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Linda Shick of Raymond James.The Globe and Mail

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Money manager Linda Shick has taken a more defensive position in her portfolios over the past year or so, taking cues from the central banks’ fight against stubbornly high inflation.

It started with selling off high-growth areas like technology and long-duration bonds in late 2021 when interest-rate increases appeared inevitable and holding more cash. Then, following last year’s bond meltdown amid the rapid interest rate hikes, she started buying mid-duration bonds.

“We were given the opportunity to buy fixed income, which we haven’t had in decades,” says Ms. Shick, a senior portfolio manager and senior wealth advisor with Family Wealth Counsel Advisory Group at Raymond James Ltd. in Toronto.

Ms. Shick, who manages about $226-million in assets for discretionary and non-discretionary clients with her business partner, David Angas, has remained relatively defensive. Her typical balanced portfolios of 70 per cent equities and 30 per cent bonds are now 63 per cent equities, 34 per cent bonds and 3 per cent cash, specifically in high-interest savings accounts.

Her balanced fund is down about 5 per cent for the 12 months ended Feb. 28 and has seen a compounded annual return of about 5 per cent over the past five years. Her performance is based on total returns and is net of fees.

The Globe and Mail spoke recently with Ms. Shick about her investing style and what she’s been buying and selling:

Describe your investing style.

We’re asset allocators. We design asset mixes based on our client’s needs and objectives at different points in their lives. We also do a lot of work on understanding their cash flow needs. We ensure that their cash flow is protected for at least two years because we don’t want to be in the position in which we’re raising cash during times like we’re in now when markets are experiencing a correction and are volatile. That cash flow is protected by income-producing assets in the portfolio, such as dividend-paying securities, maturing bonds or high-interest savings accounts, the latter of which are paying relatively high interest right now.

What’s your take on the current market environment?

The leading economic indicators are pointing to a recession; consumer confidence is starting to wane, [purchasing managers’ indexes] are down, and yield curves are inverted. It’s something we saw coming. It’s difficult for central bankers to control and get inflation down. It takes a long time. Historically, central bankers do overshoot. We think interest rates will be coming down – the question is when. We’re setting up for that with asset mix changes, including moving into more fixed-income and dividend-paying securities.

What have you been buying or adding?

We have been buying RBC Target Maturity Corporate Bond ETFs. These [exchange-traded funds] hold primarily investment-grade corporate bonds that all mature in the year associated with each ETF. We’re doing that because we don’t know when rates will start to decrease. We don’t want to be in fixed-income funds with no maturities. They are very volatile and can provide a negative experience.

What have you been selling?

We’ve been trimming some of our global funds, starting in late 2021, particularly in the technology and health care sectors. We took profits and wanted to reduce the volatility in our portfolio. One stock we sold at a loss last year was Algonquin Power and Utilities Corp. AQN-T. The stock tanked after the company experienced some issues due to variable interest rate costs and balance sheet concerns. Long-term, we think it has good prospects, but we sold it at a loss to offset gains in 2021.

Name a stock (or sector) you wish you bought.

We don’t hold any direct oil and gas securities, which hurt our performance a little bit last year. We own some in diversified ETFs and some pipeline stocks. That said, while valuations look good in the sector, it’s volatile because the sentiment changes and stocks can move dramatically. So, we’ll see what happens this year.

What advice do you have for new investors?

Before you start investing, take some time to understand your objectives and make a plan, whether on your own or with an advisor. You should adjust that plan as your life changes, but not when the market changes. A plan will help you stick to your objectives, even when markets are down as they are. It’s tough to do, but you need to focus on your portfolio’s long-term performance.

This interview has been edited and condensed.

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