The following strategies guide our advice to clients and are reflected in the positioning of the Founders Fund.
Like we’ve done in the Founders Fund, we suggest investors stick close to their long-term target of stocks and bonds. This may require some rebalancing given the decline in equity markets. Investors drawing from their portfolio, including those enrolled in the Steadyhand Retirement Withdrawal Program, should top up their spending reserve. We recommend investors have two years worth of expenses set aside in the reserve (please contact us if you’d like to learn more about the program).
Concerns about tariffs have shaken equity markets. Investors don’t like uncertainty, and the on-again, off-again policies have caused many to turn to safer assets, notably fixed income. Areas of the market that were the most elevated, specifically U.S. mega-cap stocks, have seen prices fall sharply.
Fortunately, our defensive positioning has helped our balanced portfolios weather the storm well. Our portfolios have limited exposure to U.S. mega-cap stocks as our managers focus on building diversified portfolios of profitable companies selling at reasonable prices. In the Founders Fund, we're holding less in equities (58%) but have been rebalancing to get closer to our long-term target (60%). We’re holding 35% in bonds, which is right on our target, and more in cash (7%), which has allowed us to take advantage of bearish sentiment and opportunities.
Bonds
The risk versus return trade-off for bonds is in line with long-term averages but returns are likely to come with higher volatility than investors have been accustomed to as yields react to changes in interest rate expectations and central bank activity. Over the next five years, we expect bonds to return between 3-5% per year, which translates to a 15-25% cumulative return.
Bonds remain an important tool for most clients. They can provide safety when stocks are volatile, and as such, are a diversifier for a balanced portfolio.
In the Founders Fund, we’re at our target weight in bonds (35%). We continue to hold an above-target weighting in cash (7%), which provides some defence and gives the fund liquidity. Much of the cash is invested in short-term investments such as T-Bills which are currently yielding approximately 2.8%.
Stocks
Our outlook for 5-year stock market returns is 5-7% per year (or 25-40% cumulative), which is below the historical average for long-term equity returns. Despite recent market declines, stocks continue to trade at elevated levels. Additionally, global markets have become increasingly concentrated in U.S. mega-cap companies, making declines in these stocks more impactful on global returns than in past years.
The Founders Fund does not own the market. It owns a diversified mix of stocks that are profitable and trading at better valuations than many areas of the market. The fund currently holds 58% compared to our 60% target to ensure we have some extra liquidity in the fund to take advantage of opportunities.
Specific Advice
If you would like an assessment of your portfolio or help with developing an investment strategy, we encourage you to book a meeting with us. We provide clear-cut advice and can help better align your investments to your personal situation.
Founders Fund Asset Mix: April 15, 2025