I recently read one of the best paragraphs on personal finance I’ve ever seen. It’s from venture capitalist Morgan Housel, in an excerpt from his book The Psychology of Money.
Mr. Housel wrote, “Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping money requires the opposite of taking risk. It requires humility, and fear that what you’ve made can be taken away from you just as fast.”
He went on to describe the importance of a ‘barbelled personality’, one that is optimistic about the future but also paranoid about all the unforeseen dangers that could lie ahead.
This barbell personality is not an easy one to carry around – it involves being greedy and afraid at the same time. The easiest resolution of the incumbent dilemmas is through discipline and rules, ones that automate the process of mitigating both greed and fear.
Rebalancing diversified portfolios to prevent a successful investment from dominating future returns is one example of automating risk management; reducing risk as age increases and investment time horizons shorten is another.
No matter how many rules are applied there will always be an inherent tug of war for investors, a tension between wanting more and dreading loss. That’s just part of the process. Each investor must broker their own deal between these competing emotions but thankfully there are many right answers. The most important thing is to avoid permanent loss of capital that reduces the positive effects of long-term compounding, so safer is better at the margin.
-- Scott Barlow, Globe and Mail market strategist
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The Rundown
Don’t make this GIC buying mistake – it could limit your CDIC protection
For better or worse, pretty much everyone knows that Canada Deposit Insurance Corp. protects eligible deposits for up to $100,000. But that ceiling can be misinterpreted in a way that can limit the amount of CDIC coverage you’d get if your bank failed. Rob Carrick explains.
Value investors, these stocks could be bargains right now amid tax loss season
Tax loss season is a time when many investors choose to part company with stocks that have been a disappointment to them. They are anxious to complete the trade before year end so that the loss can be claimed on this year’s tax return, so there may be a temptation to dump the stock without regard for the best price. This presents an opportunity for bargain hunters looking for value in washed-out stocks. How do we identify these potential bargains? Robert Tattersall suggests famed value investor Ben Graham’s “net-net” working capital screen. Here are some stocks that made the deeply undervalued list.
Wondering when it will be time to jump back into stocks? This buyer’s checklist will help
When is the best time to buy stocks? Any time, as long as you follow these certain basic rules, says Gordon Pape.
RBC joins other banks in offering investors option to reinvest dividends in stock
Royal Bank of Canada is tweaking its dividend program to help build up its capital reserves. The move, as Tim Shufelt reports, gives RBC investors the opportunity to reinvest their dividends at a 2-per-cent discount to the price of the shares.
Should Canadian investors be concerned about China?
Angry demonstrations in China over the country’s harsh zero-COVID policies stand little chance of toppling the country’s authoritarian government, but that doesn’t mean they won’t reverberate in your portfolio in more subtle ways, as Ian McGugan explains.
Also see: Analysts upgrade China’s 2023 earnings projections on reopening hopes
Tense conversations lie ahead as investors process their losses in 2022 – and the fees paid to their advisers
Unsure of the value you got this year for the fees paid to your adviser? Start your analysis by recalling what your adviser did to manage the unusual events of 2022, says Rob Carrick.
Outlook 2023
BMO’s chief strategist sees 7% gain for TSX in 2023
BlackRock backs banks, cuts European, EM debt as part of ‘new playbook’ for 2023
When the chips go up: Big banks bet on South Korea, Taiwan stocks for 2023
Others (for subscribers)
The highest-yielding stocks on the TSX, plus risk data
Ron Meisels: This is the week the market correction ended
John Heinzl’s model dividend growth portfolio as of Nov. 30, 2022
Number Cruncher: 12 communication services stocks showing signs of a rebound
Number Cruncher: Seven TSX-listed financial services ETFs that have outperformed their peers
Friday’s analyst upgrades and downgrades
Thursday’s analyst upgrades and downgrades
Barrick Gold insider ownership on the rise
Blackstone limits withdrawals from its US$69-billion REIT
Ask Globe Investor
Question: I have a small portfolio. Currently I own the Horizons Active Canadian Dividend ETF (HAL-T) and GICs. I’m waiting to buy bond ETFs when appropriate. I want to hold an equity index or ETF for a small position in equities at some point when it’s favourable. Thoughts?
Answer: My thoughts are that you are trying to time the market with your equity index purchase. It never works. No one has been consistently able to pinpoint a market bottom, which would obviously be the most favourable time to invest in stocks.
Right now, stock markets are lower than they were a year ago, so it’s a favourable time to buy. Perhaps it will be more favourable a month from now, but who knows? If you have enough money to invest, you might consider dollar-cost averaging your purchases over the next several months.
The same advice applies to your plan to buy bond ETFs “when appropriate.”
--Gordon Pape (Send questions to gordonpape@hotmail.com and write Globe Question on the subject line.)
What’s up in the days ahead
CIBC shares got clobbered this week. Is it an opportunity for investors? David Berman will have some thoughts.
Ready for that Santa rally? World market themes for the week ahead
Click here to see the Globe Investor earnings and economic news calendar.
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Compiled by Globe Investor Staff