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Martin Hubbes, chief investment officer, AGF Funds
Martin Hubbes, chief investment officer, AGF Funds

Earlier discussion

Martin Hubbes, chief investment officer of AGF Funds, took your questions Add to ...

September was supposed to be a brutal month for the stock market, and many investors chose to stay on the sidelines and wait it out. Well, here we are past the halfway mark of the month, and equities are still rising. Is this the right time to get in the market -- or could it be time to jump out? What should you be looking for?

1 . Do you think this is a bear market rally?

2. AGF manager Christine Hughes who runs a Canadian balanced fund, has been cautious on the market in recent years. She suggested in a interview earlier this year that there could be a very steep market collapse - maybe in 2010 - that could present a buying opportunity of a lifetime. What do you think?

Martin Hubbes: Thank you, Shirley, for your questions.

1. We do believe that over the next few years, economic growth will be challenged due to the deleveraging going on in the market economy. This, in turn, may very well translate into more muted returns for the equity markets. It also implies more volaility for the equity markets. Whether it is a bear market rally or not, history will tell us. At AGF, we continue to focus on the long term opportunities in all asset classes, regardless of where we are in the cycle. Given a muted economic environment, companies able to generate growth will garner a premium. We continue to seek out those companies, rather than make a call on the market.

2. Certainly if there is a steep market collapse, I would agree. We have to remember that there are always opportunities for investors. As I mentioned earlier, I would not disagree with Christine that markets continue to be challenging. However, timing them is a diffiicult thing. Therefore, my best advice is to focus on sound investments. Try to be as diversified across asset classes as possible, as well as geographies. This is the best way to deal with the continuing volatility and uncertainty. There is nothing wrong with a bit of caution in these markets. However, caution, should not be interpreted as holding excessive amounts of cash and not participating in other opportunities.

Thomas Lewis writes: From what we read the economy has started to rebound, albeit at a slower pace than originally anticipated. However, the market indices suggest that valuations have got ahead of the limited recovery. Is this a time to wait for a correction? If not, what sectors are particularly attractive in the early stages of the economic recovery?

Martin Hubbes: Thank you, Thomas. We are seeing a rebound in the markets due in large part due to the fact that we have staved off the imminent collapse of the financial system. As you noted, the pace of the recovery is still unclear and thus causes a challenge for investors.

Waiting for a correction is not what I would advise. Currently, people have focused on the more speculative side of the market and that is creating opportunities in more sustainable businesses.

I believe there are still opportunities in technology stocks, energy, as well as consumer oriented stocks. The key is not to overpay for expected future growth. For example, names that our fund hold include Cisco Systems, Research in Motion , Suncor, Encana, Metro and CVS Pharmacies. We think all these companies will yield long term returns and shouldn't be hurt too much if we get a correction.

M.B. Brill writes: Hi, I am about to completely overhaul my portfolio. I would like to invest solely in index etfs. I am in my mid 30's and have a high tolerance for risk. Could you please suggest the best asset allocation both by region and sector and give examples of index etfs with relatively low management fees which might fit within the parameters of your plan?

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