Courtesy: Saskatoon Star Phoenix
Most Canadian investors with a high-net-worth appear in excellent shape. After a decline in 2008, Canadian real estate markets have roared back to life.
The concern is that we may now be in our own mini-bubble. And, in my experience, the portfolios of most well-diversified investors are back in the black, even though the Canadian stock market remains below its June 2008 high. Canadian bonds, preferred shares and gold are all in positive territory. Serious investors who took advantage of the opportunity to acquire Canadian corporate bonds during the dark moments of early 2009 have been particularly well-rewarded.
Compared with stock markets elsewhere in the developed world, Canadian equity investors have good reason to smile. As of May 28, Canada ranked third out of the 24 countries in the MSCI World Index in three-year return performance. Only Israel and Hong Kong did better. Our annualized loss of -2.7% pales beside the losses of Greece (-32%), Austria (-27.1%) and Italy (-19.5%).
Yet, the wealthy Canadian investors I talk to are almost as anxious as their global counterparts. There is constant, nagging worry that we are in the eye of a massive global macroeconomic storm that will soon return in full fury. Wealth preservation has moved to the top of many affluent investors' objectives. Globally, more than 50% of wealthy investors are more concerned with wealth preservation now than they were before the recession and more than one-half are likely to avoid high-risk investments.
Worry can be a good thing, though. Many affluent investors today are asking questions about how their portfolio was managed over the past several years. Was our capacity for risk properly explored and measured by our financial advisor? Did we have a long-term, diversified strategy in writing? Did we have the right process and safeguards in place so that serious deliberation, not fearful emotion, guided our decisions?
Asking these questions can help investors get ready for the next, inevitable downturn.