Investment advice everyone needs to hear

Early in my career, a mentor told me, “Keep your life exciting and your investments boring." This is a piece of advice I've held onto all the years. Here's why.

When you operate in this fashion, during bad years, you might end up with poorer-than-expected performance, as seen from the results of the S&P 500 and TSX indices.

But for those who choose to make their investments exciting, it could mean losing almost all your money quickly. Just look at the performance of companies like Tesla, Shopify, Airbnb, Peloton, Beyond Meat, and Virgin Galactic. Anecdotally, these were some of the most popular names I was asked about in the last several years.

Now it doesn't take long working in finance to see how many investors (professionals included) are solely focused on trying to hit home run investments. It's not entirely our fault. This overly optimistic thinking has been programmed into us since we were little kids. We grew up hoping superheroes were real, believing in the tooth fairy, and dreaming about, maybe, just maybe, we'll catch that one lucky break that takes us from rags to riches.

With the companies listed above, I'm sure some clients probably felt like I was crazy for not wanting to hop on the bandwagon as they watched prices go up and up. Some may have even questioned my advice.

But I know good investing has less to do with trying to nail the big one and everything to do with consistently avoiding bad investment decisions. Which was precisely what I was trying to help them avoid. Good investing is about using the exponential power of compounding.

It blows clients' minds when I ask them, "if I could give you 1 cent today and you could double what you have every day for 30 days, how much money do you end up with? The answer is $ 5.3 million."

Crazy right?

But for compounding to work, you need to stick around long enough for it to do the heavy lifting. In my example, most of that $5.3 million was made in the last five days over the 30-day period. Blowing up your portfolio definitely means you're not sticking around long enough.

When we get too focused on trying to hit home runs, we lose sight of the things that actually matter to our success. Things like planning, goal setting, savings and spending rates, asset allocation, and discipline, all of which we have some level of control over.

Your goal as an investor should be to focus on what you can control, remain disciplined, and allow your money to experience sustained uninterrupted compounding for as long as possible. Avoiding the latest hot stock investment trends will help keep your attention where it needs to be.

- Brandt Butt, Portfolio Manager/Investment Advisor, CIM®

Brandt is a Portfolio Manager/Investment Advisor and part of an award-winning team at Endeavour Wealth Management with iA Private Wealth. Brandt’s focus is working within incorporated physicians and dentists between the ages of 35-45 who are looking to set themselves up on the right financial path in hopes of reaching a point where they are choosing to work, instead of having to.

This information has been prepared by Brandt Butt who is an Investment Advisor/Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Investment Advisor/Portfolio Manager can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

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