by Tom Bradley

Our clients know that investment returns come with surges and dips. To get the good, you need to accept the bad. But WOW, that wasn’t easy to do in 2022 and 2023. There were more surges and dips than usual, and a lot more noise. The volume was turned up to 10 on issues like recession, inflation, central banks, AI, and global tensions. And then there were what Salman and I call the ‘bright shiny objects’ – trends, stocks and products that capture investors’ imaginations and cause them to change strategy. Things like crypto, AI, and more recently, good old money market funds and GICs.

I’m happy to say that our clients did remarkably well in running this gauntlet, but I know it wasn’t easy. Indeed, my biggest takeaway was just how hard it is for investors to stay steady and invest for the long term. It’s easy to say (my part) and hard to do (your part). Really hard.

Joe Wiggins, a keen observer of investor behaviour, said, “… taking a long-term perspective is the most severe behavioral challenge that investors face.” Meeting the challenge means “frequently ignoring issues that we and everyone believes – at that moment – are absolutely critical. No wonder so few investors can do it.”

Of course, it goes beyond the last couple of years. Consider that the S&P 500 has had a positive return in 33 out of the last 44 years. In those 33, the average intra-year drop was 14.2%. Even good years like 2023 have significant setbacks built in.

At Steadyhand, we’re wired to invest for the long term. We make our share of mistakes, but never waver on this. Our hope is that if we walk the talk, you’ll have a better chance of doing the same.

We believe that stocks will continue to be the most reliable source of returns over time. Using my favourite tool on our website, the Volatility Meter, you can see that stocks earned an average return of 9.6% over the last 63 years. You’ll also see there were some gut-wrenching down periods along the way.

What will ‘steady’ mean to our investors in 2024?

• We won’t try to predict the markets. Rather, we’ll be prepared for anything to happen. 
• We’ll always be diversified and buy companies that are strong enough to be held for many years.
• We’ll listen to our fund managers. If they’re enthusiastic about the opportunities available, we’ll give them more money, and vice versa. 
• In turn, our managers will care about what they pay. Valuation is still the most reliable indicator of future returns (i.e. lower leads to higher). 
• We’ll make deliberate but modest adjustments to the Founders Fund’s asset mix. They will reflect the outlook for 5-year returns, not what’s in the headlines. 
• We’ll use investor sentiment to keep our enthusiasm or despair in check. How bullish or bearish investors are, is a contrarian indicator that helps us avoid big mistakes at market highs and take advantage of opportunities at market lows.
• We’ll always be accessible to advise clients on determining the best portfolio for their goals and situation, and then help them stick to it.

Nobody knows what 2024 will bring but you can be assured that, no matter what comes our way, we’ll stay steady. Cue the flashy animation.

I encourage you to read the rest of our Q4 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.