As Canadians face the ongoing trade dispute with their southern neighbours, diversification is the best mitigation against risk for investors facing uncertain times, according to Scott Blair.
The chief investment officer at Canadian Western Bank Wealth says having a portfolio that's diversified across different markets and asset classes is important.
Blair pointed to the performance of European stocks, some of which were up double digits throughout different markets when BIV spoke to him Wednesday, offsetting some of the struggles in North American markets this past week.
Blair said a prolonged trade war won’t be positive for Canada, bringing with it the possibility of a recession. Nevertheless, one of the most significant long-term impacts will be around market sentiment and investor confidence in the economy.
When people are confident, they spend their money – and when people are unsure of the playing field, they tend not to expand their investments, Blair said.
“Every day that this [trade dispute] is in the paper is another day this will sap business and consumer confidence,” he said.
Blair said whether this is a good time to invest in the market or not really depends on cash needs. Those with expenditures in six months might want to take their money out of the market and put it in cash. For those wanting to enter the market, it’s always a good time to invest if you’re investing for the long term, he said.
“It's a very difficult time. People tend to buy high and sell low, the opposite of what they should have done,” he said. “When the market's going down, people get less confident, they cash out – then they wait till the market's going back up, and then they turn around and invest their money.”
Blair said if one is investing for the next week, month or three months, anything can happen.
Panic selling is exacerbated by negative headlines, with some clients even surprised that their portfolios aren’t down, he said. Blair added having an adviser helps people stay invested, especially when corrections and bear markets drive down investments.
“You had 100 grand or a million dollars, now you're worth 10 per cent or 20 per cent less than you were. That's very difficult, but that is sort of the bargain that we make,” he said. “We invest in the stock market so that over time, if you want those good returns of six, eight, 10 per cent a year, you are going to have those drawdowns.”
