Although there are plenty of financial matters on which financial advisors need to advise their clients these days, investment strategies are still a top priority.
After a year like 2020 – during which stock markets reached new highs in February, fell off a cliff in March before eventually recovering their losses and establishing yet new highs before year-end – there’s no doubt of the importance of keeping clients invested during good times and bad.
Furthermore, proper investment acumen and foresight are key to producing solid returns and income in the years ahead.
Here are 10 investment-related strategies and themes that advisors were focused on this year:
Volatile stock markets and reduced consumer spending during the COVID-19 pandemic have resulted in many Canadians sitting on extra cash, wondering how and when to put it to work. Advisors recommend a prudent approach when investing cash in these unsettled times, not only in light of the threat of a second wave of the pandemic in the weeks ahead, but the uncertainty around the U.S. presidential election in November.
Although COVID-19 has been a vicious headwind for many stocks, it has emerged as a strong tailwind for others. That includes some Canadian companies flying under the radar that may benefit from changing consumer and corporate behaviour or could have a possible treatment for patients suffering from the coronavirus. Three portfolio managers shared their top small-cap picks.
Recession clouds are lurking, but there can be a silver lining. Global stock markets have been roiled by coronavirus fears and plunging oil prices. Still, certain dividend-paying stocks can help ease the pain. When the S&P/TSX Composite Index dropped by 35 per cent in 2008, some of these equities outperformed the market or eked out gains. Others outpaced the market in the ensuing years. At the very least, investors can get paid while waiting for a recovery. We asked three fund managers for their top recession-resistant stock picks.
Emerging markets may have enjoyed a strong start to the year, but they were sent tumbling in mid-March along with all world markets. The swoon sent the MSCI Emerging Markets Index, the broadest measure of emerging economies, down 32 per cent. Since then, emerging markets have rebounded nicely and look to be in a good position as recovery takes hold. The engine has been Chinese stocks, which make up 41 per cent of the index.
Faced with interest rates that will be low for several years, yield-hungry investors may want to seek opportunities among Canadian dividend stocks. Although higher-yielding dividend stocks are not without risk, there are firms with stable cash flows that will allow them to maintain and raise payouts – and their stocks still trade below pre-pandemic highs. We asked Stephen Groff of Cambridge Global Asset Management, Steve DiGregorio of Canoe Financial LP and Michael Simpson of NCM Asset Management Ltd. for their top picks.
Yield-seeking investors may want to hunt for bargains among real estate investments hit hard during the recent stock market collapse. Given falling interest rates, the robust dividend yields that some real estate investment trusts and stocks offer have become more attractive. Further, some of these firms have strong fundamentals to weather the current storm. Three fund managers share their top real estate picks.
Cybersecurity has become top of mind for many organizations as much of our interactions shift online because of COVID-19. The renewed focus on online safety is also a potential investment opportunity for financial advisors and investors looking for sectors that could withstand the current market volatility. Early during the pandemic, some cybersecurity investments saw either modest gains or single-digit losses compared to double-digit declines for broader indexes such as the S&P/TSX Composite Index or the S&P 500.
Dividends are rarely top of mind when investing in technology stocks. After all, companies in the high-growth tech sector often just reinvest their earnings back into their businesses. Still, there are some mature companies that offer decent dividend yields or others that can grow their payouts over time. They can also help investors ride out bumps in these typically volatile sectors. Three portfolio managers shared their top picks among tech stocks with payouts.
While the traditional portfolio asset mix of 60 per cent in stocks and 40 per cent in lower-risk bonds has served advisors and investors well for many years, some in the investment industry are now questioning its future. Alternative investments can potentially make up for shortfalls in this balanced portfolio for some investors, but others may want to consider other options.
It may be time for long-term investors to start nibbling at beaten-up cyclical, dividend-paying stocks to bet on an economic recovery – even though its timing is uncertain. Stock markets have rallied recently amid signs that the outbreak is stabilizing in the hardest-hit countries, but they could retest the March lows. Three dividend fund managers shared their top cyclical stock picks.