Plus: how to invest during them ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ The importance of emotionless investing Hi there, In this month’s letter, I want to talk a bit about missed opportunities — and what we can all learn from the markets this past year. Although Q2 was relatively flat in terms of performance (we’ll get into that below), it comes on the heels of two quarters of extraordinary returns. There have been plenty of ups and downs along the way, but overall the market is on an upswing. And the returns so far in Q3 have been strong — for those who stayed invested, at least. A lot of people were scared out by the volatility. Market swings are a natural part of investing. They're driven by uncertainty, changes in interest rates, fear, and greed. But if you look at history, over long periods of time the average stock market return is 4-5% more than the inflation rate. The last five years have highlighted that dynamic at warp speed. We've had some huge swings thanks to changes in economic outlook, policy, and investors' aversion to risk. But when you look at the entire period — even with the scary environments we saw at the start of the pandemic and in the first part of 2022 — returns for world stocks have been a little bit above average, at about 8%, and Canadian stocks are up about 7%. If you shorten the time frame and look only at the past year, world stocks have rallied by about 20%. According to the inflow data for Canadian investment funds, quite a few investors missed out on strong returns over the last year by selling or putting new savings into cash. (See the chart below.) Based on our data, however, many of our managed investing clients continued to invest — and experienced a significant increase in wealth over the last year as a result. If you’re in that group, congratulations. It means a lot to us to see you persevere through tough times. Q2 recap Other than the US stock market, most assets offered roughly zero returns in the second quarter. As a result, our portfolios were a bit over zero. Those with higher allocations to stocks (and US stocks) gained about 1.6%, while those with more bond-heavy allocations gained <1%. All of our portfolios remain positive year to date: the more stock-heavy portfolios are up a bit over 7%, while balanced portfolios returned in the 5% range. Over the past twelve months, our returns ranged from 7 to 14%. What’s next Last month I talked about how stock markets were pricing in a wide range of outcomes, and bond markets were pricing in rate cuts. We've seen economic conditions improve since then, as inflation declined significantly and unemployment stayed low. If inflation continues to decline without a spike in unemployment or a drop in economic growth, more positive returns may be on the way. But if inflation is stickier than expected, or the economy slows significantly, there may be more turbulence. Either way, our outlook is the same: over a longer horizon (five years or more), median returns are at 4-5% over inflation — pretty close to long-term averages. Before you go As many of you know, we host webinars on a variety of topics. (We’re doing one next week on Q3. See below for details.) In case you missed it, here’s a link to our webinar on Private Credit. In it, Sagard CIO Adam Vigna joins me to talk about Wealthsimple’s Private Credit offering, its role in a portfolio, and its long-term outlook. We also did one on cash that covers its role in your portfolio and how to use it as a tactical asset. But be prepared: it gets a little wonkish. I hope you’ll check them out. Ben Reeves Chief Investment Officer One way to help ensure market slides don’t make you miss out on market gains is to take the emotion out of investing. Auto deposits help you do that. Turn on auto deposits Your opinion matters I’ve been sending these updates more frequently lately, and I’d love to know if you’re finding them useful. Yes, useful Could be better Not for me Wealthsimple, 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Privacy Policy Unsubscribe Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. All information and commentary provided is for illustration purposes only and is not investment advice or recommendations. All investments involve risk. To get more info on our products, investment decisions, fee schedules, user testimonials, promos & more visit wsim.co/disclaimers. Indicated performance data are historical for the period indicated. Rates of return do not take into account any fees or tax payable. Past performance may not be repeated. Managed accounts are offered by Wealthsimple Inc., a registered portfolio manager in each province and territory of Canada. Self-directed investing is offered by Wealthsimple Investments Inc. (WSII). WSII is a member of the Canadian Investment Regulatory Organization (CIRO). Customer accounts held at WSII are protected by Canadian Investor Protection Fund (CIPF) within specified limits in the event WSII becomes insolvent. A brochure describing the nature and limits of coverage is available upon request or at CIPF. © 2024 Wealthsimple Technologies Inc.