first thinking about where they’re going. By clearly defining a target mix, you’re better able to consider the reinvestment process, and knowing how far off plan you are may be motivation enough to get started.

Think of SAM as your trail map. It’ll get you where you’re going without getting lost in the woods. You shouldn’t leave home without it.

by Tom Bradley

When you look at your statement, you may be surprised at how well your portfolio has done over the last year. I say that because a year ago things looked bleak. Bonds and stocks were down a lot, interest rates were up, and commentators were calling for a recession.

At that time, we had a different take. I said in my 2nd Quarter Brief: “I don’t know when markets will bottom but know that I want to own a diverse collection of leading businesses when it does.”

I built on this message in the 3rd Quarter. “Nobody knows when stocks will find a bottom and start to recover. It could be another 3 to 12 months, or it may have already started. What we know for sure is that most of the money will be made well before the current problems are resolved.”

Since the end of last June, the World Equity Index is up over 20%, reflecting an overly pessimistic starting point and the rise of a small group of technology-related companies. Many Canadian stocks did well too, as evidenced by our Small-Cap Fund, although the market overall was held back by weakness in two big sectors, financials and energy. Mixing in positive returns from fixed income, balanced portfolios at Steadyhand earned a 10-12% return over the past 12 months.

So, where to from here? Unfortunately, we haven’t had that recession yet, at least not a broad-based one, and some of last year’s issues have worsened. Relations with China have deteriorated, the outlook for commercial real estate is darker, and the U.S. banking system has wobbled. And then there’s a new wild card — Artificial Intelligence.

But some factors have improved. Inflation is down meaningfully, supply chains, including energy, have adjusted to the war in Ukraine and the post-pandemic recovery, and the use of technology continues to reduce the cost of doing business.

As I process these cross currents, I find myself in a reflective mood. I’m hitting a rather sobering milestone — 40 years in the investment business. Over that time, I’ve changed or revised my thinking on many things, but one I feel more strongly about than ever is that investors can’t predict what stock prices are going to do over the short to medium term.

In light of this belief, Salman and I endeavour to understand the current situation and then determine where our clients have the best chance of achieving an attractive return over the next 5 years. Our current assessment is:

• Fixed income yields are competitive again and will be a good contributor to portfolios.

• Non-tech, non-AI stocks already reflect a difficult economic outlook and are trading at reasonable prices.

• Excessive leverage is causing problems for some companies and property owners, and will present opportunities for well-capitalized investors.

• We can never be certain enough about the opportunities and risks to be anything but broadly diversified.

On the business front, we continue to build our team to ensure our clients are well looked after. We’re delighted to have Samantha Warszawski join us. We’re also excited to introduce the Steadyhand Retirement Withdrawal Program, a new initiative designed to help retirees draw a steady income from their portfolio. In the meantime, enjoy the great Canadian (hopefully smoke-free) summer.

I encourage you to read the rest of our Q2 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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by Scott Ronalds

Born and raised in Toronto, our newest Investor Specialist has a love for numbers, nature, news, fashion, coffee, and dogs. Meet Samantha Warszawski.

Samantha has worked in financial services since 2016 and has a passion for advising individual investors. She’s based out of our Toronto office (alongside David, Evan, and Alex) and her focus is on helping our clients build and manage their portfolios.

Along with a Bachelor of Commerce from York University, Samantha has a Business Marketing diploma from Sheridan College and holds the CIM Designation (Chartered Investment Manager). She comes to Steadyhand from Pembroke Management, and prior to that worked at Richardson GMP, where she was part of a team that serviced high-net-worth investors.

She’s also our 20th employee. As we continue to grow, we want to ensure our clients are well looked after. Samantha has valuable experience and a great skill set in this regard.

When she’s not on King Street (our Toronto office) Samantha loves spending time with her young daughter and family, and is a fan of everything outdoors, especially cycling and running. As an early riser and news junkie, she also enjoys savouring her morning coffee and chewing over the headlines under the watchful eye of her dog Bane.

And while numbers are her first love, Samantha also has a zest for interior design and fashion. There’s a theme here: she’s all about making your portfolio look good.

If you’d like to talk investing with Samantha, or any of our other Investor Specialists, call us at 1-888-888-3147, or book a meeting here.

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by Tom Bradley

We’re used to being able to sell a fund or stock at the drop of a hat, but some investors are finding out it’s not always so easy. Holders of some real estate and mortgage funds, including ones managed by Ninepoint Partners LP, Romspen Investment Corp., Hazelview Investments and even the mighty BlackRock are being told they must get in line to take their money out.

Before we address their situation, let’s take a step back and put these funds in context.

These investors are trying to earn a return from owning alternative asset classes, real estate and mortgages. In doing so, they’re also capturing what’s called a ‘liquidity premium.’

Liquidity is the least known of the four risks investors use to generate returns in excess of the risk-free rate (that is, Government of Canada T-bills). The first three are: interest rate risk, credit or default risk and equity risk. The fourth involves accepting limited liquidity in return for a higher potential return.

Instead of buying public companies on the stock exchange, you can invest in a professionally managed fund, known as a private-equity fund, that owns private companies.

You can do the same with debt instruments. You can own a fund or exchange-traded fund that holds easily tradable government and corporate bonds, or invest with a private debt manager and get exposure to a portfolio of higher-yielding private loans.

In the real estate category, you can buy real estate investment trusts (REITs) or a private fund that owns individual properties.

Where do the extra returns come from for going private? Managing companies outside the public eye, and the quarterly reporting cycle, allows fund managers to take a longer view. They can buy out-of-favour or underperforming assets, rehabilitate them and sometimes re-position them in the market, or build scale by consolidating fragmented industries. They also have more flexibility to use debt to enhance returns and minimize taxes.

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Previously, private assets were only accessible to institutional investors, but there’s been a push in recent years to make them available to individuals. The challenge with retail-izing private assets, however, is it creates a mismatch. The funds are designed to be tradable like other retail products, but largely hold assets that are slow to transact. In other words, liquid products invested in illiquid assets.

This mismatch isn’t a problem in good times when money is flowing in. It only comes into play when the outlook deteriorates and there’s a surge of redemptions, which we’re starting to see now.

The sentiment towards real estate has changed. REITs, particularly those exposed to office and retail, are well off their early 2022 highs. But property values in private funds haven’t reduced to the same degree. This, despite many of them excitedly talking about the opportunities to buy other properties at reduced prices.

This valuation lag is actively being debated. Are REIT shareholders overreacting such that private valuations better reflect long-term fundamentals, or are private fund managers deluding themselves? The truth may be somewhere in between.

Long-term returns will tell the tale, but in the meantime, there are consequences to the gap.

First, it has helped smooth out returns for portfolios holding private assets. They weren’t down nearly as much in 2022 because privates held up better than bonds and stocks, which immediately reacted to rising interest rates. In 2023, the opposite is occurring. Stocks are up while private asset classes are now adjusting to the higher rate environment.

Second, the valuation lag has contributed to the liquidity problem funds are having. If investors can sell a yet-to-be-marked-down private fund and buy an already-marked-down public company, why wouldn’t they? Sell expensive and buy cheap.

Capturing the liquidity premium makes sense for part of your portfolio, but the challenge currently being experienced by private funds is a reminder that there’s no free lunch with this type of risk.

You should buy private assets with the expectation that the money will be unavailable for the term of the product, or will at least take time to liquidate if you decide to exit sooner.

As with any risk, make sure you’re getting paid for it. If you’re tying up money for a long time, there needs to be potential for significantly higher returns.

You should also be leery of products investing in illiquid asset classes that are easily tradable. If you want the manager to deliver good results, the structure should be truly illiquid.

by Scott Ronalds

When Bono and his mates in U2 sat down to write Mysterious Ways back in the early 90’s, it didn’t come without controversy. Apparently, the band’s frontman and producer argued intensively and struggled to build the idea into a song before The Edge (lead guitarist) stepped in to save the day with his signature chords.

I often get the chorus stuck in my head after hearing the tune.

It's all right, it's all right, it's all right She moves in mysterious ways It's all right, it's all right, it's all right She moves in mysterious ways, oh

These days, I can’t help but relate it to the stock market. Without a doubt, she moves in mysterious ways. And like that heated songwriting session 30 years ago, there’s debate today over those moves.

The U.S. market (S&P 500 Index) has seen a nice uptick this year and is on track to turn in an excellent first half, up 15% as of June 20 (in U.S. dollars). Driving the gains, however, are just seven stocks: Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta, and Tesla. The enthusiasm around artificial intelligence (AI) has helped propel these stocks and there’s likely an element of FOMO at play. The ‘group of seven’ have risen between 40% to 200% this year. The other 493 companies that comprise the broad index haven’t moved at all, in aggregate.

The American market, in the meantime, has become increasingly top-heavy. The biggest seven companies are all tech related and account for over one-quarter of the index.

Opinions abound on the situation. Many analysts argue that this isn’t healthy. When market breadth (the number of companies rising versus falling) is negative and leadership is narrow, the risks are escalated, so the thinking goes. Other professional investors contend that a rising tide lifts all boats and the stocks that are treading water now will eventually play catch up. Ride the momentum wave, in other words.

There are opposing views, too, on whether a recession will pour cold water on the recent rally. The argument goes that if the economy cools and corporate earnings shrink, stocks will be vulnerable, and the recent gains erased. Countering this belief is the notion that the market looks forward and has already factored in the impact of a slowing economy. We’ve noted repeatedly in our communications that the economy is not the market, and indeed, the two do not move in tandem.

We bring it all back to two things: diversification and valuation. Our managers don’t build portfolios that look like the index, so we’re not too concerned about the U.S. market’s changing look and the chatter around its makeup. Our focus is on making sure our funds are well diversified — by industry, geography, and style (growth and value). Equally important, we look hard at the price we pay for a company. If it trades at a big premium to its underlying value and future prospects, we stay away.

The result of our approach is that our clients’ portfolios continue to look much different than the market. We have a large position in one of the above stocks that’s been riding high, Microsoft, because our managers believe it’s a great business trading at a good price. But we don’t own the others, for reasons coming back to both valuation and diversification.

We watch with interest the moves of the market, but they don’t change our investment approach. Experience has taught us that chasing a trend or coming late to the party can have unwelcome consequences for your portfolio. The title of U2’s album is fitting in this sense — Achtung Baby.

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by Salman Ahmed

Inflation rates recently reached levels not seen in 40 years. In this video, we compile data going back to 1960 from some of the largest economies and put it into an easy-to-understand visual. The graph puts current inflation into historical perspective. You’ll see how prices in Canada, the U.S., U.K., Europe, Japan and China reacted to events including the OPEC oil embargo in 1973, sharp central bank interest rate increases in the late-1970's and early 80's, Asian currency crisis in 1997, popping of the tech bubble in 2000, global financial crisis in 2008-09, and COVID-19 pandemic.

by Scott Ronalds

We’re excited to announce a new initiative, the Steadyhand Retirement Withdrawal Program.

The program is designed to help retirees draw a steady income from their portfolio — a paycheque, in essence — without having to worry about selling their investments at the wrong time (i.e., when markets are down).

It is based on an approach known as the ‘Spending Reserve Strategy.’ Put simply, the program involves:

1. Allocating a portion of your portfolio to cash (typically two years’ worth of your annual spending requirements), in the Steadyhand Savings Fund.

2. Investing the balance of your portfolio according to your desired long-term breakdown of stocks and bonds (what we call your Strategic Asset Mix).

3. Taking all regular withdrawals from your cash reserve (Savings Fund).

4. Replenishing your cash reserve based on our advice (further details below).

Importantly, you still earn a return on your cash reserve, based on the prevailing yield of the Savings Fund. The key benefit of this strategy is that it provides you with protection from market volatility and greater peace of mind. You aren’t forced to draw from your growth or income assets at an inopportune time — i.e., when stocks or bonds are down.

Market pullbacks are a natural part of investing and cannot be avoided. When they occur, the spending reserve strategy allows your portfolio time to recover while you continue to draw a regular income from it.

What makes the program unique is that we will advise you when to replenish your cash reserve (by selling some of your equity and/or fixed income investments). Our advice is based on the three things we pay the closest attention to when evaluating the current investing environment: valuations, corporate fundamentals, and investor sentiment.

By enrolling, you’ll receive an email from us every quarter advising you whether we recommend any action. If we suggest it’s a good time to top up your cash reserve, you simply need to call us to place the necessary trades. We will work with you to determine which of your Steadyhand holdings you should sell to replenish your reserve, and of course help with any math. Note: we will not make any trades without receiving instructions from you.

We’ve designed the program to make it flexible (you can make changes to the amount and frequency of your withdrawals if your personal circumstances change) and cost friendly—it has no additional fees associated with it!

If you think the Steadyhand Retirement Withdrawal Program might be suitable for your personal situation, we encourage you to read our Guide, which provides all the details, or book a meeting with one of our Investor Specialists to learn more. Enrollment is easy—simply call us at 1-888-888-3147.

We’re excited about this initiative, as we believe the spending reserve approach is highly effective and can take some of the worry out of retirement.

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by Salman Ahmed

When it comes to online stock trading, the phrase "zero commission" has become a buzzword in recent years. But what does it really mean? We delve into the concept, explore how it works, and bring to light the hidden costs you should be aware of. Gain a deeper understanding of how platforms like Wealthsimple, Robinhood and Schwab operate, the costs involved, and how they make money in the video below.

by Scott Ronalds

Back by popular demand, we're reintroducing our Transfer Fee Reimbursement Program for July and August!

Here’s the deal: Steadyhand will reimburse all transfer fees (up to $150 plus tax) for existing clients who move an account(s) to us worth $5,000 or more from another financial institution between July 1 and August 31, 2023.

Why we’re doing this

We first introduced this program for a limited time last summer and many clients appreciated it. We noted at the time that it’s out of character for us (reimbursing transfer fees) because we don’t charge exit or redemption fees on our end. Yet, we realize that you hate these charges as much as we do — which is why we’re running the initiative again.

Note that the program is only open to investors who already hold an account with us (spouses and common-law partners of existing clients who don't already hold an account also qualify), as we’ve always believed in putting our existing clients first.

The details

Programs of this nature require clear terms and conditions. We lay them out below.

• Each transfer must be for a minimum of $5,000 to qualify.

• You must be charged a transfer fee from your other institution to qualify for a fee reimbursement.

• All account types qualify (e.g., RRSPs, RRIFs, TFSAs, non-registered accounts, corporate accounts).

• All fee reimbursements will be in the form of Steadyhand fund units (based on your chosen allocation), and such reimbursements will not impact your contribution room for registered accounts (e.g., RRSP, TFSA).

• The total maximum fee reimbursement per account is $169.50 ($150 plus tax).

• There is no limit to the number of accounts you can transfer which qualify for the fee reimbursement. For example, if you transfer over five different accounts and are charged $150 for each transfer, we will reimburse you $750 (Note: each individual transfer needs to be $5,000 or more to qualify for the fee reimbursement).

• Transfers must be initiated, and all documents signed and received by us, between July 1 and August 31, 2023.

• You must be an existing Steadyhand client (before June 30, 2023) with a funded account to qualify for the fee reimbursement.

• To receive the fee reimbursement, you must provide us a copy of your account statement(s) showing the transfer fee(s) charged, before December 31, 2023.

• Any assets transferred to us must remain in your Steadyhand account(s) until December 31, 2023, or the fee reimbursement will be fully clawed back.

If this initiative has piqued your interest, you may have some questions. Hopefully you find the answers below, but if not, please reach out to us at 1-888-888-3147 Mon-Fri 7:00am to 5:00pm PT. We pick up our phone promptly.

Frequently asked questions (FAQ)

Q: If I transferred an account earlier in the year and was charged a fee from my former financial institution, can I get reimbursed? A: Unfortunately, no. Programs such as this require strict rules and regulations, and we are unable to make exceptions.

Q: What qualifies as a ‘transfer fee’? A: Any fee that you are charged for moving your account from another financial institution to Steadyhand is considered a transfer fee. It does not include trading fees or commissions.

Q: If I’m a client, can I transfer over an account type I don’t currently hold and qualify for the fee reimbursement? A: Yes. As an example, if you currently hold only one account with us, say an RRSP, and you want to transfer a TFSA, you will be reimbursed for any transfer fees (up to $150 plus tax). Note: in this scenario, you would also need to complete a TFSA Application Form.

Q: If I’m a client but my spouse isn’t, can they move an account over and qualify for the fee reimbursement? A: Yes.

Q: How quickly will I receive the transfer fee reimbursement? A: After you provide us the statement from your other financial institution showing the transfer fee, it will take up to five weeks for the fee to be reimbursed to your Steadyhand account(s).

Q: Is Steadyhand going to start charging transfer out fees in return? A: That’s a hard no.

The paperwork

If you’re interested in taking us up on this offer, a Transfer Form needs to be completed, and an account statement from your other investment provider is helpful to make sure all the details are in order. You can complete and sign all documents electronically, and we recommend you speak with one of our Investor Specialists to walk you through it all over a phone or video call—book a meeting here.

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by Scott Ronalds

The great Canadian summer is just around the corner. It’s time to clean the grill, dust off the beach chairs, put away the hockey stick (and aspirations of a deep Leafs/Oilers/Jets playoff run), and buy a book or two to sink into during those long, warm days ahead.

This is where our annual Summer Reading List comes in. Our team has compiled a list of titles this year that are sure to please a variety of tastes. There are stories on business, nature, quitting, money, a secret World War II assassination plot, and the art of persuasion.

Quit: The Power of Knowing When to Walk Away, by Annie Duke. Tom Bradley, our Chair and co-founder, recommends this latest read from the famed poker champion turned business consultant and speaker. Tom started following Duke after her breakout TED Talk where she outlined why the Seattle Seahawks made the right call to throw on 2nd down on New England’s goal line in the closing seconds of Super Bowl XLIX. A sucker for a contrarian view, in investing and the locker room, Tom was hooked. The book looks at why, in the face of tough decisions, we’re terrible quitters and how this holds us back. It’s a follow-up to Annie’s first book, Thinking in Bets. Both are fun, thought-provoking studies into our behavioural foibles.

Dead in the Water: A True Story of Hijacking, Murder, and a Global Maritime Conspiracy, by Matthew Canpbell and Kit Chellel. Our Chief Investment Officer, Salman Ahmed, puts forward this exposé on the criminal inner workings of the international shipping business. Few industries are more secretive than shipping, yet we all depend on it for virtually everything we consume. The authors bring some clarity to this murky world through their investigation of David Mockett, a maritime surveyor working for Lloyd’s of London who was responsible for assessing the damage done to a pirated oil tanker, and who was murdered after asking too many questions. A Financial Times Book of the Year and a gripping crime thriller perfect for the hammock.

Braiding Sweetgrass: Indigenous Wisdom, Scientific Knowledge and the Teachings of Plants, by Robin Wall Kimmerer. Lori Norman, one of our Investor Specialists, raves about this highly-acclaimed bestseller. The author, a scientist, professor, and founder of the Center for Native Peoples and the Environment, takes a fascinating look at the teachings of plants and animals, drawing on her scientific knowledge and experiences. Lori notes: “This book completely changed the lens I view nature with now and introduced to me to a new, stunning language.” Lori recommends the Audible version of the book, praising Kimmerer’s warm voice. With nature in full bounty, summer is the perfect time to read Braiding Sweetgrass. You’ll never look at a strawberry the same again.

How Minds Change: The Surprising Science of Belief, Opinion, and Persuasion, by David McRaney. Our CEO, Neil Jensen, recommends this thought-provoking narrative. McRaney is a science journalist and bestselling author of You Are Not So Smart, who writes with humour and a deep sense of curiosity. The book explores the limits of reasoning and how the power of groupthink can influence cult members, conspiracy theorists, and political activists. A timely read in this day and age.

Talking to Canadians: A Memoir, by Rick Mercer. David Toyne, our Chief Development Officer, recommends this memoir from the Newfoundland raised comedian and TV personality. Famous for his bit Talking to Americans, Mercer tells many tales and behind-the-scenes revelations that are sure to have you laughing out loud. David is a big fan of the comedian, from his days on This Hour Has 22 Minutes to The Rick Mercer Report. He loves that Mercer’s stories are told with candour and humour, and couldn’t wait to dive into the next chapter. If you’re looking for a fun, lighter read this summer, this one’s for you.

The Nazi Conspiracy: The Secret Plot to Kill Roosevelt, Stalin, and Churchill, by Brad Meltzer and John Mensch. This one is my pick. It tells the little-known true story of a Nazi plot to kill the three Allied leaders at a secret conference in Tehran at the height of World War II. A thrilling account of an assassination plan that would’ve changed history, the book also includes the story of Mussolini’s mountaintop rescue, the controversial shooting down of Japan’s top naval officer, and the near takedown of the battleship USS Iowa—with Roosevelt aboard—by an American torpedo. I’m not a fast reader but couldn’t put this one down and finished it in a week.

Worry-Free Money: The Guilt-Free Approach to Managing Your Money and Your Life, by Shannon Lee Simmons. Lisa Guo, one of our Associate Investor Specialists, is a big advocate of this practical guide to managing your money and has been using Shannon's budgeting method ever since she read the book. In Lisa’s words: “Instead of viewing money as a negative, stressful thing, it's empowering to be able to allocate your money to things that matter to you while still being practical.” Lee Simmons advocates that you stop traditional budgeting and start living. And what better time to do so than the summer.

Return to Solitude: More Desolation Sound Adventures with the Cougar Lady, Russell the Hermit, the Spaghetti Bandit and Others, by Grant Lawrence. Chris Stephenson, another one of our Investor Specialists, recommends this story of time, family, and place by one of the Sunshine Coast’s renowned broadcasters and indie rock musicians. Lawrence weaves the history of the Desolation Sound area with his own life on the coast. “Great stories for a sunny summer day that may make you laugh out loud and definitely want to share!”, touts Chris.

Happy reading!

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by Tom Bradley

It’s not often you get a chance to talk to someone who’s been involved in a profession for more than 70 years. But the Vancouver investment community has such a person. Michael Ryan has been a pillar of insight, integrity and sound counsel since the early 1950s, and on June 1, the CFA Society Vancouver is launching an award in his honour: the Michael Ryan Award of Excellence.

Think about it. Ryan started out when luxury cars had fins, the Rolling Stones were in grade school and the NHL had six teams. His career provides a perspective on how things have changed, particularly regarding ethics and the availability of information, and how investing principles have remained the same.

Things were primitive back when he graduated from the University of British Columbia in 1952 with a degree in finance. His first job with a tiny brokerage firm, HJ Bird, lasted exactly a day, but he quickly got a job down the street at Hall Securities. Everything was done on paper and blackboards. Being near a ticker tape machine was a real edge. There was very little business reporting in the newspapers (the Financial Post was a weekly) and prospecting for new clients was done through the mail.

As Ryan recalls, brokerage firms were “a dime a dozen.” In Vancouver, there were “a few national (investment) houses and three local firms trying to do a job for individual investors, and 40 firms trying to do a job on investors.” Forbes magazine once called Vancouver the “Scam Capital of the World.”

Ryan had an analytical bent early on. He read the Wall Street Journal as a youngster and went “halfers” on a set of nine investment books from Barron’s with his school chum, Art Phillips, co-founder of Phillips, Hager & North. “We learned as we went,” he said.

He began doing security analysis when few others did. It was rare to talk to company management or even read an annual report. He tells the story of going to see a company and the CEO sliding the annual report across the table and grumbling, “Read this.” Ryan shocked him by saying he already had and had a question about one of the notes in the auditor’s report. “We became very good friends after that.”

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In those days, investors got an edge by getting information nobody else had. Today, there are rules against that, and company information is a commodity. Investment results weren’t rigorously recorded, either. Few people knew what mutual funds were, and their results were reported once a year. Closed-end funds were more common.

Ryan made several other stops along the way, including setting up Ryan Investments, where he trained Murray Leith of Leith Wheeler Investment Counsel. He didn’t have a mentor himself, but mentored many industry notables including Leith, Bill Wheeler and Ken Shields.

Initially, his teachings were about security analysis and markets, but he became an invaluable consultant on management issues. “It was great having Mike around when there was a tough decision to make,” Wheeler said.

In the 1950s and ’60s, it was easier to differentiate your firm than it is today. Ryan Investments’ big edge was U.S. stocks. His small team had the U.S. market to themselves while everyone else was touting mining stocks.

Ryan also worked for Pemberton Securities twice (the second time after it bought his firm) and spent many years at Leith Wheeler. He was at the centre of some important investment milestones, most notably the creation of the Portfolio Management Foundation at UBC, which gives aspiring investors real money to manage and a professional committee to report to (many Canadian business schools have used the UBC template). In mid-May, he was bursting with pride when he told me the initial stake of $300,000 in 1986 had grown to more than $10 million.

A lot has changed during Ryan’s career, but his approach to investing is timeless. He believes you shouldn’t trust anything you can’t prove. “Most portfolio managers and analysts waste about 80 per cent of their time,” he said. “They’re looking at metrics and things that really aren’t that important.” He didn’t accept commonly accepted indicators unless he could prove them. “There are too many loose ideas around. You have to ask questions.”

Along the way, he developed a penchant for growth stocks, and learned from Phillips to pay attention to what is now called momentum. Phillips believed a majority of his holdings should be in uptrends. Ryan remembers him saying, “It doesn’t matter if I like the stock. What matters is that others like it.”

As is typical, Ryan is looking ahead, even at 93 years of age. He believes years from now people will be talking about how primitive our work on governance was. “Corporate governance is incredibly important, and we have very poor tools to get at it.” I think you’ll agree, he has the perspective to say that.

Are you a prospective first-time home buyer looking for a better way to save and invest for your first home? The First Home Savings Account (FHSA) is for you. In the below video, Lisa (one of our Associate Investor Specialists) takes you through the main benefits and features of this new investment account type and how it can help you achieve your homeownership goals more effectively.

Lisa explains the main features of the FHSA, who can open this type of account, how contribution and carry forward amounts are calculated, and other important rules that might impact the timing of when you choose to open the account.

by Tom Bradley

I always push back when I hear a colleague or client say we’re going through a period of heightened uncertainty. I get grumpy because there’s always uncertainty in investing, regardless of how the landscape is portrayed. The only thing that changes is the urgency around a small number of issues.

That’s not to say we don’t live in interesting and dynamic times. Indeed, it’s a fascinating time to be analyzing businesses, the economy and the market. I have compiled a list of important trends that are going through profound change or just starting a transition. It’s long. The ground is shifting underneath us.

In progress

A number of cyclical factors are in flux. We’ve had higher interest rates for about a year and their impact is rippling through the economy. Consumers and companies are renewing loans at higher rates, and, in some cases, having trouble getting financing at any rate.

The poster child for this impact is residential and commercial real estate, which seems to be adjusting to higher rates in slow motion. Transaction volumes have plummeted as sellers are stuck on 2021 prices while buyers calculate what they can afford using 2023 mortgage rates. Meanwhile, the definition of hybrid work seems to change weekly.

Unprofitable tech companies, the darlings of 2020 and 2021, are experiencing a sea change. Their market penetration was enabled by technology and fuelled by unsustainable pricing. Unfortunately for them, growth-oriented investors who willingly funded the resulting losses have changed their tune and are now demanding profits.

Price increases at companies such as Netflix and Uber are just the beginning of the disruptors’ difficult pivot to “profitable growth” from “growth at all costs.”

At the other end of the spectrum, the tech giants are gushing profits, but showing signs of maturity. Revenue growth has slowed at the likes of Apple, Alphabet and Facebook owner Meta, and they’re now doing what other mature, blue-chip companies do: cut costs, buy back shares and maybe even increase dividends.

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Early days

The makeup of the energy complex is shifting as renewables work into the mix. For progress to continue, advancements in grid management are needed.

Related to energy, there are an increasing number of electric vehicles (EVs) on the road. In this regard, we have a front row seat to watch the incumbent car companies pursue a variety of strategies in hopes of a successful transition. So far, they’re losing badly to Tesla and the Chinese EV makers.

Are you tired yet? Well, there are other tectonic shifts just getting started. There’s artificial intelligence, of course. We’re all scrambling to assess how big an impact AI will have.

And the West’s changing relationship with a more confident and pugnacious China could be a game changer. Its increasingly isolationist tone (a new Cold War?) is putting a chill on corporate strategies. Will Apple be a US$2.7-trillion company if it stops getting along with the Chinese government?

So far, investors are in denial about the risks, and companies are finding it hard to diversify their supply chains away from China.

Still to come

There are more shifts on the horizon. Loan losses, a much-watched metric by bank shareholders and bondholders, seem destined to go through a cyclical spike. According to management, “Everything is fine,” but it’s hard to see how there won’t be an increase in defaults given that we have higher interest rates and are coming off the greatest debt cycle ever.

Speaking of debt, governments are nearing the point where they’ll need to buckle down and show some restraint. As it is, our children and grandchildren will be burdened with rising interest payments and ballooning health-care costs as spendthrift baby boomers roll into their 80s. The current math doesn’t compute.

I’ve run out of room and haven’t even mentioned U.S. regional banks, cryptocurrencies or lithium. There’s a lot going on right now, some positive, some negative, and all of it nuanced and unpredictable.

Is this turbulence unprecedented? Probably not. Indeed, the expression, “May you live in interesting times,” dates back to 1898 when Joseph Chamberlain, a British statesman, reputedly said, “I think that you will all agree that we are living in most interesting times. I never remember myself a time in which our history was so full, in which day by day brought us new objects of interest, and, let me say also, new objects for anxiety.”

by Salman Ahmed

Are you considering investing in GICs or bonds but aren’t sure which option is right for you? In our latest video, we explore the benefits and drawbacks of each to help you determine which might be a better fit for your investment goals and horizon.

GICs offer advantages such as a guaranteed return, CDIC insurance, and a low minimum investment requirement. They also have negatives, however, including limited liquidity and fixed returns. Bond funds, on the other hand, fluctuate in value but can provide diversification from stock market volatility, greater liquidity, and potential for higher returns over a longer investment horizon. Tune in below to learn more!

by Tom Bradley

I’ve been asking a variety of people what the most common barriers to better investment returns are. Certain mistakes such as chasing past performance, fear of missing out (FOMO) and a lack of interest regularly crop up in their answers. The one I’m going to address here doesn’t come up as often, but, in my view, is super important: investors believe their advisers know more than they do.

That’s a mistake, and it’s important, because it creates unrealistic expectations for an endeavour where realistic expectations are a must. Investing isn’t about the sizzle; it’s about the steak. It’s not about what might be possible, but rather the strategies and behaviours that give you the best chance of succeeding.

You’ll have a better idea of what I mean when I break down what advisers don’t know and what they absolutely should know.

I don’t know

Advisers need to have these three words in their vocabulary, not because they’re lacking in knowledge, but because so many things about investing are unknowable. How will the economy affect my portfolio? I don’t know. When will the stock market bottom? I don’t know. What will the price of gold or bitcoin be? I don’t know. What will my return be over the next few months or years? I definitely don’t know.

This may seem obvious, but think about how many advisers have a strong view of where the market is going based on their reading of the economic tea leaves.

That’s not to say advisers can’t have educated views about more predictable factors. It’s reasonable for them to set expectations for five-to-10-year returns for broad asset classes (stocks and bonds). Hopefully, they have a good sense of where valuations are in the historical context, and where we are on the greed-versus-fear spectrum.

Must know

Your adviser must be able to help you formulate a plan. I’m referring to an investment plan as opposed to a full financial plan since most advisers aren’t qualified to do tax and estate planning, or cash-flow projections. There are several aspects to this.

Asset allocation: Asset mix is the most important tool you have in finding the right balance between potential return and risk. Before you pick your first stock or fund, you need a portfolio framework that fits with your goals, time frame and personality, and diversifies the risk.

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Product knowledge: Your adviser should know everything about the products being used to implement your plan. Remember, there’s no silver bullet. Every investment has trade-offs. For example, strategies with less short-term downside risk produce lower long-term returns. Conversely, aggressive equity funds with the potential to have huge years will experience big down years, too.

Asset location: Your adviser should have a comprehensive knowledge of all account types (that is, registered retirement savings plans, tax-free savings accounts) and how best to use them for tax efficiency.

Autopilot: The more automatic your investment process is, the better. If you’re growing your portfolio, pre-authorized contributions that come out of your chequing account every month work well. If you’re living off your assets, your adviser should have a system in place to provide you with a regular paycheque.

Cost management: The investment return you’re going to retire on is net of all costs. Your adviser should be able to explain what you’re paying and how they’re working to reduce it. There’s no room for vagaries here — they know exactly how they’re being compensated.

Temperament: Assessing whether an adviser is a good investor when picking stocks and funds is difficult, but less important than you might think because your portfolio can be invested in products that are professionally managed. The behavioural side of investing is where people need the most help. Your adviser needs to be steady and keep you on plan, particularly during challenging periods such as the speculative euphoria of 2021 and the weak markets of 2022 (it’s why we named our firm Steadyhand).

The most important thing

Your adviser needs to be an absolute expert on one more thing: you. What makes you tick? How long before you start drawing on your portfolio? Who is dependent on you? How do you react to portfolio declines? How do you like to be advised and reported to?

My partner Lori Norman always warns prospective clients, “I have a lot of questions.” Your adviser should know all about you without needing to be reminded.

You get the picture. Your adviser may not know what they don’t know, but you should. Tap into what they’re good at and make sure you’re not paying for the rest.

by Scott Ronalds

Let me start by saying that a fee increase is never a popular decision for a firm that prides itself on being highly investor-centric.

But in the case of our Savings Fund, it’s time. After 14 years of charging a reduced fee on the Fund, we will be increasing it effective July 1, 2023. The ‘One Simple Fee’ (what other firms refer to as a Management Expense Ratio, or MER) will increase from its current level of 0.20%, to 0.45%.

The current fee was instated as a temporary measure back in 2009 in response to record low short-term interest rates. We reduced the fee from 0.65% (its original figure) to 0.20% to ensure that unitholders would receive a positive return, even if it meant that we had to subsidize the Fund internally. Our intention was always to reinstate the initial fee when rates returned to more normal levels. This, however, took much longer than expected.

We have decided that it’s now an appropriate time to partially restore the fee, given today’s higher interest rate environment. Note that the new fee of 0.45% will still be lower than the original fee of 0.65%.

If this all sounds a little confusing, some history may help.

Back in the spring of 2007, the Bank of Canada’s key lending rate (“policy rate”) was 4.25%. Most money market funds such as our Savings Fund had a similar yield to this and charged a fee in the neighbourhood of 0.5% to 1.0%. Investors were receiving a decent net return on their cash in this environment.

Then the Global Financial Crisis hit and central banks around the world began reducing their policy rates to help stimulate economic activity. In Canada, our central bank started its rate-cutting program in late 2007, and by April 2009, the benchmark rate had come down to 0.25%. Consequently, money market investments such as T-Bills and short-term corporate paper were offering rock-bottom yields.

Money market funds were in a bind, as even a modest fee was eating up most or all the returns. In response, we temporarily reduced the fee on our Savings Fund from 0.65% to 0.30% in April 2009, and subsequently reduced it further to 0.20% in November of the same year.

We chose to keep the fee at 0.20% until the present day, as interest rates remained at below-normal levels throughout much of the period. With short-term rates now much higher—the Bank of Canada’s policy rate currently sits at 4.50%—it’s a logical time to make the fee adjustment.

We feel that 0.45% is a reasonable fee. It is comparable to, or lower than, most of our competitors. Further, most Steadyhand clients pay a reduced rate thanks to our Fee Reduction Program.

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by Scott Ronalds

Even though nearly 40,000 Canada Revenue Agency (CRA) employees are on strike, your tax return still needs to be filed by Monday, May 1 (unless you or your spouse or common-law partner are self-employed).

As of last week, more than 40% of taxpayers hadn’t yet filed, according to Financial Post columnist Jamie Golombek.

If you’re in this camp, or if you’ve already submitted your return but are keen to learn some tax saving strategies for the long run, we’ve got a few tips to consider, courtesy of tax planning experts Tim Cestnick and Cynthia Kett. We hosted a webinar in February with Tim and Cynthia, where they provided a trove of valuable information and advice. Among the biggest takeaways:

• Claim all deductions to which you’re entitled! These may include child care expenses, moving expenses, carrying charges, and home office expenses. Indeed, you may be surprised at what you can claim.

• Fully utilize all tax credits afforded to you. The list here may include age credits, caregiver credits, disability credits, medical expenses, and donations.

• Use RRSPs!

• Split your income with your spouse or family members where possible.

• Don’t forget about losses from previous years.

The full discussion can be watched below. Happy filing!

by Tom Bradley

While attending the Collision conference last June, I heard Sairah Ashman speak. She is the Global CEO of Wolff Olins, a New York-based consulting firm. She caught my attention with a concept I’d never heard of before — composable brands.

If I’m interpreting it correctly, she’s referring to the fact that different people use a brand, or company, in different ways. They make it what they want and use it to fit their own situation. For instance, I’m on Spotify with millions of other music fans, but my Spotify is unique to me. It’s my Spotify.

Starbucks might be another example. People know exactly what they want — i.e., venti; dark roast; double shot of espresso; triple shot of mocha; nutmeg; half caff extra hot.

This composable concept got me thinking about how our clients use Steadyhand. We didn’t know the term when we started, but we are indeed a composable company.

We have 4,000 clients who trust us to manage their money. The engagements range across a wide spectrum. The core of our client base are families that have most, or all, of their retirement savings with us. They have balanced portfolios and rely on one of our Investor Specialists for advice and guidance.

We also have young people who are just starting out on their investment journey.

We have do-it-yourself investors who come to us strictly for one or more of our funds. Some occasionally use us as a sounding board, but many don’t.

We have many clients who have developed a plan with an independent, advice-only financial planner. In some cases, we get involved in fine-tuning the strategy, but often we simply execute the plan using our fund lineup.

Some clients like to deal with one Specialist only. Others get to know and use a number of our team members.

And as you can probably tell, we have clients who have accounts ranging from $10,000 to many millions.

If you’re thinking this doesn’t sound that unusual, try going to an investment advisor, bank branch, robo-advisor or counseling firm and do something that doesn’t exactly fit their way of operating.

We’re more composable because we have few rules, barriers, and labels. We don’t have gold, silver, and bronze clients. We have clients who all get the same quarterly statement, quarterly report, and access to personal advice.

We offer an array of resources from our well-followed blog to monthly newsletter to a website that includes detailed fund information, performance data, and retirement planning tools.

To be clear, we have limits. Our fees are low for the service we provide, so we need to be highly efficient and rely on our clients to reach out to us whenever needed (rather than us calling them every quarter). Our business model is such that clients determine how they want to be served. They’re able to make it ‘My Steadyhand’, whatever that means to them. It’s a rarity in our industry, for sure, which gets me thinking that perhaps Steadyhand is the ultimate composable investment company.

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by Tom Bradley

My noise-cancelling headphones are working overtime. In addition to giving my wife some private time, they’re helping me tune out the market noise that seems to be hitting a new crescendo.

There’s much intense and conflicting talk about inflation, recession, banks, China, artificial intelligence, the war, the United States Federal Reserve’s next move and the never-ending U.S. election. These issues will impact stock prices (with one exception), but the speculation about what will happen when, and the inevitable predictions, do nothing to improve investment decisions.

At our firm, we keenly observe the current landscape, make sure we understand it and have views on how things will play out. We don’t, however, base strategies on these views, but rather focus on businesses we own (or want to own), where outcomes are more knowable.

We make the distinction between what’s urgent (that is, in the news and being talked about) and what’s important. The following issues feel urgent, but not all are important.

Inflation

This one ticks both boxes. Interest rates and the economy key on inflation. The things that drove the consumer price index (CPI) higher in 2021 have abated and goods inflation has dramatically dropped. The debate now is on how sticky housing and other service costs will be.

The wise old bond market is betting inflation will continue to come down. Yields are well below current CPI levels. It’s saying that inflation isn’t anything a good recession can’t fix.

Recession

Speaking of the economy, there’s a consensus view (not just among bond traders) that we’re heading for a recession in the second half of the year. This view has become even stronger in recent weeks.

I have four things to add to the discussion. First, if we have a recession, it will be the most anticipated and longest anticipated in history.

Second, it’s important that we have one, even if it causes hardship (job losses). Recessions reset the economy by reigning in risky behaviour, driving efficiencies and getting management teams off their heels and focusing on growth.

Third, we need to be careful when comparing previous recessions to what we might face. There’s an important difference this time: labour markets are extremely strong. Recessions generally don’t occur when people have jobs, so if we have one, it may not look like any other.

Finally, investors must remember that stock markets will absorb the bad economic news and bottom before the slowdown is over, perhaps even before it starts.

The Fed

The U.S. central bank’s move to normalize interest rates has dramatically changed the investment landscape, and Fed watching is at a fever pitch. However, the nuance around chair Jerome Powell’s words and body language has no impact on long-term returns. The Fed’s general direction is important, but the hype around its announcements is out of proportion with its effect. Personally, I ignore the Fed chatter and have much more time in my day.

Banks

It would appear we’ve avoided the much-feared contagion from Silicon Valley Bank’s demise. So far, there hasn’t been a widespread run on the banks. If this is indeed the case, the debacle may prove to be a real positive: a shot across the bow causing bankers to be hypervigilant about their credit risks and balance sheets.

Artificial intelligence

I’m both excited and scared about AI. Which way I’m leaning depends on the day. It’s clear we should all be learning as much as we can about AI since it’s already important and brings on myriad ethical issues. For investors, AI will be used for research and portfolio construction, but the important thing will be understanding how its deployment will benefit their holdings.

Ukraine war

I hate to say it, but the world has largely adjusted to the war. At least, financial markets have. It doesn’t appear that peace, further escalation or more trade disruptions will have a meaningful impact on bond and stock prices.

China

On the other hand, dealings with China are both urgent and important. Any further deterioration in trade relations could cripple how the world economy functions and businesses operate.

U.S. election

Of the issues I’ve listed, the run-up to the 2024 election will likely get more attention, spark intense emotion and have the least effect on your portfolio. The two are not linked.

Indeed, election polls and Fed announcements are for day traders. Important factors such as inflation and China are the ones long-term investors should try to understand, recognizing of course that the outcomes are largely unknowable.

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by Scott Ronalds

Last fall we hosted an estate planning webinar with subject experts Lucy Main (Partner and Co-Chair of the Wills, Trusts and Estates Practice Group at WeirFoulds LLP) and Julia Chung (CEO and Senior Financial Planner at Spring Planning). The session focused on some of the key things to consider when making your estate plan and proved to be popular. Indeed, many clients told us they wished it was extended to cover related topics.

You asked, we delivered! We recently sat down again with Lucy and Julia to discuss some of the subjects you told us you want to hear more about. The three videos below cover: (1) how to pass your wealth to the next generation, (2) probate tips, and (3) a primer on trusts.

Building your legacy: How to pass wealth to the next generation

The probate process explained: Understanding your legal rights and responsibilities

Trusts 101: A guide to understanding and creating trusts

by Tom Bradley

I love my noise canceling headphones. The sound is great and they’re useful when I want to listen to music while my wife is doing something else. They’ve come in handy for work too, particularly in recent months. There’s more noise around the markets than usual.

We’re being barraged by talk about inflation, recession, the U.S. Federal Reserve’s next move, banks, AI, the war, China relations, and of course, the perpetual U.S. election buzz. These things are all serious business, but the speculation about what is going to happen, and the inevitable (bold) predictions, do nothing to enhance an effective investment process. Making investment decisions based on unknowable outcomes is folly.

I will try to put the noise in perspective in an upcoming National Post column, but in the meantime, I want to review how we deal with all these uncertainties.

In a word, we diversify. We make sure your portfolios have exposure to a broad array of asset types, economies, currencies, and industries. In other words, at least a part of your portfolio will benefit from whatever the outcomes are. Being disciplined about this has meant clients in the Founders Fund have achieved strong results since its inception.

At Steadyhand, diversification doesn’t mean we own everything. We hold more of some things and less, or none, of others based on two factors: our fund managers’ investment philosophy, and their short to medium-term strategies.

For instance, we have a long-standing bias towards corporate bonds, which at times make up more than half of the Income Fund. We tend to hold a lot of stocks in companies that are categorized as industrial or consumer products. The unifying theme in these highly diverse sectors is consistent profitability and the opportunities to benefit from rapid advancements in technology.

Conversely, Steadyhand portfolios tend to have modest holdings in oil & gas, banks, and real estate. There are many good companies in these sectors, but either slow growth, erratic profitability, excessive debt, or uncontrollable risk prevent us from going all in. And our fund managers traditionally have little or no exposure to unprofitable companies, many of which operate in the technology, resources, crypto and cannabis sectors. The companies don’t have the profitability they’re looking for, which means we miss some hot stocks in good markets but also avoid some equally powerful meltdowns.

Specific to right now, our search for attractively valued companies has our funds tilted away from the U.S. market. We still own plenty of American companies (29% of the Builders Fund) but are finding better opportunities in Europe and Asia.

Our long-term preferences and near-term tactics aren’t intended to capture every ounce of an upturn, or completely avoid a downturn, but rather to give your portfolio the best combination of return potential and risk over the long term.

If the level of noise has your head spinning, we understand. For us, however, the increased volume doesn’t change our approach. We observe the current landscape and make sure we understand it. We have views on how things will play out but don’t base our strategies on them. Rather, we prepare to take advantage of whatever comes our way by focusing on the businesses we own, or want to own.

I encourage you to read the rest of our Q1 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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by Tom Bradley

I was an equity analyst when investors were trying to figure out how quickly mobile phones would penetrate the market. It was when they looked like bricks, and Rogers and the telephone companies were just starting to build cell towers. I recall us agonizing over whether 3% or 5% of Canadians would be using cellphones in five years.

This sounds ridiculous now, but it’s a reminder of how difficult it is to make forecasts for new industries (ask cannabis investors). There are so many unknowns, including the pace of product improvement and price reductions, and, of course, the fluidity of social patterns.

I’m reflecting on this because it feels like we’re set to make the same mistake our team made in the early 1990s. The pace of new inventions and the adoption of existing ones is going to make our heads spin. There’s a wave of emerging technologies coming at us, such as artificial intelligence (AI), alternative energy, robots, genome sequencing and self-driving everything.

There’s also a tsunami of new applications using existing technologies. If you think an innovation isn’t very good, wait five minutes. It will get better and quickly be a part of your daily life.

For example, AI’s usage has been building for years. The emergence of ChatGPT is its coming-out party. Assessing AI’s value, however, is fraught with skyhook assumptions, which makes stock movements hypersensitive to changing narratives. Nvidia was perceived to be a winner in the AI race and its stock shot up. Alphabet stumbled out of the gate and its shares got dinged.

These two stocks are examples of how new technologies are contributing to market volatility. In 2022, volatility was higher than in any year since 1945 when measured by the number of days with big price movements (the S&P 500 moved more than 1% on a third of trading days). But there are other reasons for the wilder ride.

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Dave Picton, chief executive of Picton Mahoney Asset Management, talks about how the market has gone through structural change. Volatility is higher and cycles are shorter. Bottoms are reached more quickly and recoveries come sooner than expected.

Evidence bears this out. The tech wreck in the early 2000s played out over two and a half years. The decline related to the 2008 financial crisis was over in less than a year. The corrections in 2016 and 2018 lasted a couple of months. And in March 2020, the market was back on a tear within a matter of weeks.

Asked what has caused this acceleration, most analysts answer in terms of macro-economic factors such as interest rates, the war in Ukraine and China-United States relations. These have contributed, but are episodic and, in some cases, cyclical. The structural changes Picton refers to are more lasting.

The gamification of investing is part of the change. I’m referring to the “go big or go home” approach pursued by phone-toting day traders using slick apps, free trades, options and social networks such as Redditt. In particular, trading in short-dated options (which is like buying a lottery ticket) has contributed to volatility.

This betting mentality, however, affects relatively few companies and has limited impact compared to the movement by enormous funds on Wall Street to deploy high-octane strategies. Some are driven by computer models, and many have a hair trigger, keying on factors such as price momentum and market volatility.

For example, there are long/short managers using leverage to enhance returns, which means their bottom lines can swing wildly, and there are more shares to buy or sell when they pivot.

What’s an investor to do in the face of these rapid movements?

First, expect the market to be dynamic and volatile. The ride has gotten bumpier.

Don’t expect to always understand it. The high-velocity capital mentioned above has a different time frame than you and is reacting to different things.

Don’t get discouraged. The theory behind stock investing hasn’t changed. By owning a portfolio of stocks, you’re a partial owner of a variety of businesses and are building wealth through their growth and dividends.

Do your work ahead of time. Picton and other investment managers talk about how opportunities are fleeting. If a stock you’re following gets crushed by a market downdraft, or industry-specific issue, you need to have done your research, understand the issue (if there is one) and be ready to act.

The market’s speed and volatility are gifts for those who have a good sense of value and can keep their head from spinning.

by Scott Ronalds

We’re coming to the Land of the Living Skies from May 2nd to May 5th! Two of our senior Investor Specialists, Lori Norman and Evan Parubets, will be in Saskatoon and Regina to meet with clients and investors interested in learning more about Steadyhand.

One-on-One Meetings

Lori or Evan would be delighted to meet with you in person (at one of the meeting rooms we have booked) to talk about your financial situation, review your portfolio, and discuss the current market environment.

They are available for one-on-one meetings during the following dates and times:

Saskatoon (111 2nd Avenue South, Suite 400)

• Tuesday, May 2 from 8:00am – 12:00pm

• Wednesday, May 3 from 8:00am – 4:00pm

Regina (Royal Bank Building, 2010 11th Avenue, 7th Floor)

• Thursday, May 4 from 8:00am – 12:00pm

• Friday, May 5 from 8:00am – 12:00pm

If you are interested in booking a meeting, please call us at 1-888-888-3147.

Introduction to Steadyhand Presentation

If you’re not familiar with Steadyhand and would like to learn more about our company, we invite you to join Evan and Lori for a discussion on our approach to investing and how we’re steering clients through the current challenges of rising interest rates and recessionary worries. Of course, existing clients are welcome to attend as well.

We’ll be hosting two presentations:

Saskatoon (111 2nd Avenue South, Suite 400)

• Tuesday, May 2 from 2:00pm – 3:30pm

• Register for this event

Regina (Royal Bank Building, 2010 11th Avenue, 7th Floor)

• Thursday, May 4 from 2:00pm – 3:30pm

• Register for this event

Navigating the market’s ups and downs may not be your cup of tea. Totally understandable. It’s what we live for though; in our DNA you might say. If you know anyone who may be interested in hearing more about our approach or meeting with Lori or Evan, please forward this blog!

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by Salman Ahmed

You’ve heard it dozens of times on this blog: bond prices fall when interest rates rise, and vice versa. In this quick two-minute video, we explain why bonds and interest rates move in opposite directions. Understanding this relationship will help shed some light on why bonds struggled in 2022.

by Tom Bradley

David Rosenberg is a thoughtful and experienced economist. He’s in the media often and has a huge following. I know this because my brother-in-law sends me a note every few weeks asking if I agree with his latest article.

But David falls into the same trap many other economists and commentators do — he assumes there’s a tight relationship between what’s happening in the economy and where the stock market is going.

In a recent Globe & Mail article entitled Why the long-term outlook for Canadian stocks is rosy (in the short term, not so much), David finishes with, “… although we believe that equities are likely to see continued downside (on tighter financial conditions/growing recession risks), we think the Canadian equity market has decent value for long-term investors.”

David has wonderful insights, as do a few other economists, but be careful to not get too caught up in his short-term market forecasts. His call that we’re “likely to see continued downside” may prove to be right, but if it is, it will be a total fluke. He doesn’t know what the market is going to do in the coming months, and neither does anyone else. There are too many factors at play. The relationship between the economy and stock market is sloppy at best.

Not to put too fine a point on it, but as I said in a post late last year: “I don’t read market forecasts. These predictions aren’t worth the paper they’re written on and shouldn’t influence investment decisions. If you must, read them to learn about the underlying reasoning and ignore the conclusion.”

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by Tom Bradley

If I told you about a company that is highly profitable, has a strong balance sheet, has grown steadily by expanding into new business areas, pays a healthy dividend and dominates its market with a few other firms, what would you think its price-to-earnings multiple (P/E) should be? I suspect you’d say it should trade at a premium to the overall market, perhaps a P/E in the high teens or low 20s.

Well, not even close. The description above is that of our Big Five banks, all of which trade in the range of 10 to 12 times earnings. How is it that these world-leading institutions, which investors are so fond of, barely crack double digits while other companies with less impressive track records garner higher multiples?

Last week’s banking scare in the United States goes a long way to explaining why. Two banks were bailed out after depositors rushed to pull their money out. The demise of Silicon Valley Bank (SVB) and Signature Bank illustrates how quickly the tide can turn.

Let’s go back to basics. There are two key factors to consider in valuing a lending institution. First, the banks are highly levered. The amount of money they lend out is many multiples of their common equity. If a chunk of its loan book goes bad, a bank’s equity can be wiped out in a heartbeat. Banks’ valuations reflect this leverage even though such a circumstance is highly unlikely.

Unlikely, but it has happened during my investment career. Hugh Brown, Canada’s all-time great bank analyst, described it best in a 2011 exit interview.

“In 1982, Third World debt collapsed. The Big Five Canadian banks had 2.5 times their equity invested in Third World loans, and those loans plunged to 50 cents on the dollar. On a mark-to-market basis, the banks were insolvent. Canada was also in the worst recession in 40 years. But it was another testimony to the banks’ core franchise — give them time and they can earn their way out of trouble. It took seven years to absorb the Third World writedowns.”

Since that loan debacle, Canadian banks have skated through credit cycles well. They’re well-diversified and less exposed to big blow-ups. They have better balance sheets and make healthy profits at everything they do (I remind my wife that while she can grumble about obscene bank profits, it beats the alternative).

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On the other hand, they wouldn’t be given seven years to dig themselves out from another 1982-like situation. They’d be rescued in weeks and, like SVB, shareholders and unsecured creditors would take the hit.

The second issue to keep in mind is that banks have a natural liquidity mismatch. The people and companies funding the loans, namely the depositors, can show up at a branch, or on their app, and ask to take their money out any time they want. The loans and investments funded by the deposits aren’t nearly as liquid. In other words, the banks’ liabilities are liquid while their assets are illiquid.

Because of these two dynamics, banks must engender depositors’ and investors’ trust and confidence in their lending practices and financial management. As we saw last week, a crisis of confidence can have a dramatic effect and spread quickly through guilt by association.

Getting back to valuations, I suspect the banks will continue to trade at conservative multiples. As recent events attest, the environment isn’t conducive to a breakout from their historical range. The U.S. Federal Reserve’s dramatic action to protect depositors speaks to the fragility of the banking system, or at least the fragility of customer confidence.

And, just as important, it would appear the Canadian banks’ supercycle is coming to an end. They’ve had everything go their way for decades now. They’ve been allowed to expand and, in most cases, dominate in new business areas such as brokerage, asset management and insurance.

Their primary customers, Canadian families, have significantly expanded their debt levels via mortgages, home equity lines of credit (HELOCs), lines of credit, car loans and leases, and credit cards. Rising real estate prices have improved their collateral and higher stock prices have increased their wealth-management assets. And with the benefit of time, the industry’s comfortable oligopoly has been entrenched.

If the banks couldn’t break out of their modest valuation range with a howling wind at their back, investors shouldn’t expect it to happen any time soon. Then again, stability and a good dividend sound pretty good about now.

by Salman Ahmed

In this video, we discuss what you need to know before you hire or fire your financial advisor. We cover the best questions to ask an advisor using the FIRE criteria: Fees, Incentives, Returns, Experience. We also give you a checklist (at the 5:15 mark) you can use to judge whether an advisor is any good so you can make an informed decision.

by Tom Bradley

We find ourselves in another banking crisis. The word ‘crisis’ may seem like an overstatement at this stage, but when it comes to banking, confidence and trust are crucial. Right now, there’s a crisis of confidence.

I won’t repeat what’s been covered in the media other than to say that the U.S. government was forced to bail out two banks — Silicon Valley Bank (SVB) and Signature Bank. I know little about the smaller Signature, but SVB doesn’t appear to be suffering from the credit problems that typically bring a bank down, at least not yet. Rather, it’s been hurt by balance sheet mismanagement. It was heavily exposed to U.S. Treasury bonds, which were in a loss position due to rising interest rates, and was highly dependent on the technology sector. It was a bad combination. Tech companies haven’t been able to raise new capital and were tapping into their bank deposits to cover expenses which in turn forced the bank to sell Treasuries and trigger losses.

As an aside, I find it hard to believe that regulators weren’t on to the problem sooner. SVB’s balance sheet mismatch and its troubled client base were well known on the street.

As I’ve reminded readers in the past, we need to be careful about reading too much into the initial reaction to a story like this. The big declines of other bank stocks may prove to be overdone, as may the benefits that come out of the resulting decline in interest rates. There are a lot of crosscurrents here and plenty of sorting out to do in the coming weeks.

The Steadyhand funds are underexposed to the banking sector and don’t hold SVB or Signature. On Monday, our equity funds had some stocks get hit by the uncertainty, but the Founders Fund was down only 0.22%. Our fund managers will be watching this closely and looking for opportunities to take advantage of the dislocations.

On a final note, if this crisis turns out to be a mere flair-up and contagion is limited to a few regional banks, this may prove to be a good thing for the banking sector. It will serve as a warning shot across the banks’ bows that their shareholders won’t react kindly to unexpected loan losses or unstable funding.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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by Scott Ronalds

I was going through an old marketing file and found a gem that never saw the light of day. It came courtesy of a firm we worked with several years ago when we were doing some thinking around our messaging and value proposition.

The piece was designed to resonate with Canadians who are nearing retirement. Specifically, those who are a little uncertain about their investment choices and whether they’ll be able to live the life they want after they stop working.

The imagery was dynamite, in my humble opinion. It’s got a “Three’s Company” and Jack Tripper vibe, circa 1980. And who doesn’t love a good leisure suit? The copy read:

Retirement seemed further away back then. Luckily, there’s no wrong time to start making the right investment decisions. Let’s talk about what matters to your investments now, and how you can make sure your future is as colourful as your past.

After speaking with thousands of investors over the years, we know there are a lot of Canadians who share the above concerns.

Some common questions reverberate in our conversations.

• Will I have enough?

• Should I be changing my asset mix and investments?

• What’s the best way to start drawing on my portfolio?

• What’s the process of converting my RSP?

• How should I view my pension in relation to my overall portfolio?

If you’ve got a sequined jumpsuit and platform heels gathering dust in the closet, you may be asking these same questions. We want to let you know we’re here to answer them. With no judgement (wardrobe included).

Investment advice is an important part of our offering. This includes guidance on retirement thinking and preparation. And if your situation requires in-depth modeling, we have a network of fee-for-service specialists we can refer you to.

Retirement may have seemed further away back then, but there’s no reason the last third of your life can’t be as vibrant as the first third with the proper investment footing.

Book a meeting with one of our Investor Specialists to discuss your situation.

P.S. If you’re wondering why we never ran the piece, it’s because we don’t spend a lot on advertising, which is part of how we keep our fees low. But with moustaches making a comeback, maybe we need to strike while the iron’s hot.

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by Tom Bradley

One of the delights of driving an electric car is the pasted-in-your-seat acceleration. There’s nothing like it. You push the pedal and the smile on your face is instant.

Unfortunately, managing investments isn’t like that. The analogy is more like a driving experience from the past: turbo lag. The power and acceleration may be exhilarating, but there’s a pause before it kicks in. For investors, the impact of a decision often takes time to show up, and, unlike my 1983 Volvo Turbo, when I knew how long it would take, the length of the wait is indeterminable.

I've previously talked about a high-profile lag related to last year’s shift in monetary policy, namely higher interest rates. Commentators have been marvelling at the resilience of the consumer and the overall economy without acknowledging the time needed for higher rates to filter through the economy.

Turbo lag occurs throughout the investing world, although, like the current economic commentary, it may not seem that way. If you watch the business networks BNN and CNBC, the market appears to behave like a Tesla off the line. Stocks jump and dive on news announcements. A better-than-expected earnings report causes a stock to pop. A subdued outlook has the opposite effect.

Indeed, it’s almost automatic. Cost cuts, share buybacks and purchases by activist investors push stocks up for the day or week. Looking back a year later, however, the move doesn’t even show up on a stock chart. The reality is that immediate reactions are often short lived and have little to do with the long-term success of a company, and its stock.

A new CEO may get credit for a good quarter (which may have been in the bag before they started), but, ultimately, the grade on their report card will depend on their drive, strategy and management skills over a number of years.

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Market reactions to acquisition announcements are fraught with errors. I’ll never forget a former colleague calling CAE’s 1988 acquisition of Singer Co’s Link flight simulation and training systems division the “Deal of the Century.” It was a disaster. In 2000, Telus was in the doghouse after announcing it was buying Clearnet Communications. As it turned out, going national in cellular was its deal of the century.

Generally, I’m wary when cost-cutting CEOs become media stars. Promising to improve profit margins is a reliable way to move a stock, but the sizzle is often better than the steak. Targets aren’t reached, and/or the company’s long-term competitiveness is compromised. Invariably, the next CEO needs to invest in the business and play catchup.

There’s a lot of money to be made in highly cyclical industries by managing the lag effect. Capital for expansion dries up when metals and minerals, lumber, semiconductors and other cyclical products are down, which has a predictable effect when demand increases. Markets get tighter and prices skyrocket. As the saying goes, the solution to low prices is low prices.

Of course, the wait is often difficult. Losses can be large, and turnarounds delayed. Shareholders in lumber companies never seem to wait long for the next cycle, but Cameco investors waited a decade for the uranium cycle to kick in.

The most challenging time lag you face as an investor comes when setting up a retirement portfolio. What matters is achieving your long-term goals, but you won’t know if you’ve been successful for decades to come. You’re forced to measure the progress of your 20-plus-year plan using one-, three- and five-year results. It’s a highly flawed feedback loop.

A bad year along the way isn’t likely to be important, but how do you know it isn’t a harbinger of long-term disappointment? The answer is you don’t. But you can put the odds in your favour by doing the things I regularly talk about:

• Have a plan that has a clear purpose and time frame for the money

• Build a broadly diversified portfolio that fits with your goals and personality

• Develop a routine that helps you stick to the plan, making only small adjustments based on life changes, not economic forecasts.

• Keep costs down

And, finally, work with people who enable you to be at least a little contrarian. In the context here, that means being patient with high potential, well-valued stocks that are going through their version of turbo lag. Because if predictable, instant acceleration is what you’re looking for, you’ll have to buy an EV.

by Tom Bradley

When asked what lessons investors learned from the 2008 Financial Crisis, Jeremy Grantham, Co-Founder of GMO (a U.S. investment manager), responded, "In the short-term a lot, in the medium-term a little, in the long-term, nothing at all. That would be the historical precedent."

As we exited 2022, we’ve been doing lots of navel gazing about what we learned last year, or more to the point, what we should learn. I started the year with an article on this topic. For that reason, I’ll understand if you don’t want to hear more lessons, but ... the Grantham quote above came from a post by Joe Wiggins of Behavioural Investment in the U.K. It explores the topic even further and is a good read.

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by Tom Bradley

One of my rules of thumb is that if something doesn’t seem to make sense, it probably doesn’t. Right now, there are more things than usual going clink, clink ... clunk.

Let’s start with a macro example that’s almost over. Last year, central bankers did a 180-degree turn. They went from having their foot on the accelerator to stimulate the economy to hammering the brakes to get inflation under control. Much of the commentary about this reversal has focused on the continued strength of the consumer and how resilient the economy is.

The commentaries underplay the time lag. Monetary policy takes time to filter through the economy. Until now, most households and corporations were able to make relatively easy adjustments to their budgets, as well as benefit from previous financings done at low rates. Tougher decisions will need to be made as mortgages come up for renewal and the low-hanging fruit is used up.

The next six months will determine how successful the central banks have been in their mission. The prior data points were just noise. But beyond that, here are four more potential clunkers looming for investors.

The red flag of China

Despite recent geopolitical events such as Brexit and the war in Ukraine, investors don’t seem to be treating China as a big risk factor. I’m specifically referring to companies that are dependent on China for manufacturing and/or sales growth. Stocks like Apple, luxury brand companies and German automakers are holding up well considering how important China is to them.

If we’re not heading into a cold war, it’s certainly getting chilly. There’s a lot of denial going on in the corporate world. It doesn’t appear firms are moving fast enough to lessen their reliance on China.

A lack of green

Under the same theme of not far or fast enough, it’s surprising to me that major oil companies such as ExxonMobil, Chevron and BP aren’t using their enormous cash flows to meaningfully expand into other energy sources.

Not too long ago, they were falling all over themselves to outgreen each other, but now that they have more cash flow than anyone to move the climate dial, they’re downplaying their commitments to alternatives while raising dividends and buying back shares.

Energy diversification isn’t like Meta's investment in the metaverse, which doesn’t yet have a path to profitability. Renewable energy is now competitive with fossil fuels and there’s money to be made.

Creative accounting

If you Google “Uber earnings,” you get a wall of articles with “strong quarter” in the title. Indeed, in the fourth quarter of 2022, Uber's revenues were US$8.6 billion, ridership was at an all-time high and “adjusted EBITDA,” the company’s fantastical measure of profitability, was positive.

To be more specific, Uber earned US$665 million before interest, taxes, depreciation, amortization, stock-based compensation (which totalled US$1.8 billion in 2022), the cost of protective equipment for drivers and a slew of other items.

What’s going on here? Uber has been around for more than a decade. It’s a global leader in two business areas. When will analysts and the media stop giving it a pass on its financial reporting? How about good old net income — that is, profit after all costs, including paying and protecting employees.

The private-public gap

Stocks in the public market are instantly repriced when there’s news or the outlook changes. That’s not the case for private assets. Price adjustments take time and are at the discretion of the investment manager.

This pricing lag is part of the charm of holding private equity, debt and real estate in your portfolio. They behave differently than public markets and are wonderful diversifiers. It would seem, however, that private valuations have strayed far from what similar assets are trading for in the public arena.

There’s an argument that the privates have it right. Public markets are irrational at times, with price volatility that doesn’t reflect what’s happening at the underlying companies. I get that, but I feel like I’m reliving the classic behavioural study that asked participants how good a driver they were and 80 per cent said they were above average. In this case, too many firms are saying their portfolios of companies and loans are doing well despite an economy in transition and higher financing costs.

I can’t help but wonder who is putting money into funds holding private assets that have done so well when they can buy similar companies on the stock market that are marked down.

Whether you agree or not with my interpretation of these conundrums, hopefully, I’ve alerted you to some potential clunks.

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by Scott Ronalds

Last week we hosted a webinar on tax planning with subject experts Tim Cestnick (a best-selling author and financial columnist at the Globe and Mail) and Cynthia Kett (a financial planner with over three decades of experience in accounting, tax, and planning).

The event, which was part of our Steadyhand Café series where we discuss important and timely topics of interest to investors, focused on tax tips and strategies to help you keep more of your hard-earned money in your own pocket. Tim and Cynthia offered advice on a wide range of topics, including debt and leverage, trusts and corporations, life insurance, and charitable giving. You can watch the session in its entirety below.

New to investing? Need a refresher on the basics? Or are you looking for an easy-to-understand resource to share with your kids to kickstart their financial education? (And help them achieve financial independence earlier!) Check out our latest video, in which Lisa breaks down the three fundamental types of investments — stocks, bonds, and cash.

by Tom Bradley

“Any word that’s really important is also confusing.”

This according to marketing guru Seth Godin. He explains, “Words like trust, love, friend, fair, honest, lead, connect, authentic, justice, dignity — they have dozens of different meanings. Perhaps that’s because they’re important.”

His post got me thinking about the words we use to communicate with clients. Is what we’re saying being received as we’d hoped? According to Godin, almost assuredly not.

Below is my attempt to clarify the meaning of three frequently used investment terms.

Diversification

Diversification is the practice of owning an assortment of investments in different asset classes, industries, geographic regions and currencies that each contribute to returns in different ways at different times. It’s often referred to as “the only free lunch” in investing, because by not putting all your eggs in one basket (or sector, country or strategy), you’re likely to have a smoother ride without sacrificing return in the long term.

The confusion around the term comes from its lack of precision. How well it works varies from cycle to cycle. In most cases, diversification makes market dips less painful. For example, if Canadian stocks are suffering from a commodity collapse, foreign stocks in other sectors are providing positive returns. Sometimes it averts the decline altogether. And then there are rare instances, such as in 2022 when bonds dropped almost as much as stocks, that it lets the side down.

There’s another important feature of diversification that’s often overlooked: it eliminates the risk of capital loss. This is a bold statement, but history shows diversified portfolios always recover their losses given time. The same cannot be said for narrow strategies that focus on a handful of stocks of a particular type. To be clear, owning four Canadian bank stocks instead of one is not diversification.

Neither is owning thousands of stocks through myriad funds. That’s diworsification.

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Volatility

Volatility refers to how dramatically a security, or the market overall, bounces around. A stock that’s up 20% one week and down 20% the next is volatile. One that trades in a narrow range is not. An emerging tech stock is volatile. A five-year Telus bond is not.

Confusion comes from how volatility relates to risk. Measures of bond, stock and interest rate volatility are used as inputs by banks, hedge funds and other financial firms in their risk-management models. They build strategies based on assumptions about expected volatility. For them, unanticipated downside volatility is a risk. It results in big losses.

For most long-term investors, however, volatility is not a risk. Sharp declines are disconcerting and cause anxiety (upward surges are celebrated), but it’s investment returns over 20-plus years that are important, not how smooth the journey is.

To build on what I said earlier, volatility is not a permanent loss of capital. It’s an opportunity to buy securities on sale or sell at prices you thought would take years to achieve.

Fees

Fees is a seemingly simple word that is open to a wide range of interpretations. It means different things to different investors and their advisers.

How often have you heard one of your friends say, “My guy charges me 1%.” That likely means his annual fee for trading, advice and administration is 1% of assets. There are taxes on top of that, and if he holds exchange-traded funds, mutual funds or other bank products, all of which have their own fees, the correct phrase is more likely, “My guy charges me somewhere between 1.5% and 2.5%.”

And then there’s, “I trade for free.” Well, no. The discount broker charges annual account fees, earns interest on your cash balance, gets commissions from the mutual funds you own, and, in most cases, is paid to flow your trades through a hedge fund that does high-frequency trading.

And, unfortunately, I hear this too often: “I have no idea what I’m paying, or what I’m entitled to.”

Giant investment firm Vanguard Group offers the best description for investment fees: “lost return.” It’s the total of all fees and charges that reduce how much you put in your pocket at the end of the day.

Unfortunately, I can’t clarify what fees mean to you. You’ll have to do some digging to determine how much return you’re losing for the service and expertise you’re receiving.

by Scott Ronalds

Did you know that you may be able to split certain forms of income with family members to save taxes? Tim Cestnick, a best-selling author and financial columnist at the Globe and Mail, discusses the ins and outs of income splitting in a recent article.

He also provides other helpful insights in his weekly Globe column on how to keep more of your hard-earned money out of the taxman’s hands. From home renovation costs to self-employment losses, there could be valuable deductions you’re missing out on.

Tim, along with Cynthia Kett, will be offering tax tips and discussing best practices at our complimentary February 9 webinar (10am PT; 1pm ET). Cynthia is a well-respected financial planner with over three decades of experience in accounting, tax, and planning.

Whether you’re approaching retirement and pondering which account you should draw from first (e.g., RRSP/RRIF, TFSA, or regular investment account), or hitting your peak earning years and wondering what you can do to reduce your tax bill, you’re sure to benefit from Tim and Cynthia’s experience.

Register today, as the session is just a week away. (Note: If you register and are not able to attend, a video of the session will be made available to you in the days following. Participants will also receive the video.)

Bonus points if you were a fan of 80’s television and can list the original members of the A-Team.

In our latest video, Associate Investor Specialist Lisa Guo shares some tips to help you stay on track with your financial goals throughout the year.

Do you want to save for a down payment on a house? Figure out better ways to pay off your debt? Get in the habit of investing more for the future? Or are you struggling with which money goals to prioritize? Lisa's here to help.

by Tom Bradley

In my year-end letter to clients, I talked about 2022 as a year of normalization. Interest rates moved back up to more sustainable levels, price-to-earnings (P/E) multiples came down and investor behaviour became more rational. The investment landscape is now more conducive to generating attractive investment returns.

Let’s look at the assumptions that underpin this view.

Fixed-income fixing

Savers can once again generate an income by holding fixed-income securities and guaranteed investment certificates (GICs). To call yields more normal, however, assumes that inflation comes down significantly. If it doesn’t and was to stay at, say, 8%, then a bond yielding 5% would have a real yield of -3%. The holder would have significantly less purchasing power when the bond matured compared to when it was bought.

Negative real yields run counter to economic theory, but there were a few noteworthy periods when they persisted. Bond holders suffered in the 1970s when yields didn’t keep up with spiralling inflation. Interest rates rose, but real yields were still negative. That happened again in 2019, but for a different reason. Central banks pushed interest rates down near zero (below modest inflation) to stimulate the economy (and appease investors).

Real yields have stayed negative since then, but the reason has flipped back to the 1970’s scenario. Even though the stimulation pump was turned off, yields failed to keep up with the rapid rise in inflation.

Fortunately, recent data suggests inflation is starting to decline, although it will be months before we know if buying a 5% bond was a good purchase or not. I’m betting it will be.

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Better pricing

Prior to last year, P/E multiples were running well above their historical range. Starting from a peak in the summer of 2021, however, the broad market P/E dropped to its long-term average of 16x (as measured by the Value Line Investment Survey) from the low 20s.

P/Es have come down because of declines to the P (stock prices), but what about the E? Don’t earnings have to hold up for valuations to be considered reasonable? An economic slowdown will undoubtedly hinder profit growth and result in losses for some companies. Nonetheless, I’m now comfortable with valuations for two reasons.

First, I think profits will hold up better than the recession doomsayers suggest. Sales volumes are likely to fall, but some of the cost headwinds corporations are facing — labour shortages, supply chain challenges, high input prices and a strong United States dollar — will abate, too. And, whether we like it or not, many industries are highly concentrated and are more co-operative than competitive.

Second, an average P/E is a good measure for comparing a stock price to the company’s ongoing earnings power. But when earnings are depressed, investors look further out to the company’s longer-term potential. I have no doubt we’ll read about an economist applying an average multiple to trough earnings and declaring the market overvalued, but it doesn’t work that way. Indeed, the best time to buy a resource or other highly cyclical stock is when the P/E is sky high, or infinite (no profits).

I don’t deny that stocks are vulnerable to lower profit estimates, but I am happy to buy a great business at a good price. If that price goes from good to great, I’ll buy more.

Investor sentiment

The third thing to normalize is investor sentiment. Prior to the market decline, investor behaviour could only be described as speculative, euphoric and go-for-broke. We had it all. Meme stocks were hot, as were loss-making tech companies, cryptocurrencies and non-fungible tokens. Individual investors traded like bandits and there was an unprecedented level of options trading. I’ve never seen anything like it, and I was around during the dot.com boom in the late 1990s.

Since then, investor sentiment has come full circle, hitting extreme levels of fear last summer and early fall. The bearishness has moderated recently, but investors are still cautious, which makes it easier for companies to meet, or beat, expectations.

If yields are better, inflation is trending down, stocks are reasonably priced and investors are acting more rationally, what will drive returns from here?

Well, the answer isn’t very exciting, especially compared to the go-go days of 2021. It’s the same thing that always drives returns: corporate profits. No matter the hype around trends and macro issues, stock prices are ultimately linked to companies expanding, making a profit and paying dividends.

Boring, right? Well, maybe, but I like investors’ chances way more now than I did in the exciting new world of 2021.

No explanation required.

Note: The above table shows the returns of our five long-standing funds — Steadyhand Savings Fund ("Savings"), Steadyhand Income Fund ("Income"), Steadyhand Equity Fund ("Equity"), Steadyhand Global Equity Fund ("Global"), and Steadyhand Small-Cap Equity Fund ("Small-Cap"). The Steadyhand Founders Fund is not included in the table, as it was not launched until 2012. The Global Small-Cap Equity Fund and Builders Fund are also not included, as they were launched in 2019.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

by Tom Bradley

It was a difficult year for investors. Inflation and interest rates rose, geopolitical tensions heated up, the war in Ukraine dragged on, and stock and bond prices fell. Many would describe where we’ve gotten to as far from normal, even extreme, but I have a different view.

It was the previous year that was off kilter. 2022 was a year of normalization. It was a surprising, dramatic, painful normalization, but normalization just the same. Interest rates returned to more sustainable levels. Oil prices better reflected the underlying economics. Investors again cared about profits and balance sheet strength. Stock valuations returned to their historical range. And the go-for-broke attitude towards investing chilled out (to be clear, it was speculation, not investing).

As a result, the performance chart on page 3 of your Steadyhand account statement that trends up and to the right took a zig down. Generally, our clients gave back their gains from the previous year. The Builders Fund, an all-equity fund, was up 14.7% in 2021 (before fee reductions) and down 12.1% in 2022. The cash reserve in the Founders Fund to start the year (in lieu of bonds) helped soften the blow of rising interest rates, but not enough to offset the worst year ever for bonds. The fund was down 9.9%. Most importantly, however, our clients stayed steady and overwhelmingly stuck to their long-term plans.

Calling what happened in 2022 a normalization doesn’t mean there aren’t still dislocations and extremes remaining. Inflation is still high. Labour shortages remain commonplace. Estimates for corporate earnings seem overly optimistic. Private asset prices don’t yet reflect higher interest rates and lower stock prices. And investor sentiment is, well, downright bearish.

We have no preconceived notions about how this all plays out in 2023 but believe a more normal landscape provides a much better foundation on which to generate returns. As investors, we want the risks and bad news to be out in the open. Check. We prefer expectations to be low. Check. We expect to earn a reasonable income from holding fixed income securities. Check. We want the companies we own to have pricing power, financial resilience and be willing to take advantage of their strong position in a weak economy. Check.

We’d rather not experience another 2022, at least not for another decade or so, but we’re prepared for anything. In my first National Post column of the year (How investors can turn last year’s mistakes into their future advantage), I talk about not wasting 2022. Indeed, it was a good year for reminding us how markets work, and how returns are generated.

In addition, watch for our 2022 Year-end Review video that will be posted in the next two weeks. In the meantime, let’s hope for a more normal 2023.

I encourage you to read the rest of our Q4 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.

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by Tom Bradley

As we launch into 2023, it’s a good time to embed some lessons from the past two years into your investment process. I say “embed” because investors generally aren’t good at learning from past mistakes.

In a recent article, Morgan Housel, a partner at Collaborative Fund Management, made the distinction between cumulative and cyclical learning. The medical profession, which steadily builds on past successes and failures, fits in the former category. The investment world, not so much. It seems its lessons need to be relearned each cycle.

“Cyclical knowledge, and the inability to fully learn from others’ past experiences, means you have to accept a level of volatility and fragility not found in other fields,” Housel said. “I can imagine a world in 50 years where things like cancer and heart disease are either non-existent or effectively controlled. I cannot ever imagine a world where economic volatility is tamed and people stop making financial decisions they eventually regret.”

Ever the optimist, I’d like to think investors can shift experiences to the cumulative category from the cyclical. Here are a few you can draw upon when needed.

Mr. Market is whacko: We should never forget that markets are totally unpredictable. There’s no excuse for being surprised when stocks go up, sometimes by a lot, on seemingly bad news or down on positive news. The market is a complex organism driven by expectations of what may happen in the future to a multitude of economic and social factors. There should be no expectation of precision. Basing an investment strategy on a short- or even medium-term forecast is a mugs game.

It’s cyclical, stupid: Part of the unpredictability is because most aspects of investing are cyclical. It’s basic economics. Something that becomes popular attracts more capital, which pushes prices up and, in turn, increases supply. Higher prices ultimately lead to less demand. More supply and less demand are a bad combination. I recommend treating every trend as cyclical until proven otherwise.

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Fear and greed: Another factor that makes stocks so volatile is human emotion. The degree to which investors are positive or negative has a huge impact on stock prices. If you can stand back from the charging herd and observe, however, investor sentiment is a useful risk-management tool. When everyone around you is being greedy, it’s time to be careful. When they’re fearful, well, you know.

Knowing that markets are unpredictable, cyclical and unduly volatile, what should you base your investment decisions on? What lessons should you accumulate? Here are three.

It’s all about profits: In our multimedia world of instant information (and gratification), we must remember that a company’s true worth ultimately comes down to its long-term ability to make a profit and pay dividends. Short-term news reflects the current situation (and influences investors’ mood), but often has little or no impact on the long-term outlook. Nor does an interesting pattern on a stock chart.

Valuation is the closest thing to gravity investors have: The price you pay for a security isn’t the only factor on how it does, but it’s the most important. The higher the price relative to its history, the lower the return. This applies to stocks, private investments and real estate. Investors who have a good sense of what a company is worth don’t blink at market volatility; they take advantage of it.

Trend versus trendy: Cellphones, online retailing, social media, black tights and ridesharing aren’t fads, but many market trends turn out to be. When looking for the next Apple, Amazon, Facebook, Lululemon or Uber, keep an eye out for the warning signs of a frothy fad.

For example: stories in the media about how much money people are making with no mention of profitability; valuations based on metrics such as eyeballs, likes, subscribers or square footage; a wave of new exchange-traded funds launched to capture the trend; and recommendations from your cab driver. But the No. 1 tipoff that it may not be sustainable: it seems too good to be true.

Last year was a tough one and shouldn’t be wasted. There are many lessons that deserve to be entrenched in your knowledge bank. You’re guaranteed to need them again, because successfully managing your portfolio through market extremes and bursting bubbles will contribute hugely to your long-term returns.

by Scott Ronalds

As we step into a new year, it’s timely to highlight a few important financial numbers for 2023.

First, the TFSA limit. The maximum annual contribution for Tax-Free Savings Accounts has been increased this year to $6,500 (from $6,000 last year). This means the total lifetime cumulative contribution room for these accounts is now $88,000 (for investors who meet all eligibility requirements). TFSAs offer a rare tax break that all investors should take advantage of.

Next, the RRSP contribution limit. The max you can add to your Registered Retirement Savings Plan this year is the lesser of 18% of your 2022 earned income or $30,780 (unless of course you have unused contribution room from previous years).

Not sure which account is best for you? Our TFSA vs RRSP Calculator can help. Or take a deeper dive as we walk through some rules of thumb and the virtues of each account type in a popular article from last year.

The extra contribution room can have a meaningful impact on the growth of your accounts over time — explore our Savings Growth Calculator to see just how much.

As a reminder, you can contribute to your accounts with us by simply calling 1-888-888-3147 7am-5pm PT Mon-Fri (we can electronically transfer money from the bank account we have on file to your Steadyhand accounts).

Happy New Year!

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by Scott Ronalds

It’s the last week of December, which means year-end lists and market predictions are hitting your inbox. We’re not one to make short-term calls — as a recent piece in the New York Times so eloquently put it, “Wall Street’s market forecasts for 2023 are worthless” — but it can be helpful to reflect back on some of the year’s biggest stories and events when thinking about the outlook for your portfolio.

Below are some of the key happenings that 2022 will be remembered for. We’ll be talking more about the impacts they had on the capital markets and your portfolios in our Q4 Report and year-end video, which we’ll be releasing the week of January 9 and 16, respectively.

Interest rates

The Bank of Canada raised its key short-term lending rate seven times in 2022, from 0.25% to 4.25%. The U.S. Federal Reserve bumped up rates at a comparable pace, with its policy rate ending the year at a similar level. Longer term interest rates also rose significantly, and bond prices declined by the greatest extent in a generation (when rates rise, bond prices fall). With one trading day to go, the Canadian bond market is poised to finish the year down more than 10%.

Inflation

Prices of everything including food, shelter, energy, transportation, and entertainment rose at the fastest pace in decades, surpassing 10% in some developed countries. The latest numbers suggest the Consumer Price Index (which represents changes in overall prices as experienced by Canadian consumers) will end the year roughly 7% higher.

War in Ukraine

Putin’s devastating campaign in Ukraine has marked one of Europe’s biggest battles and crises since World War II. The consequences have been far reaching, including punishing economic sanctions, severe disruptions to the flow of energy and commodities, multinational companies pulling out of Russia, and a restructuring of the geopolitical order. Lost in the discussion can be the human toll, which has been crushing.

Tech stocks and higher-risk investments hammered

Tech stocks took a beating in 2022, including industry leaders Shopify (down 75%), Meta (-65%), Amazon (-50%), and Alphabet (-40%). Investors shunned growth stocks, generally speaking, and higher-risk investments had an especially weak year, notably cryptocurrencies. Bitcoin fell 65% and crypto exchange FTX collapsed, leading investors to ponder the sector’s future. The broad U.S. market will finish 2022 down around 20%, and Canada down 6% (our market was propped up by the energy sector).

China

The country’s zero-Covid policy led to factory and city shutdowns, exacerbating supply chain issues worldwide. Late in the year, mass protests led to a re-evaluation of the government stance on Covid and growing contempt towards President Xi Jinping. China also upped its saber-rattling with Taiwan by firing test missiles over the island and increasing military exercises in the region. A show of American support for Taiwan further angered China and weighed on its relations with the west.

Clearly, 2022 wasn’t a banner year for investors. What’s more, economists are painting a bleak picture of 2023, with many calling for a recession. Importantly, however, the stock market is not the economy and the correlation between the two is sloppy at best. And we can draw on several positives looking forward.

First, higher interest rates and bond yields mean that fixed income investors are generating a higher income stream in their portfolios. Future bond returns, as gauged by the market’s current yield, look much more attractive than at the start of the year. Second, lower stock prices and valuations foreshadow better future returns over the medium term, if history is any guide. Following negative years, investors should be revising return expectations upwards, not down. And finally, there are signs that Covid is nearing an endemic stage (although things can change quickly, as we know).

As we close the book on a bleak financial year, let’s not forget some of the accomplishments and breakthroughs in science (nuclear fusion technology), medicine (next generation mRNA advances), and human perseverance (Elton John pulled off yet another farewell tour).

Cue up Auld Lang Syne.

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by Scott Ronalds

If you’ve ever been to the Cariboo Chilcotin region of B.C., you’ve probably had a run in with a camel. Or you would have in 1862, that is.

When gold was discovered in the area in the mid 1800’s, a few enterprising businessmen got together and purchased 23 camels, thinking they would be ideally suited for hauling equipment and supplies to the gold fields. Seemed like a good idea considering that camels had been successfully utilized as pack animals at the time by the U.S. army.

It didn’t work out so well though. The two-humped beasts (the entrepreneurs chose the Bactrian breed rather than the one-humped Dromedary) trashed their feet on the rocky roads, weren’t shy of kicking anyone nearby, didn’t mix well with the local wildlife, and ate the miners’ Levi’s.

A little over a year into the venture (1863), the camel train was retired and the animals were abandoned. Apparently, some were taken in as pets, others succumbed to the cold winters, and a few ended up on dinner plates. Today, a bridge in Lillooet is named “Bridge of the 23 Camels” as a nod to the Bactrians’ colourful past.

One saving grace of the B.C. camel saga is that the entrepreneurs realized their miscalculation early on and cut their losses. Had they prolonged the venture, many more camels could have suffered a similar fate to the ‘Cariboo 23’ and the region could look much different today (legend has it, there’s still the odd camel sighting).

After a year like 2022, we’ve all probably got a Cariboo camel in our portfolio. What may have seemed like a good investment idea in theory didn’t work out so well in practice. As more speculative investments started racking up huge returns early in the pandemic, there was a very real temptation to stray out of our risk comfort zone or diverge from our plan and buy into the hype behind cryptocurrency, unprofitable tech companies, or other shiny objects of the day. Alas, the oasis has dried up and returns evaporated.

But don’t beat yourself up too much over a mistake or ill-timed investment. Learn from it. Get back to fundamentals. Reset.

A portfolio that’s littered with slipups of the past will be tilted from its intended structure, which can weigh on future returns. As you review your investments this year, think of the 8-foot ungulates roaming the Cariboo a century and a half ago. Take a critical eye and if you conclude that your thesis on a holding is flawed or realize that something doesn’t fit with your investment approach, set your camels free and move on.

No doubt, it can be painful to admit a mistake and sell at a loss, but it will set you up for greener pastures ahead. And lean on a lesson from the early Chilcotin pioneers: don’t drag it out.

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by Salman Ahmed

In this video, I talk to TimesSquare Capital's Magnus Larsson, the manager of our Global Small-Cap Equity Fund, about his outlook for global small-cap stocks and how he has positioned the fund.

This is one of four videos we filmed with Magnus and his team; below are the links to the rest of the series.

Europe Energy Crisis and Investing in the Region China, Asia, and Emerging Markets The Future of Global Tech Stocks

by Salman Ahmed

Higher interest rates and prices are putting strain on people’s finances at the time of year we tend to spend the most. So, we asked some experts for their guidance.

Annie Kvick, Julia Chung, Owen Winkelmolen and Ron Graham are among the leading financial planners in Canada and shared some sage advice. Consider it our Christmas gift to you in keeping with their suggestions.

• Budget, budget, budget: It might not be fun, but it works. Budgets shouldn’t be limited to gifts either. Set a budget for how much you’re willing to spend on social gatherings.

• Focus on activities, not food: Fill social gatherings with games and caroling and trim the menu by 30%. No one will mind with so much food ending up in landfills this time of year and food prices having skyrocketed.

• Use this year to reset expectations: Larger presents and menus may have become more common over the last few years. But no one is going to blame you for scaling things backs this year and you can use this holiday season to reset expectations for years to come.

• Make a donation: Food banks and shelters are busier than they’ve ever been. Substitute a gift with a donation or sponsor a family. Your loved ones will appreciate helping those in need. The tax credit is nice bonus.

• Start new traditions, or bring back old ones: Build a snowman, do a holiday-themed scavenger hunt, or play some shinny with family and friends. You’ll make more memories than with presents.

• Give an experience: It’s hard buying gifts for adults so give them an experience instead. They’ll remember it more and appreciate the thought you put into it.

• Start a gift fund: It’s probably too late this year, but consider starting a gift fund in January for next year. If you spend $600 a year on gifts, sock away $50 every month.

• DO NOT take on debt: The experts are adamant on this one.

Merry Christmas, happy holidays and have a great new year.

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by Neil Jensen

Word is catching on that there’s a real benefit to having a steady hand on your portfolio! We now manage over $1 billion for more than 3,900 Canadians from B.C. to Ontario and we want to make sure we’re well positioned to continue our growth — and provide our clients with industry leading service — by expanding our team.

Specifically, we’re looking for an Investor Specialist in our Toronto office.

The new member’s primary role will be to work with clients, providing advice on asset mix, portfolio construction and monitoring, and related issues. She or he will also have the opportunity to work with our Chief Development Officer (David Toyne) to build our profile in Ontario and promote the firm to potential clients and centres of influence. A full description of the position can be found here.

All interested candidates are encouraged to submit their resume and cover letter to Irene Gilligan at irene@gilliganassociates.com. While we thank all candidates for their interest, only selected individuals will be contacted for follow-up.

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by Tom Bradley

Emerging technology and growth companies have been in the headlines constantly in recent years, though not always for the same reasons.

Until the end of 2021, they were on a roll. Investors wanted growth at any cost and interesting, innovative companies garnered stratospheric valuations and were able to raise seemingly endless amounts of capital. Growth was the priority. Profits could come later.

In 2022, investors changed their tune. They’re less starry-eyed and want to see profits, or at least a credible plan to get them. Later has arrived. Stock prices and private valuations have been crushed even though many companies are successfully executing on the plan everyone was so excited about last year.

I’m talking a lot about profits here because they’re needed to pay dividends and, ultimately, they drive stock prices. But investing isn’t about profits today as much as it is about what could be in the future. Mr. Market is always looking ahead.

How do successful growth managers identify future profit machines? Well, they all do it differently, but when they’re looking at early stage, growth companies (that is, no profits), the following factors are definitely on their lists.

Is the product or service addressing a need or solving a problem? Will it have a positive impact on how people live, or, as one manager puts it, “break down the barriers to human progress?”

Is it meaningfully better than what already exists? Growth investors are looking for game changers, not incremental improvement.

What will the competitive response be from incumbents? The size of the opportunity often depends on how quickly established firms can adapt or copy.

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How big is the addressable market? Investors want something that is applicable to millions or billions of users around the world, not something that targets a small niche.

Are there barriers to entry? A company needs to have an edge, or a lead, that will give it a competitive advantage. The size of the market matters less if it’s easy for everyone to join the party.

Are sales growing rapidly? The growth rate is important if the company is already producing revenue. It indicates how quickly customers are adopting the new idea. An innovation can be truly amazing, but the market may not be ready for it yet.

Is there recurring revenue? Growth investors will pay more for companies that have ongoing revenue as opposed to a one-time sale. They’re interested in razor blades, not razors.

Is the management team capable of building a large company? The founder(s) may be able to do this, but investors often want experienced, professional managers in the mix.

Who is backing the venture? The big, successful venture-capital firms make lots of mistakes (it’s the nature of the business), but their sponsorship of an emerging company is still an important factor in bringing on other investors. There must be something to the business if Sequoia Capital or Bill Gates is investing.

How much capital will be required to get there? This is more important than ever. There are still billions of dollars of growth capital available, but it’s being more selective now and driving a harder bargain.

And, importantly, is there a path to profitability? Investors are looking for products or services that will be profitable after they’re fully rolled out. Scale must equal profits.

As you look at the hits and misses in your portfolio, you might evaluate them against this set of criteria.

Does cannabis have any barriers to entry, or will it continue to be a free-for-all? Can Uber and Lyft make meaningful profits in a competitive, labour-intensive industry? How big is the addressable market for Beyond Meat?

Does Zoom have a big enough lead and is its offering unique enough to stave off Microsoft? Is WeWork’s model of committing to long-term leases and offering customers short-term flexibility sustainable?

Have the “buy now, pay later” companies adequately accounted for the risk of loan losses? And when there’s only two or three food delivery companies left standing, will diners be willing to pay enough for DoorDash to make real money?

Finding the next Nvidia, Shopify or Moderna is an art, not a science. There’s no guarantee the idea will scale and become profitable. There are no solid metrics to rely on. And, as we found out this year, the stocks are highly vulnerable to changes in investor sentiment.

by Salman Ahmed

A war in Europe has caused a humanitarian, political and energy crisis across the region. Despite these challenges, the Steadyhand Global Small-Cap Equity Fund continues to hold on to many of its existing European investments and has added new positions as well.

In the below video, I talk to David Hirsh about why he sees potential in small-cap stocks in Europe. David is a Director and Partner at TimesSquare Capital (the manager of our Global Small-Cap Equity Fund) and has been researching European stocks for over two decades.

by Salman Ahmed

China, Asia, and emerging markets have long shown promise but have produced mixed investment results recently. In the video below, David Oh, Head of Asia at TimesSquare Capital (the manager of our Global Small-Cap Equity Fund), takes us through the opportunities and challenges the region faces and why he's excited about the potential he sees. In the interview, David talks about two stocks in the Steadyhand Global Small-Cap Equity Fund to give investors a flavour for the kinds of investment ideas he is seeing today.

by Tom Bradley

There’s an expression in our household that’s used a lot. When there are deeply held views on opposite sides of an issue, my wife or I invariably say, “That’s what makes a market.” The origin of the reference is, of course, the stock market. For every optimistic buyer, there is a seller with a different opinion. If this wasn’t the case, there wouldn’t be any transactions.

Investors currently have a long list of concerns, and most of the urgency in the market debate resides on the negative side.

The economy is expected to weaken or even slip into recession. This will cause corporate profits to fall in absolute terms, and even more relative to expectations (at this point, estimates are for S&P 500 earnings to increase in 2023). To date, sales have been robust enough to offset higher labour and input costs, but if they weaken, losses will be common.

If the economy takes a dip, loan defaults will accelerate for both consumer and commercial borrowers, and corporate bond yields are likely to increase relative to risk-free government bonds. This spread, as it’s referred to, has already widened, but doesn’t appear to be discounting a meaningful recession.

Similarly, private-market assets aren’t yet reflecting the weakness in public markets. Unless there’s a dramatic recovery in stock prices, further markdowns are coming in venture-capital and private-equity funds.

But this is all well known. The current dialogue is centred around these risks, and indicators of investor sentiment are overwhelmingly bearish. But what about the forces on the other side that are helping to make a market?

First off, there’s a positive take on many of the concerns mentioned above. For example, the sooner the recession is declared, the better. Markets can then do what they always do, which is look ahead to the other side of the valley.

In this respect, weak earnings this year will set up the next period of growth. An economic slowdown will reset supply chains, loosen up the labour market and shake out weak competitors.

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And when management is forced to report disappointing results, they will throw in everything, including the kitchen sink. Anything of questionable value on the balance sheet will get written off, and any unrealistic expectations for profit margins disavowed. In other words, the decks will be cleared for favourable comparisons in the coming years.

Companies based in the United States have been feeling the negative impact of a strong U.S. dollar. Revenues and earnings from foreign operations translate into fewer U.S. dollars, which weighs on overall profitability. If the greenback stops going up, or even weakens, reported earnings will get a boost.

High inflation has been a cloud over everything this year, but if economic weakness takes the steam out of the consumer price index, investors will breathe an enormous sigh of relief. We’ve already seen signs of this happening on days when the market significantly rallied not because of good news, but because of less bad news.

Private-asset firms are struggling to manage their existing portfolio of companies, but most still have significant capital to deploy in the next year or two. Some of the money will be used to bid for public companies. More broadly, strong companies with access to capital will take advantage of weak asset prices to further consolidate their industries.

There are three ongoing trends at buyers’ backs that partially offset the weight of higher inflation and interest rates. One is that the middle class in the world’s two largest countries, China and India, is rapidly growing, which creates additional demand for all kinds of goods and services.

It’s also early days in a surge of technology adoption. Companies and governments are harnessing mature technologies such as cloud computing, the internet of things, data analytics, sensors, drones, machine learning and artificial intelligence to streamline how they operate.

And, despite the noise around residential real estate, there is a structural shortage of housing units in North America. The current building drought is likely to be followed by a powerful surge of activity.

By pointing out these market complexities and contradictions, I’m not trying to discourage you from acting on your convictions. That’s what makes a market after all. But before you enthusiastically buy or grudgingly sell, you might pause to understand what the investor you’re transacting with is thinking.

by Tom Bradley

I saw a slide this week in an investment review that was titled, ‘What we’re watching to become more constructive on equities.’ Here’s the list of indicators this U.S.-based firm is looking at to determine when to make a higher commitment to stocks (along with explanations where necessary).

1. A positive spread on the 2-to-10 year yield curve. Right now, short-term bond yields are higher than long term (negative spread). This isn’t normal, but it happens. It’s noteworthy because an inverted yield curve is always present before recessions (although not every inversion is followed by a recession).

2. A decline in 5-year breakeven inflation rates. I think this refers to inflation-adjusted bonds, commonly known as real return bonds (RRBs). Built into an RRB’s yield is an assumption about future inflation. If the breakeven inflation rate is declining, it means (I think) that the bond market is expecting inflation to abate.

3. A decline in corporate yield spreads for both investment grade and high yield bonds. The spread, or gap, between corporate and government bond yields widens when there are concerns about the economy, which in turn can lead to increased defaults.

4. A decline in the U.S. dollar index. Since early 2021, the U.S. dollar has been on a tear against all currencies (not just the Canadian dollar). This has the effect of reducing foreign profits for U.S.-based companies.

5. A decline in the VIX. The VIX is a measure of how volatile the stock market is at any point in time. When stocks are bouncing around and the perceived risks are higher, the VIX tends to be higher.

6. Cooler inflation readings.

7. A ceasefire in Ukraine.

8. Significant easing of U.S. regulations on the fossil fuel industry.

When I saw this list, I couldn’t help but think of something the late Bob Hager used to say. “If you wait for certainty you’ll miss the market.”

At Steadyhand, we’re also watching these factors, but as regular readers know, we never profess to know where the market is going in the short to medium term. Indeed, we don’t have a clue and neither does this firm, or anyone else for that matter. But we do know that Mr. Market looks ahead and tries to anticipate what is coming.

Bob refers to the fact that by the time the concerns and risks of the day are resolved, stock prices will already be significantly higher. Indeed, times of extreme pessimism and negative indicators often turn out to be good buying opportunities, as Scott pointed out in his Is it time to ‘start the car’? piece last month.

It’s our belief (Salman, our fund managers and me) that we should allocate clients’ capital to stocks that we think have an attractive long-term return based on their competitive positioning and the price we’re paying. We don’t know what road the stocks will take to achieve that return, and at the risk of sounding cavalier, we don’t spend any time trying to figure it out.

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by Salman Ahmed

Technology stocks have taken a beating in 2022. The narrative on the sector has shifted significantly compared to just a year ago when tech companies were the ‘darlings’ of the market. Is it time to look for opportunity in the rubble?

In the below video, I speak with TimesSquare Portfolio Manager Sonu Chawla (TimesSquare manages our Global Small-Cap Equity Fund) about the global technology sector at a high level while also narrowing in on certain sub-sectors and companies. With two decades of experience covering tech stocks, Sonu provides some context on the potential of these companies in the current environment and what she’s focusing on when looking at these businesses today.

by Tom Bradley

On October 27th, I had the honour of being inducted into the Investment Industry of Canada’s Hall of Fame. I know what you’re thinking – doesn’t he need to be retired for five years before that can happen? Well, this isn’t the Basketball Hall of Fame (my lifelong dream) and I’m not finished yet. The investment industry does it differently.

At the dinner, my wife Lori and I hosted a wonderful group of people who have been important to me throughout my career. They included family, friends, Bay Street ‘Luminaries’ (as one of our guests described them) and some of our Steadyhand team.

As part of the induction, I got a chance to get up on my well-worn soap box. It was a joy to be able to talk about my roots and give credit where credit is due. And I couldn’t resist talking about what I care most deeply about, which is captured in the excerpt below. (For those who are interested, here’s a link to the whole 10 minutes.)

I don’t know what the nominating committee saw in me. I’ve done many things at a high level for almost 40 years, but I hope part of it was what I’ve dedicated the last 15 years of my working life to. Let me we explain.

I’m speaking to a room full of talented investment professionals. We’re trained to look for inefficiencies in the market that we can take advantage of — overlooked stocks, structural dislocations, or underappreciated trends. Well, one of the biggest inefficiencies in our industry, by far, is investor behaviour. And when I say ‘inefficiency’, I mean the biggest cause of slippage to client returns.

Providing great investment management is important. Charging reasonable fees is a given. But it all goes for naught if the ultimate consumer uses our products and skills incorrectly.

The penny dropped for me when I saw a study of returns for clients of an eminent U.S. money manager. The firm had an excellent record and at one point was named ‘Investment Manager of the Decade’. But the study showed that the clients of the firm hadn’t done nearly as well. Indeed, they’d done poorly.

Why you ask? Well, money flooded into the firm when results were good (and valuations were stretched) and flowed out just as quickly when they were bad (and opportunities were plentiful).

When studying history, we can always find similarities between previous market cycles, but there are more differences. What is consistent through all the cycles is the part that human emotions and behaviours play. What investors do with the portfolios and products we create is the biggest swing factor and yet it has been ignored by many of my more talented contemporaries.

This has been my sandbox — the area where we can have the biggest impact on the outcomes of our clients and other investors.

I, and many others, implore investors to take care of the things they can control. Having an appropriate asset mix. Keeping costs down. Sticking to the plan.

But we, the professionals, can also do a better job of taking care of our controllables. We can’t know what the market is going to do, but we can make sure our processes and client interactions reinforce sound investor behaviour.

That means not portraying ourselves as knowing more than we do. In other words, stop making market forecasts (which is an unfortunate occupational hazard and the biggest waste of grey matter I know). Stop promoting frequent trading. Provide clear reporting that tells clients what they need to know. And align promotion, product launches and growth strategies with what our portfolio managers are doing, not what clients are feeling. The slippage I mentioned comes when we push a safe product when our portfolio managers are doing the exact opposite … buying stocks on weakness.

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by Tom Bradley

I’m suffering from digital fatigue. Maybe you are, too. Think about what’s competing for our attention: social media, website popups, news alerts, newsletters, calendar reminders, email notifications, Alexa, Siri, surveys on everything and ads everywhere. We also have endless entertainment options from traditional media, streaming services, podcasts and gaming.

Attention has become a scarce resource and gives second meaning to the term attention deficit. Meanwhile, everything I read suggests we need to go in the opposite direction. Dead time is the answer for creativity and problem solving.

Well, I can help, at least when it comes to your investments. Below are two lists. The first has things I spend little time reading about and contemplating. The second is where I focus. As you’ll see, I’m pretty ruthless, but hopefully there are a few ideas here to help manage your attention capacity.

Things to skim over or ignore

I don’t read market forecasts. These predictions aren’t worth the paper they’re written on and shouldn’t influence investment decisions. If you must, read them to learn about the underlying reasoning and ignore the conclusion.

I spend no time reading previews of big announcements or earnings releases. I’m not a day trader and would rather wait a day to see the actual announcement or a report by someone who has had time to fully analyze it.

I ignore explanations of why the stock market was up or down yesterday. Don Dillestone, a wily veteran on our research team when I started in the business, warned me that the media need a simple narrative to explain what happened — a cause for every effect. But markets are driven by a multitude of forces, and their interactions are anything but simple.

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I’m very careful with the views of people who have an axe to grind. For example, predictions about the housing market from real estate agents go straight in the garbage.

Similarly, I tread lightly with cryptocurrency, gold and cannabis boosters. I’m repeatedly told bitcoin is the future, but not why it is, or what it’s worth. If there was a good explanation, I’d be more interested.

And I’m careful about commentators who recommend a new stock or strategy every week. Good investment ideas are precious, and trends don’t change overnight. I never know whether I’m supposed to buy this week’s recommendation or last week’s.

Things to focus on

I read everything I can about China. It’s been the world’s growth engine over the past two decades and will have no less impact in the next two, although likely for different reasons.

I was trained as an equity analyst and thought bonds were boring. Now I closely follow the credit markets because they tell me a lot about what’s going on in the capital markets overall: who’s issuing debt, who’s buying, changes in corporate spreads (the excess yield above government bonds), and how liquid the market is. I hate to admit it, but the bond market is often ahead of the stock market.

I look at every chart or table I can find on valuation. There’s no shortage of information about what companies do, but articles often miss the most important determinant of return — the price paid. Price-to-earnings multiples and discounted cash-flow calculations can get a little geeky, but they’re important. As American investor Howard Marks has said: “No asset can be considered a good idea (or a bad idea) without reference to its price.”

Speaking of Marks, I follow many investment managers. It’s remarkable how much they share about their strategies and what they own. And I don’t limit myself to managers who are performing well. The laggards provide the other side of the argument and tend to be more open about their investment thesis.

For example, it was the value-oriented managers who pointed out the lack of capital going into energy and resource projects during the recent tech boom.

And, finally, I pay attention to what my nephews and nieces are into. This might sound weird, but the reality is that we’ll all be doing the same things in six to 18 months. Think iPhones, texting, Lululemon, WhatsApp, YouTube, Facebook, Instagram, TikTok and shows such as Breaking Bad and Squid Game. They provide a sneak preview of emerging trends.

Which brings me back to the problem. You need to treat your time as a scarce resource and be proactive about managing it. Focus more on what’s important and less on what’s urgent. Who knows, maybe there’s an app for that.

by Scott Ronalds

Savers haven’t had much to cheer about over the last decade. Short-term interest rates have been at rock-bottom levels, and as such, cash-like investments (e.g., T-Bills, corporate paper) have provided measly returns.

Well, no longer. Central banks have been aggressively increasing their policy rates this year in an effort to contain inflation. The Bank of Canada’s key lending rate has risen from 0.25% in early March to 3.75% today (following last week’s hike).

The yield on our Savings Fund has followed suit. As of October 28, its pre-fee yield was 4.1% (up from 0.3% at the beginning of the year).

The fee on the fund is only 0.2% (we temporarily reduced the published fee of 0.65% back in 2009 and have kept it at its current level since), and many of our clients pay an even lower figure thanks to our Fee Reduction Program.

The fund’s yield is sensitive to actions by the Bank of Canada, meaning it will likely rise if the central bank further increases its policy rate or if further rate hikes are being priced into money market securities. Likewise, the yield will fall if the Bank cuts rates.

Of note, the Savings Fund’s return doesn’t always equate to its current yield (even after fees). In periods when short-term rates are rising rapidly, such as this year, it takes time for existing, lower yielding holdings to mature and be replaced with securities that offer higher interest rates.

Mechanics aside, unitholders are now receiving a much better return on their cash.

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by Tom Bradley

Investment managers often talk about buying companies that have pricing power. That is, ones that have the ability to raise prices in response to rising input costs or demands from shareholders for higher profits. This is particularly important in these inflationary times.

In reality, finding pricing power today is like shooting fish in a barrel. After three decades of increasing consolidation, many industries are now dominated by a handful of players, many of which could be described as comfortable competitors.

But before we talk about the investment implications of this trend, let’s look back at how we got here. In the 1970s and 1980s, acquisitions were often done for diversification reasons (for example, Molson buying retailer Beaver Lumber and chemical maker Diversey Corp.) and to pad CEO egos. Mono-line businesses wanted to smooth out their revenues. Some went so far as to create conglomerates that owned a variety of businesses. (I started in the investment industry in 1983 as a conglomerates’ analyst covering the likes of Canadian Pacific, Power Corp., Brascan and Federal Industries).

Unfortunately, the success rate of these deals was abysmal. Study after study revealed the acquirers would have been better off if they’d kept their chequebook in their pocket. They paid too much and too often knew nothing about running the new businesses.

Despite the lack of success, M&A activity in the 1990s remained robust, although the emphasis changed. Conglomerates narrowed their focus on fewer businesses, and some were unwound altogether (as CP and Brascan did).

Companies increasingly bought assets that were in the same business, or a related one. The goal wasn’t diversification as much as it was cost reduction. Adding scale and eliminating competitors was a good formula for doing that. To work, deals didn’t need to rely on often-touted but ever-elusive marketing synergies.

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These acquisitions were a better use of capital than building new plants or starting new product lines. And with management more capable of running the acquired assets, the outcomes were much better.

After more than two decades of rapid consolidation, we now have a long list of industries that have two or three dominant players that are in a position to control pricing and pound down new competitors or buy them out. In many cases, they fit the description of oligopolies, which the Organization for Economic Co-operation and Development (OECD) describes as “markets dominated by a small number of suppliers. They can be found in all countries and across a broad range of sectors. Some oligopoly markets are competitive, while others are significantly less so …”

In a small country such as Canada, oligopolies are a natural outcome, particularly in industries that rely on the domestic market. Today, we have comfortable competition in banking, insurance, telecommunications, grocery and drug stores, to mention a few. But as the OECD points out, consolidation is a global phenomenon, impacting industries across the spectrum.

Oligopolization isn’t talked about enough given its impact. In the past 12 years, corporate profit margins have achieved new heights and, to the surprise of many (including me), stayed there. It’s surprising because economic theory would suggest fat margins draw competition and profits fall. This hasn’t been the case.

This is an important topic in today’s market environment because the big question hanging over the stock market is how much corporate earnings will decline in an economic slowdown.

Think about it in terms of the price-to-earnings (P/E) ratio, a commonly used valuation tool. The P (stock price) has come down a lot, but the E is taking longer to show its hand. Most companies are still reporting decent profits, but they are also warning of an uncertain outlook. Nevertheless, analyst estimates remain sticky.

I underestimated the power of consolidation during the good times so I’m watching with interest to see if it has an equally powerful effect in the bad times. If profit declines are less than expected, it will be partially due to the high level of industry concentration.

Of course, pricing power only goes so far in an economy where consumers’ purchasing power is diminished. Prices may keep up with inflation, but that may not be enough to offset decreases in volume.

It’s early days, but there’s been encouraging news in one of Canada’s oligopolies, grocery stores. Loblaw Cos. Inc. has reported such strong profits that it’s now taking heat for gouging customers who are struggling with food inflation. So next time you’re grumbling about the price of toothpaste, or the cost of internet access, keep in mind that what’s hammering your budget may be benefiting your portfolio.

by Scott Ronalds

We’re pleased to announce that Investor Specialist Chris Stephenson has been recognized as one of the country’s best financial advisors in the 2022 Report on Business ranking of Canada’s Top Wealth Advisors.

The list of top advisors was started last year through a partnership between The Globe and Mail and SHOOK Research, and seeks to identify “the most effective and successful financial advisors in the country.” The ranking is compiled based on SHOOK Research’s proprietary methodology and includes 150 advisors from coast to coast.

Chris joined Steadyhand in 2007 and works with our clients, providing advice on asset mix, portfolio construction and monitoring, and related investing issues.

The acknowledgement is a great accolade for Chris, as well as a recognition of the scope and quality of advice we offer our clients. As a reminder, investment advice is an integral part of our offering at Steadyhand (indeed, it’s where the name came from) and is included as part of our all-in fund fee.

The complete top advisor rankings are published in the November issue of Report on Business magazine and online at the ROB magazine website.

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by Scott Ronalds

There’s an old IKEA ad that I love. A woman is running out the door loaded with bags and yelling to her partner, “Start the car! Start the car!” Her thinking being that the cashier must’ve made a mistake ringing in the goods, so they better hit the road before someone figures it out. Now when I see a deal that’s too good to pass up, I utter those three words to my wife.

Are we at a “start the car!” moment in the markets? I’d say no. But it’s a decent sale, nonetheless.

Stocks in general are 20-30% cheaper than they were at the beginning of the year. If we accept that we’re never going to pick the market bottom, the numbers suggest it’s a good time to buy. Tom cited some stats in a recent article, courtesy of legendary investor Bill Miller: in the 15 instances since 1938 when the U.S. stock market (S&P 500 Index) was down at least 20%, you’d have made money over the next year on 11 out of 15 occasions if you invested at the -20% point (not the market bottom), with the average return being 16%. Going out to five years, the record was perfect, and the average annual return was 13% (all figures are in U.S. dollars).

When looked at this way, it’s a compelling time to be purchasing stocks if you’ve got a 5+ year time horizon. Sure, the sale may get even better, but the discount door could also be closing soon. If you’re looking to invest in quality businesses, there’s rarely a better time than when prices are down, expectations are low, and pessimism is high (a good contrarian indicator).

Without a doubt, it’s not an easy thing to do. Adding money to your portfolio when you’re staring down losses month after month takes a strong stomach. Or you may be in retirement and drawing on your portfolio, in which case buying is not an option (although rebalancing may be). It’s easy, too, to put together a list of reasons not to buy, with a pending recession and escalating war in Europe at the top.

But if you’re the type that likes a sale, you might want to think about warming up the car.

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by Scott Ronalds

The Canadian bond market is down 15% this year in what’s shaping up to be one of the worst calendar years ever for bond investors.

Yields have risen significantly which has led to sharp declines in bond prices across the maturity spectrum (reminder: when yields rise, prices fall, and vice versa). Indeed, the benchmark Government of Canada 10-year yield has climbed from 1.4% at the beginning of the year to 3.6% today. Just two years ago, the yield was 0.5%.

Bond investors aren’t used to these types of price declines. For almost 40 years, interest rates have trended downwards, providing a nice tailwind for returns (in the form of capital gains). But that was then, and this is now.

There is a benefit to rising rates, however. The cost of borrowing has risen, meaning companies and governments issuing new bonds must offer higher interest payments to lenders (i.e., bond investors). Bond portfolios are thus able to generate a higher income stream. In the case of our Income Fund, this has enabled us to increase its quarterly distribution, from $0.045/unit to $0.06/unit.* It’s the first time in six years that we’ve been able to do so. (Note: we’re not yet in a position to increase the Founders Fund’s distribution, as bonds comprise a smaller portion of the fund.)

Going forward, an additional benefit of this higher income stream is that it will better cushion any further declines in bond prices if interest rates climb higher. The pre-fee yield on the Income Fund is now 4.4% (as of October 21), which is considerably more attractive than the 2.3% that it was yielding at the beginning of the year.

A lot of the pain associated with rising rates has already been realized by bond investors at this point and the picture is more positive today. We note in our latest Outlook:

The risk versus return trade-off for bonds has improved but returns are likely to come with higher volatility than investors have been accustomed to as yields react to changes in inflation and central bank activity. Over the next five years, we expect bonds to return between 3-5% per year, which translates to a 15-25% cumulative return.

To be sure, we’re in a better place than we were when borrowing costs were at all-time lows just a few quarters ago. Some solace, at least, for bond investors in a year many would like to forget.

*The December distribution for the Income Fund is typically higher, as it includes any stock dividends, interest income, and capital gains that have accrued in the portfolio but haven’t yet been distributed.

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by Scott Ronalds

Last week we hosted a webinar on estate planning with subject experts Julia Chung (CEO and Senior Financial Planner at Spring Planning) and Lucy Main (Partner and Co-Chair of the Wills, Trusts and Estates Practice Group at WeirFoulds LLP).

The event, which was part of our Steadyhand Café series where we discuss important and timely topics of interest to investors, focused on some of the key things to consider when making your estate plan. Julia and Lucy addressed a number of topics and provided tips and insights on wills, executors, powers of attorney, family dynamics, and tax planning. You can watch the session in its entirety below.

by Tom Bradley

One of the songs in my current rotation is Valerie June’s version of Look at Miss Ohio. There’s a line in the song that is just haunting: “I wanna do right but not right now.”

This sentiment applies to so many things in life, including investors who just don’t want to get on with the basics. Make sure you know the purpose of the money and have a plan. Save as much as you can, as early as you can. Know how you’re doing and what you’re paying. In short, take care of the things that are controllable before getting into the more interesting stuff such as picking stocks and funds, or online trading.

Why do investors charge ahead without first taking care of the basics? Why does something as important as their level of income in retirement get pushed so far down the priority list? I know life gets in the way, but there are other reasons.

For one, the topic is something most people know little about, which makes the task more daunting. Getting things in order can involve conflict, such as changing firms or firing an adviser. As for saving, there’s a very real short-term sacrifice for an unknowable long-term payoff.

If that isn’t enough, the markets right now have a lot of “not right now” going on. The common refrain from economists, strategists and analysts is not to buy yet. The long-term potential for stocks is good, but the short-term outlook is ugly. There are more interest rate hikes coming. Corporate profits are just starting to turn down. Europe will be in crisis for a while and China is no longer the world’s growth engine. In other words, there’s a convergence of risks and no need to hurry.

But this seemingly ubiquitous viewpoint needs additional context.

First, the recommendation to beware of the short term requires you to base your actions on something that is totally unpredictable. Nobody knows how much of the gloom is already factored into stock prices. An impassioned, reasoned argument has no more chance of predicting the market’s next move than throwing darts.

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Second, there’s a much more reliable indicator that says you should pause and at least look at what’s going on in the other direction. I’m referring to measures of investor sentiment that, as I’ve pointed out before, are telling us everyone knows the risks and are extremely bearish. Remember, investors’ mood is a contra-indicator, so that suggests investment seeds being sowed today are going into fertile ground.

And third, there’s research from Miller Value Partners, a firm started by legendary investor Bill Miller, that backs up the contrarian indicators. It looked at the 15 instances since 1938 when the S&P 500 was down at least 20%, which is the threshold that defines a bear market (the S&P 500 is currently down about 25% from its high).

Its calculations showed that if you’d invested at this point in the past, you’d have made money over the next year on 11 out of 15 occasions, with an average return of 16%. Going out to five years, the record was perfect, and the average annual return was 13%.

But what about a recession, you ask? There wasn’t a recession each time there was a bear market, but the numbers are actually better in cases when there was. “After entering a bear market, the market returned 19% on average over the next year when there’s a recession,” the report said. “Over the next three-five years, the market earned 12% to 14% per year on average.”

Of course, there are caveats. When there’s a recession “there is somewhat more downside in the short term (beyond the 20%) and it takes longer to bottom, but you can more than make up for it on the other side.”

I like this research because the starting point is already known — that is, when the market passes the 20% threshold. Most studies measure recovery returns from market bottoms, which is interesting, but not very useful. The bottom is only known years later.

At this point, you may want to reflect on the last line of Look at Miss Ohio: “I know all about it, so you don’t have to shout it. I’m gonna straighten it out somehow.”

I get it, so I’ll finish with a simple message. Don’t let the market noise prevent you from taking care of the basics. Make rational decisions that match your time frame, not a media headline. And just do the right things “right now.”

by Tom Bradley

If you’ve been a client for a while, you’re used to our name, but when we started in 2007, it wasn’t something that rolled off the tongue (even mine). We picked it because we believe that to achieve good long-term returns, not only must our funds do well and our fees stay low, but our clients must do the right things.

Staying on plan is difficult at market cycle extremes when investors are scared (or euphoric), emotions are high, and mistakes come with big consequences. We’re at one of those times now. Markets are down significantly, and the headlines are anything but rosy.

I think we’ve lived up to our name when we’ve been tested previously, but it was never obvious we were doing the right things until months later. To provide a steady hand, there are a few disciplines we adhere to.

First, we use the word ‘when’, not ‘if’. We don’t hedge on this. By acknowledging that our funds will go down, we’re prepared to do our best work when it’s most needed.

We focus on buying businesses, not trading stocks. One of our core beliefs is that the short-term direction of the market (or a stock) can’t be predicted … ever. We understand economic trends and fads as well as anyone, but we don’t get caught up in them.

We focus on strong companies that make something we need. By owning businesses that we know will be around after a recession or crisis, we’re able to buy low when others hesitate. Sketchier companies provide better returns at certain times, but they don’t always survive the tough times.

Our starting point for assessing reward and risk is TODAY. We’re sensitive to our clients’ disappointment when recent returns are poor, but as investors we must have short memories. Future returns start now, not six months or a year ago. Being dogmatic about this means we often get excited about opportunities when our clients are least happy.

We never lose sight of the price we’re paying. Valuation is not the only determinant of how a security will perform, but it’s the most important one. And it’s a good risk management tool – i.e. it helps limit the damage when we do something stupid.

And finally, we do the opposite of what our hairdresser tells us to do. No knock on hairdressers, but the mood of investors is also a good risk check. If everyone is excited and optimistic, we know to be careful. When people swear they’ll never own another stock, we look for opportunities to do some buying.

Nobody knows when stocks will find a bottom and start to recover. It could be another 3 to 12 months, or it may have already started. What we know for sure is that most of the money will be made well before the current problems are resolved. So, our fund managers will continue to do the heavy lifting, buying quality companies on your behalf and selling when warranted.

Our biggest ask is that you stick to your plan. In doing so, if you need a steady hand, sounding board, or outlet for your frustration, lean on us.

I encourage you to read the rest of our Q3 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

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by Tom Bradley

It’s getting discouraging. The mid-year stock market rally is over, we’re now back below the June lows, and it feels like it’s going lower. At least, that’s what I hear in almost every investment presentation I watch. Phrases such as “stocks have further to go” and “a recession is inevitable” roll off tongues as easily as talking about the weather.

Whether you agree with this sentiment or not, it’s a hard time to make investment decisions. The noise is high, emotions are higher and recent losses are hard to ignore. In this context, here are a few thoughts that may help balance the commentary and lower the temperature.

First of all, it’s important to understand that the media’s negative bias gets even more negative in bear markets. Economists with the gloomiest forecasts get the most attention, as do companies that miss on quarterly earnings. It’s harder to find the good news and opportunities. Reports of companies doing well are buried or completely ignored.

In bear markets, predictions tend to be bold and confident, even though the situation is rapidly changing, and the quality of information is poor. Everyone has a view or statistic to show how overvalued the market is. The late economist Peter Bernstein said market bottoms (and tops) are defined by a “switch from doubt to certainty.”

Comparisons with other cycles are also common. They’re a favourite pastime of economists and commentators, but are of little use. I heard a portfolio manager recently say, “The only people who pick bottoms are liars.”

There’s another bias to keep in mind. It’s a positive one and involves anchoring on a stock’s previous high. The high price is viewed as being the value of the company, even if it was reached at a time of near-zero interest rates, extreme speculation and above-average valuations. In other words, a stock isn’t necessarily cheap because it’s down 30% from its 2021 high.

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There are other numbers to be careful of. Last week, a major brokerage firm lowered the price-to-earnings multiple (P/E) used in its market forecast. I’m sure higher interest rates are a factor, but the thinking is flawed. Putting a low multiple on low earnings is overdoing it.

Most assuredly, corporate profits — the denominator in a P/E — will go down in a weak economy, possibly by a lot, but the appropriate multiple on those depressed earnings is higher, not lower. Cyclical stocks, in particular, will carry multiples well above their historical range when they start to rebound.

In a similar vein, investors tend to reduce their return expectations after significant declines, which runs counter to what’s happening inside their portfolio. Potential returns are increasing because prices drop more than the value of the underlying companies.

Remember, stocks are valued on their expected earnings and dividends over the next 20 years or more. In a discounted cash-flow calculation, a commonly used valuation tool, the first few quarters, even years, have a small impact on the final value.

Discouraging news and red ink always push sentiment indicators into bearish territory. The AAII Investor Sentiment Survey indicator, which measures how individual investors in the United States are feeling, currently shows 61% of investors are bearish compared to the historical average of 31%. Only 20% are bullish compared to the average of 38%.

This contrarian indicator has shifted decisively from greed and speculation in 2021 to fear and frustration in 2022. Warren Buffett is no doubt doing some buying.

Most investors, however, don’t follow Buffett’s lead. They hang in with the stocks they own, but don’t do any buying. They say: “I’m not doing anything. I’m holding off until things settle down.” Unfortunately, waiting for certainty means registered retirement savings plan contributions get delayed, bonus cheques sit in the chequing account too long and opportunities to average down are missed.

Yes, procrastinating beats selling out, but rebalancing is even better. A few small purchases will enable a portfolio to go up with as much or more invested in stocks (percentage wise) than it went down with.

At times like these, the people who are gloating at dinner parties are the ones who saw it all coming and sold their stocks. The question to ask them is when are they getting back in? It’s the hardest investment decision there is, and it’s why bailing out of the market tends to result in short-term peace and long-term pain.

by Scott Ronalds

Estate planning can be a daunting task, yet it’s hugely important. You’ve worked hard to build your wealth and standard of living and owe it to yourself to make sure your wishes are fulfilled both before and after you pass.

Wills, executors, powers of attorney, insurance, and probate fees often come to mind when the topic is broached. But estate planning goes deeper, covering issues such as family dynamics (marriage breakdowns, blended families, cottages), gifting, and tax planning, among others.

Join our host David Toyne and subject experts Lucy Main (Partner at WeirFoulds LLP) and Julia Chung (CEO of Spring Planning) as they discuss the ins and outs of estate planning in plain English, while also offering valuable tips and insights.

The webinar is the next in our Steadyhand Café series and will take place on Wednesday, October 12, at 10:00am PT; 1:00pm ET. Both clients and non-clients are welcome to attend. We anticipate this will be a popular event so register today!

(Note: if you register but are unable to attend, a recording will be made available in the days following the session.)

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by Scott Ronalds

At Steadyhand, investing alongside our clients—or eating our own cooking—is one of our key business tenets. We believe there’s no better way to prove a commitment to our investment philosophy and business approach, and ultimately our clients, than to put our money where our mouth is.

We take it a step further by publishing every year the firm’s co-investment levels, which show how much of our personal assets we have invested in our funds. To the best of our knowledge, we’re the only firm in Canada that does this.

The latest figures are in and we can report that every employee continues to have a significant portion of their financial assets invested alongside our clients: on average, the team has 91% of our financial assets invested in the Steadyhand funds (as of June 30th). In dollar terms, our employees and families have $37.3 million invested in our funds.

These numbers are worth highlighting because they mean our interests are well aligned—we’re experiencing the same fund performance, client reporting, and fees that you are. Yes, we receive no “insider perks” when it comes to costs. We pay the same fees you pay and enjoy the same discount program.

In other industries, the practice of using one’s own products or services to live the client experience firsthand has come to be known as dogfooding (slang for eating your own dog food, or cooking). Not exactly an endearing term. Nonetheless, if the phrase were to catch on in our business, you can be sure there will always be a big bag of Purina in the office kitchen.

Note: For a more thorough overview of co-investment and why it’s important, see our piece Showing you the money.

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by Tom Bradley

I am in New York this week and keeping an eye out for the Sign Guy. The dudewithsign stands on a street corner in SoHo holding up a cardboard sign with messages that are funny, poignant and sometimes biting, which explains his eight million followers on Instagram.

Some of my favourites are: It’s not self-checkout if I need help every time; Drowning your salad in Ranch doesn’t count as healthy; Make the Close-Door button on elevators work; and, You can buy crypto without telling everyone.

I wonder what he would say if he focused solely on investing. Here are a few possibilities.

You can’t predict the market ... ever. Really: No matter how confident and persuasive somebody is, don’t be fooled. They have no clue where the market will be in a month or a year. Asking is a waste of time and basing an investment strategy on the answer is lunacy.

Last year’s return is a good predictor ... of last year’s return: “Past returns are not an indicator of future returns.” There’s a reason investment companies put this warning on their performance numbers. Going forward, markets will be different, as will the strategies that work best.

If your cab driver is recommending a stock, it’s time to be careful: The best investment reality check is investor sentiment, or the mood of investors. No knock on your cabdriver, but there is a lot of good news already factored into stock prices if everyone is excited and bullish. The tip may prove to be right, but, generally, high expectations and euphoria lead to disappointment. Of course, the opposite is also true.

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If you’re absolutely certain, you’re missing something: You’ve undoubtedly met people who tell you they’ve found a sure thing. I think of something Francois Sicart, the former chair of Tocqueville Asset Management, said when I hear someone say that: “I never invest in a situation in which I cannot lose money.” He explained: “Win-win situations simply do not exist in the investment world ... if the buyer of an investment is guaranteed not to lose, the seller must be guaranteed not to win.”

If it’s on your newsfeed, you’re the last to know: You’re kidding yourself if you think you have an edge over other investors because of something you read. The market is an amazing processor of information. If it’s in the newspaper or on your phone, it’s already factored into stock prices. Remember: You’re reading September 2022 news. Mr. Market is reading March 2024.

If your adviser squirms when you ask about fees, you’re paying too much: If you look up the word “opaque” in the dictionary, the Canadian investment industry is listed. Despite efforts by securities regulators, many investment firms make it nearly impossible to figure out what you’re paying to have your money managed. The answer to a question about fees should come easily, be understandable and include everything. If it doesn’t, ask again.

You’ll never get lost if you don’t know where you’re going: Every dollar you invest must have a clear purpose: retirement, kids’ education, vacation home. Different goals and time frames require different portfolios and measures of success.

If buying when stocks are down was easy, everyone would do it: In bear markets, it’s great that stock prices and earnings multiples are down, but there’s a reason. The news will be universally bad and the outlook even worse. My former partner Bob Hager used to say his best trades were the ones when his hand was trembling as he handed the trader a buy order.

The bank cares about the bottom line ... just not yours: I once asked an investment banker if a product he wanted our firm to get involved with was good for clients. He hesitated. Finally, he said, “It will sell.” Be assured, every product you’re pitched is good for the bank. Only some are good for you and your situation.

There’s never been more uncertainty. NOT: It feels like there is more uncertainty than usual when stocks are gyrating and the market is dropping. There’s not. The variables that drive stock prices are no more uncertain than when markets are steadily rising. The only thing that’s changed is investors’ emotions and how they process the variables.

If I ask again what the market is going to do, shoot me: The dudewithsign could hammer at this theme every week. It seems to be the hardest lesson for investors to learn.

by Scott Ronalds

Buy low, sell high. Four words that epitomize good investing. If you can adhere to this strategy, you’re sure to do well over time.

But what about sell low, buy low?

We’re at a place in the market cycle where most investors are looking at negative returns over the past several months. Indeed, major stock markets are down 10% to 20% from their highs. And bonds are down double digits, too. Disciplined investors know that now isn’t the time to be selling or shaking up their plan.

There is an exception, however. If you’re making a lateral move—selling a stock that’s down to buy a more attractive stock that’s also down, for example—it can make good sense to ‘sell low, buy low’. The same applies to a fund or ETF. You may be upping the quality and return potential of your portfolio by moving on from an unfavourable holding and investing the proceeds in a better investment that’s on sale, so to speak.

Our managers have done some of this in 2022. They’ve sold certain investments that have lost their appeal due to a weaker outlook or worsening fundamentals and have invested the proceeds in enticing companies that were previously deemed too expensive but have now become more attractively valued. Examples include:

• selling Dassault Systèmes and buying Dolby Laboratories (Global Equity Fund)

• selling Philips and buying Zoetis (Equity Fund)

• selling Winpak and buying Aritzia (Small-Cap Fund)

• selling ITT and buying Viscofan (Global Small-Cap Fund)

We’re also running into more scenarios where investors are wary of transferring their portfolio to Steadyhand because they’re in a loss position with some of their current holdings. It’s rightfully engrained in them not to sell low. But there are times to remember the exception to the rule. If you’re not happy with the returns, service, fees, or approach of your current provider, it’s probably time to move on, be it to Steadyhand or another firm.

And importantly, because our funds haven’t been immune to the broad decline in stocks and bonds this year, you’d be selling low, buying low. They may not be the four sweetest words in investing, but they’re far from the worst.

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by Tom Bradley

We’ve had a week to reflect on the Jackson Hole Jolt. I’m referring to United States Federal Reserve chair Jerome Powell’s short speech on Aug. 26 at the annual Economic Policy Symposium in Wyoming. In it, he reaffirmed that getting inflation under control was the Fed’s top priority and the effort is “likely to require a sustained period of below-trend growth” and may result in a “softening of labour market conditions.”

His words were consistent with what he and other central bankers have been saying for a while. They need to get inflation back to a reasonable level for there to be sustainable and predictable economic growth. And it must be addressed now before inflationary expectations get entrenched.

It was a nine-minute speech telegraphing more of the same. Right? Well, apparently not. Stock markets took a dive, finishing the day down two to three per cent. Business television has talked about nothing else since and markets have fallen further this week.

Investors (and homeowners) are addicted to ultra-low interest rates. They’ve been spoiled and want them back. The July inflation numbers gave them some hope. There were hints the consumer price index (CPI) was finding a top. Certain components of the CPI declined, such as gas prices, and many commodities are well down from their highs earlier this year.

Traders took this news to heart and tried to get ahead of a potential trend reversal, or what commentators are calling a pivot. Unfortunately for them, Powell threw cold water on the strategy. Inflation is going to take longer to tame and there will be consequences.

What is an investor to do? Before we go there, let’s look at whether the market got it right. Was the speech bad news or good?

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Those of you who view investing as a long-term endeavour are looking for monetary policy that creates a stable and supportive platform for economic growth and rising corporate profits. You care about 10-, 20- or even 30-year returns, not 10 days.

“Without price stability, the economy does not work for anyone,” Powell said. “In particular, without price stability, we will not achieve a sustained period of strong labour market conditions that benefit all. The burdens of high inflation fall heaviest on those who are least able to bear them.”

So before you buy into traders’ knee-jerk reaction, you need to first answer the question: Do I want the Fed to promote lower rates in the short term and risk much higher rates years from now (if inflation stays high), or would I rather take some pain now to set the table for better returns later?

If you voted for pain now, returns later, I’ve got good news for you: it might be as good a time as any to take that pain. Let me explain.

Economies go in cycles. Long periods of growth are followed by shorter periods of weakness, even contraction. One creates the conditions for the other.

Slowdowns serve a purpose. They cleanse the system by shaking out excesses and undue speculation, resetting labour markets and supply chains, trimming corporate and government fat, and promoting innovation.

Now is a good time to do some cleanup. We’ve had a long upcycle with plenty of risk-taking and speculation. The labour market is tight, with more job vacancies than people to fill them. Supply chains can’t keep up with demand. And the all-important U.S. consumer is in good financial shape, as are the banks.

If the Fed chair can’t take the risk of a recession now, when can he?

Volatile markets go with the territory these days, whether it’s up or down. The urgency and hyperbole around news events is approaching the absurd.

For investors with a time frame of 10 years or more, however, there isn’t anything to do on days such as last Friday, other than move onto the sports section. These types of reactions, even if they last a few weeks, don’t even show up on a chart months later.

I’ll repeat what I’ve said previously: It’s business as usual for investors who know the purpose of the money and have a plan. Stick to your savings schedule. Use registered retirement savings plan and tax-free savings plan contributions to rebalance your portfolio to its intended mix of cash, bonds and stocks.

Whatever you do, don’t blink. Noisy declines are a time to average down, not bail out.

by Tom Bradley

Baillie Gifford is a Scottish investment manager that has been at the top of the performance heap for many years. They’re a growth manager that rode the rise of tech stocks as well as anyone. For instance, they were an early and large investor in Tesla.

Not surprisingly, their returns have been lagging recently as high growth companies have seen their stocks get crushed, especially younger businesses that have yet to generate a profit. And given their past success, the firm is now an easy target for criticism.

What prompted me to write about Baillie Gifford, a firm I’ve met on a few occasions, is an article in The Financial Times. The piece derided the company for offering lame excuses for their recent underperformance. To emphasize the point, the writer included an excerpt from the company.

As Chair and Co-founder of a company that didn’t own enough Teslas over the last five years, it would’ve been easy for me to pile on with the FT. "Finally, growth managers like Baillie Gifford have come back to earth. Yay!" But the BG commentary included in the article was thoughtful, well-written and well aligned with what we preach at Steadyhand. I wish I’d written it myself. Here it is.

"It is easier to be long-term when things are going well. It is during periods of weakness that conviction is truly tested. Bear markets cause emotions to bubble to the surface which urge one to act. It can be cathartic to do something, but decision making under stress increases the chances of errors. Stress also influences our attitude towards risk and our ability to assess probabilities. Humans are prone to the affect heuristic — the tendency to take mental shortcuts when emotions are running high. Such quick decision-making conferred evolutionary advantages at earlier points in human history. But careful decision-making trumps speed when dealing with complex-adaptive systems like the stock market."

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by Salman Ahmed

This has been a busy news year: war, inflation, and politics have dominated. Lost in those headlines is a major regulatory proposal that has been making waves in the investment industry. The proposition has a lot in it, but the most impactful parts call for enhancing the fee disclosure Canadians receive from their investment providers and expanding the reporting on insurance investments.

The enhancements make a ton of sense. In our comments to the regulators, we’ve welcomed the proposal. The new disclosure requirements would arm investors with information they need to judge the value of the service they receive. Unfortunately, this type of disclosure is rare. Steadyhand clients are unique in Canada in that they’ve always seen the total fees they pay us in dollar and percentage terms every quarter on their account statement. We’re not required to do it, but we believe it’s the right thing to do.

Under the current rules, investment providers are only required to disclose fees paid for advice, which can be just half the total fees charged, as this figure excludes product costs (e.g., the investment management fees for mutual funds, ETFs or other investment products). Even this incomplete disclosure is required just annually and was forced on the industry in 2016. In our view, the proposal gives investors the information they should’ve already been receiving: the total explicit costs of investing.

Most other investment providers that submitted comments to the regulators (see here) disagree with our stance and are pushing back against the proposed changes. Their reasons are predictable: they claim the disclosure would confuse not simplify, they need more time to implement (yet they have all the time in the world when rolling out expensive investment products), and it’s complicated to build these statements (I’m sorry, but how is this even an excuse?).

In fighting the enhancements, the investment industry is missing a golden opportunity to improve the investor experience. Instead, they’ve revealed what they care about most: themselves, not their clients.

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by Tom Bradley

I want to take you into the realm of science fiction. You’re getting in a time machine and beaming yourself forward three years to a rainy afternoon in August 2025. You have your account statements spread out on the kitchen table and are reviewing your investments (time travel isn’t always exciting).

Now the question: What would you have to have done in the preceding three years to please the future you? This is science fiction, so I’m going to go inside your head to see what’s putting a smile on your face.

Roadmap: The bad markets in the first half of 2022 made me look at what I was doing. It forced me to clarify what the money was for and when I’d need it. From there, my adviser helped me determine an asset mix for my portfolio that fit with my goals, time frame and risk tolerance. It included all my accounts: guaranteed investment certificates, registered retirement savings plan (RRSP), tax-free savings account (TFSA) and trading account. I can’t believe I waited so long to have this framework for making decisions about my money.

More reason, less reaction: I stopped listening to what my golf buddy was telling me. He’d recommended cannabis, ether and Peloton Interactive Inc., all at the peak of their popularity. I finally realized his portfolio wasn’t doing that well. It seems to have cured me of my fear of missing out.

Regular contributions: Instead of managing from golf game to golf game, I set up a pre-authorized monthly contribution. It’s automatic so I don’t obsess over every purchase. It’s been brilliant, and, come to think of it, I don’t even notice the money coming out of my bank account anymore.

Fun money:I still have a small trading account. My “moonshot” fund, as I call it, is factored into my overall stock allocation. I was doing well for a while, but gave back most of my gains when the market tanked. It’s been a cheap and fun education.

Less but better: It’s true what they say about looking at your investments too much. We react twice as much to bad news as we do good news. Given that there are almost as many down days as up, I was putting myself through the ringer even though I was doing OK. I mostly own funds, so I tried to limit myself to checking my main account once a month. Now, I don’t even do that. I just spend a few minutes every quarter reviewing my account statement.

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Don’t blink: It got pretty ugly there for a while. My portfolio was down a lot, and everyone was talking about a recession. But I didn’t need the money (not likely until 2040), so I kept telling myself that lower prices meant buying more shares with my contributions.

Against the grain: I finally did what I promised myself I would. I had read for years about buying when stocks are down and everyone is scared, but had never been able to do it. I used my bonus in 2022 to add to my portfolio when the markets were looking ugly. I actually did it twice. The first purchase was about two months and 10 per cent too early. The second was near the bottom. Both worked out well.

Lingering problems: I procrastinated for years to deal with some nagging issues. I wasn’t paying myself enough (i.e., saving) and was paying my adviser too much (for one call a year at RRSP time). And I was too heavily invested in my former favourites: gold, real estate investment trusts, cannabis and the Ark Innovation Fund. Having a plan forced me to deal with them.

Work in progress: I promised my adviser I’d read a Warren Buffett book, but I haven’t finished it yet. I must say though, the first 200 pages have already changed how I think about investing. Wow.

Hopefully, your review will be this positive in three years. If it is, the self-congratulations should be about process and routine, not short-term results. That’s because being a disciplined investor is a challenge. The task goes on longer than anything you’ll ever do. There are lots of distractions to take you off course, and, of course, the outcome is always uncertain.

Having a disciplined process helps you deal with the short-term noise (and friendly tips) and focus on the things you can control: how much you’re saving; your long-term asset mix; and what you’re paying to invest. These things are more important than being a brilliant stock picker or market timer, and way easier.

by Tom Bradley

We’re reporting back. In a post on June 23rd, we nudged our readers and clients to vote for Steadyhand in a poll that the Globe & Mail’s personal finance columnist Rob Carrick was doing. The question was: Who are Canada’s most trusted financial brands?

Rob announced the results recently and we are grateful to be among the few firms listed. In his informal poll, TD Bank and RBC topped the list of most trusted financial firms, with Wealthsimple and EQ Bank scoring well with younger voters. Then there was a list of smaller firms that garnered votes. Steadyhand was mentioned along with two investment firms we hold in high regard, Mawer Investment Management and Vanguard.

Thank you to everyone who participated in Rob’s survey. Your continued confidence in Steadyhand is enormously appreciated. We are a small firm serving roughly 4,000 clients across five provinces (with thousands more readers of our blog). When we started designing Steadyhand 16 years ago, we accepted that we couldn’t buy clients’ trust, nor could we ask for it. We had to earn it over time.

We set out to do that by developing a business model that was client friendly. With every decision we made, we asked the question: Is it good for our clients? As a result, we are a firm that does a whole bunch of big and little things that we hope will engender trust ... over time. Here’s a partial list.

• We are fiercely independent: 14 of our 19 employees are owners.

• 92% of our team’s financial assets are invested alongside our clients in the Steadyhand funds. We call it ‘co-investment’ and publish the updated number every September.

• We don’t pay commissions or bonuses based on sales targets and asset gathering.

• We consistently answer our phones with diligence and enthusiasm, whether markets are good or bad.

• We charge low fees that get lower with time and as household assets grow. There are no free iPads to attract new clients; our longstanding clients always get the best deal.

• Fees are reported on each quarterly statement, in percentage and dollar terms. Most of our clients pay lower fees than our published rates.

• Clients’ investment returns (after-fee) are reported each quarter.

• We use as little industry jargon as we can.

• We explain openly and thoroughly why we change fund managers.

• If it's better for a client, we regularly recommend placing short-term cash elsewhere to earn a higher return.

• If we’re bearish, we say so (even if it’s bad for marketing).

• We’re outspoken about industry practices and products that are not in the best interests of investors.

• We don’t offer a new product for every market fad.

• We’ve never been fined by our regulators.

These are some of the reasons that Morningstar, a global research firm, called Steadyhand the “Posterchild of a good steward”. If we’re missing something that resonates with you, we’d love to hear it.

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by Salman Ahmed

Bonds have gone through the WORST calendar year start in history. With interest rates continuing to go up, investors are asking themselves if they should be ditching the bonds in their portfolios.

The answer is no. In the video below, I walk through 3 reasons bonds still warrant a place in balanced portfolios.

by Neil Jensen

As you may have heard, Tom is being inducted into the Investment Industry Hall of Fame this year. Founded in 2013, the Hall honours “excellence, integrity and leadership in Canada’s investment industry”, and includes 58 members (including this year’s three inductees).

Back in the spring, Steadyhand celebrated its 15-year anniversary, and I had some time to reflect on our journey. You wouldn’t know it from his youthful good looks, but Tom is 13 years older than me, and co-founded Steadyhand at about the same stage in life that I’m at now (mid-50’s).

At a time in their lives when many are considering retirement or at least thinking about winding down their careers, Tom took the personal, professional, and financial risk of starting a new firm. And he did it with all the passion and investor-first mentality that’s defined his career.

Tom has a storied resume with close to 40 years of experience in the business, and stops at such venerable firms as Richardson Greenshields and Phillips, Hager & North. He’s always been a gifted speaker and writer, and has used these skills over the past four decades to help make Canadians better investors.

Tom’s induction into the Hall is a great recognition of his accomplishments as an investor and firm-builder, but equally impressive, in my view, are his achievements as a person. From his philanthropic contributions to serving on several boards (including the Vancouver Foundation and UBC Investment Management Trust), Tom has always been generous with his time and resources.

What makes the induction even more special to Tom is that many of his mentors are also members. Among them are Bob Hager (PH&N), Chuck Winograd (Richardson Greenshields) and Bob Krembil (Trimark), three people who played an important role in shaping his career and values.

Tom has also been a mentor to me over these past 15 years. He’s been that proverbial steady hand for our business and clients, and has taught me a lot. I could go on, but I’ll draw on one of the many lessons I’ve learned from him here — don’t lose your audience by rambling.

Congratulations my friend, this is well deserved.

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by Tom Bradley

These are challenging times for investors. Interest rates are up, housing prices are down, inflation is on the march and there’s lots of talk about a recession. Your advisor’s response to this? “It’s all baked into the cake.”

Well, I’m a baker and know that what goes into a cake, and how much, is critical. I can be reasonably certain of the outcome by following the recipe and measuring carefully. But baking in the investment context is very different.

Before I go there, let’s define what your advisor means. “Baked into the cake” refers to the fact that investors in aggregate (the market) are aware of the gloomy outlook and have already factored it into stock prices. For example, Air Canada is down 30% from a year ago in anticipation of fuel-cost pressures and labour shortages. Amazon is down 20% because investors now assume bricks and mortar stores are here to stay, and the company will have to fight harder for market share.

We never know for sure what’s being anticipated, but there are tell-tale signs. If an issue or event is the lead story on the evening news or is dominating your newsfeed, you can be assured stock prices already reflect it. If a stock goes up after the company reports poor earnings, it’s a good indication that investors were expecting bad news.

To be clear, when something is said to be baked in, it doesn’t mean stocks won’t react if the negative scenario plays out. The market weighs the odds of something happening but doesn’t usually go all in. It considers all possible outcomes.

There are times, however, when the market is more certain than it should be. It assumes that everything will work out great, or conversely, there’s no way out of the mess. When too much is baked into the cake, there are usually wonderful opportunities for those who are willing to look in the other direction.

But let’s put the extremes aside and assume the market is all wise and forward looking. We need to fine tune our definition of risk. The stuff we’re reading about today is not what will take portfolios lower in the coming months, it’s the events and forces that are considered improbable or aren’t being talked about. Let’s look at some scenarios that aren’t being baked in.

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We know investors are adjusting to inflation and a slower economy. These issues are in the headlines and every investment commentary. It would appear, however, they aren’t factoring in an extended period of high single-digit inflation. At least, the wise old bond market isn’t. Yields are still well below current inflation which means something has to give. Negative real interest rates of 4% to 5% (adjusting for inflation) are unsustainable.

Neither are investors looking for consumer spending to collapse. They’re relying on the fact that the U.S. consumer is in good financial shape and employment is strong.

Indeed, the tight labour market has been a shining light amongst all the negatives, although this too may be changing with increasing job cuts in the technology sector. Certainly, a serious deterioration of the job market is not yet factored into many economic forecasts.

Something else that isn’t fully baked in is stagflation. This economic term goes back to the 1970s and refers to periods when there’s slow (or no) growth and high inflation. This dreary combination is being talked about, but the assumption is still that a slowdown will take the pressure off supply chains and lessen demand for commodities.

The discussion wouldn’t be complete without considering the positives. At times like this, important factors that can take your portfolio higher are often obscured by the front-page risks. They get dropped from the analysis and are no longer baked in.

For instance, while we obsess about recession here, the world economy continues to grow, partially fuelled by an expanding middle class in India and China. Innovators keep doing amazing things and have plenty of open field ahead of them in healthcare, infrastructure and alternative energy. The adoption of established technologies is changing how businesses and governments are run.

And while it’s unlikely we’ll have peace in Ukraine any time soon, any accommodation that normalizes the flow of energy and agricultural commodities would be a pleasant surprise for the market.

There’s no set recipe for what’s baked into the investment cake. We never know for sure if an ingredient has been partially, fully, or more-than-fully added. We just have to keep asking the question.

by Tom Bradley

You may have heard investment managers talk about “high grading” a portfolio. They’re likely referring to the idea that there’s an opportunity to increase the average quality of your holdings in a market where all stocks are down. The implication is that the market isn’t differentiating enough between the strong and weak and, as a result, there’s little or no valuation gap between high-quality companies and their weaker brethren.

High grading has an intuitive appeal. Leading companies that have strong balance sheets can maintain their profitability in a slower economy, and are able to be countercyclical when others can’t. They can raise money at reasonable rates, even if they don’t need it immediately. They can hire great people when bonuses are down and stock options are worth less. They can expand when engineering and building costs are lower and less disruptive to their business.

And, like a good investor, they can provide liquidity when others desperately need it. That means buying a competitor when few if any bidders are at the table, or acquiring products, facilities and customers for pennies on the dollar.

A great way to build wealth is to ride what I call the “super compounders,” companies that come out of each down cycle stronger than they went in. In Canada, I’m talking about the likes of Premium Brands Holdings, Ritchie Brothers Auctioneers, Constellation Software, Canadian National Railway and Franco-Nevada.

The list from south of the border is much longer and would include Visa, Danaher, Coca-Cola, Procter & Gamble, tech giants such as Apple, Alphabet and Microsoft, and, of course, Warren Buffett’s company, Berkshire Hathaway.

There are definitely times when quality is on sale and I like the strong-get-stronger strategy, but the execution is more nuanced than it sounds. The price of highly profitable, well-financed companies may be down, but not by as much as the speculative stocks that got crushed. This year, for instance, companies that are struggling to achieve profitability and/or highly levered are down far more than the overall market.

Also, success is highly dependent on the length and depth of the economic malaise. Since the financial crisis in 2008, setbacks have been brief, with the United States Federal Reserve and other central banks coming to the rescue with lower interest rates. The economic declines were modest, and investors knew the Fed had their back.

In short and shallow slowdowns, everyone lives to fight another day and the biggest moves off the bottom are stocks that were left for dead. The quality stocks that held up better also rebound, but don’t have as much recovery potential.

It would appear the economy is now in decline. If this slowdown is severe and drags out (that is, a recession), the weaker players may not survive, and those that do will be at the mercy of investors when they need to recapitalize. If they can issue more debt, the interest rate will be higher, and any equity raises will be at lower prices, which will cause severe dilution for existing shareholders.

To build a portfolio of leading companies, there are things you must do. You need to watch that their greatness is sustainable (and hopefully expandable), be careful you’re not paying too much, and be prepared to stay patient when other companies are in vogue and roar ahead.

At this stage of the current cycle, investing in the strongest companies may maximize your returns over the next few years, but there are two huge benefits even if it doesn’t.

First, the risk of permanent capital loss diminishes when paying a reasonable price for companies that provide something that’s sure to be needed in five years and are likely to have a stronger competitive position after the slowdown. Some purchases may prove to be early, but you know you own a valuable asset.

Second, it helps you deal with the emotion and risk aversion that get in the way of making sound investment decisions. Like everyone, you want to take advantage of periods of market weakness, but it’s extremely difficult to do when your portfolio is down and the economic outlook is grim. Buying bulletproof companies makes it a little easier to do what you promised yourself you would do, namely, buy low.

This behavioural crutch may not sound like much, but consider that most investors struggle with being countercyclical. They can’t bring themselves to buy when stocks are on sale.

If you’re wavering, perhaps buying strong companies will make you a little stronger in more ways than one.

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By Scott Ronalds

There’s a lot going on in the world. And there are a lot of sources where you can get your news and views, including podcasts. The format, first known as “audioblogs”, has gained many fans over the last decade. Count us among them.

There are some great shows in the space, from quick daily news bites to long form discussions and stories. If you’re looking for a recommendation, allow us. I canvassed the office and came up with a diverse list. I also learned a thing or two about my colleagues (it’s surprising what one’s listening habits reveal). The shows below may not all be your cup of tea, but there’s sure to be something that tickles your ear buds.

News

The Daily: A roundup of the biggest news stories from the New York Times, twenty minutes a day, five days a week.

The Economist: The popular magazine has a few different shows on current affairs, business and finance, science and technology, and global issues. All are worth a listen.

FT Podcasts: The British newspaper offers a lineup of shows covering daily news, money, and politics. With charming accents, for the most part.

The Decibel: Daily news from the Globe and Mail.

The Documentary Podcast: Documentaries from BBC News investigating global developments, issues and affairs.

Business, Culture, Opinions, and Stories

How I Built This with Guy Raz: A podcast about innovators, entrepreneurs, idealists, and their stories about the movements they built.

The Herle Burly: Back-room strategist and pollster, David Herle, is joined by journalists, politicians, sports figures, musicians, and opinion leaders for a commotion of insights, arguments, and opinions.

Sway: An interview show hosted by Kara Swisher, “Silicon Valley’s most feared and well-liked journalist.” Swisher investigates power: who has it, who’s been denied it, and who dares to defy it.

Stuff You Should Know: Two Gen Xers talk about, well, stuff you should know – like the phenomena of supernovae, how ayahuasca works, the ins and outs of beekeeping, and the challenge of the Appalachian trail.

Business Wars: Nike vs. Adidas. Gucci vs. Louis Vuitton. McDonald’s vs. Burger King. Business Wars explores high-profile corporate rivalries and what drives their leaders, investors, and executives to new heights—or to ruin.

Second Life: Hillary Kerr spotlights and chats with successful women who've made major career changes—and fearlessly mastered the pivot.

Huberman Lab: Dr. Andrew Huberman, an American neuroscientist, discusses science and science-based tools for everyday life.

Under the Influence: Former adman Terry O’Reilly gives listeners a backstage pass into the hallways, boardrooms and recording studios of the ad industry.

Pivot: Kara Swisher and NYU Professor Scott Galloway offer unfiltered insights into the biggest stories in tech, business, and politics.

Book of Basketball 2.0: Bill Simmons uses commentary and interviews with players and top media members to determine how the NBA has evolved and where it’s headed.

Against the Rules: Renowned author Michael Lewis takes on interesting topics with a perspective all his own.

Ologies: Humorist and science correspondent Alie Ward asks smart people stupid questions and the answers might change your life.

For a Laugh

SmartLess: A widely popular weekly conversation hosted by actors Jason Bateman, Sean Hayes, and Will Arnett.

Conan O’Brien Needs a Friend: Unboundedly playful and free from FCC regulations, Conan O’Brien hangs out with the people he enjoys most.

The Infinite Monkey Cage: A witty, irreverent look at the world through scientists' eyes.

Of course, these 20 shows are just the tip of the iceberg in terms of the great content out there. If you’ve got a favourite you think we should know about, do tell. Happy listening.

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