Yesterday, Cash Was King

Balance in a portfolio was handed a solid thumping yesterday as investors who had borrowed to invest turned to anything with value to sell to cover their margin calls: the Canadian bond index ETF (XBB), dropped almost 7.5%. That and the likely fact that governments will be issuing a whole lot more bonds (supply) in the not too distant future to cover all the new spending announcements. The other very borderline suggestions for balance by some advice givers, Preferred shares and REIT's, have also been walloped:

Fully invested folks hopefully knew what was coming and are hunkering down to ride this out. After 2008 - 2009, fully invested balanced portfolios (60% Equity /40% Fixed Income) took a little over a year to bounce back. 

As Paul suggested in his blog yesterday, we (at High Rock) have been over-weight cash. Not at all because we saw the Coronavirus coming, but because valuations for stocks were so over-extended. (See most of my 2019 blogs). So we gave up a little on 2019 returns (not quite able to keep up with the benchmarks), but with the benchmarks down almost 20% year to date, our client portfolios are down a fraction of that.

Here is some of the feedback we have been receiving:

"Hey Scott, you folks must be busy. I just read your blog and have been thinking lately about our timing to switch over to your firm. So glad we did. I wonder where we would be at right now if we didn't."

We worked it out yesterday. Close to down 25%.

"...funny we have no trouble sleeping considering the market slide, worrisome on the health risk though...Good job HRC. Much appreciate it".

"All I hear are people going to cash and how their retirement slipped by 10 years based on their 401k... Then I think about how different we have it... thank you for this reassurance."

So now, with our cash on hand, we are value hunting, something we have been patiently waiting to do.

To all the passive investing folks, hang in there, keep the faith, don't go to cash. 

When this is all over, give it some further thought and perhaps contemplate the expertise of portfolio management to have a nice combination of passive and tactical strategies working in unison. Strategies that will bounce back faster (because they didn't go down as far) and get back to the business of growing to provide a better chance at your long-term goals.

In the meantime, we are standing by to talk strategy with anyone who wishes.