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    • Tag: Investing

    Floating Rate Notes – a timely idea for fixed income investors

    Posted By Stephen Hafner On March 13th, 2013

    Our first order of business is always to protect capital. (If you’re a client or a reader of this blog you likely know that’s been a constant theme in everything we do.)

    In anticipation of a potential rise in interest rates, one of the risks investors should be concerned about is a decline in bond values – what many investors typically think of as “the safe stuff.” If that sounds like a dichotomy it really isn’t. Generally speaking, when interest rates go up, the value of a bond declines. The longer the maturity of the bond the more it falls. (Read our earlier posts Convexity and bonds and Is it time for bond holders to rethink their strategy?)

    To protect our clients’ fixed income investments against rising interest rates — which are inevitable at some point — we’ve been shortening the duration of our bond holdings (now 3 years on average). In addition to that strategy there’s another idea we’ve implemented in recent weeks: Floating Rate Notes (FRNs). [read more >>]

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    Is it time for bondholders to rethink their strategy?

    Posted By Peter Churchill-Smith On January 24th, 2013

    At this time last year, two key issues were front and centre for us.  We were concerned about more fallout from the economic uncertainty in Europe and the U.S.  There did not seem to be any clear plan in place to resolve the debt and deficit issues. We were also concerned that interest rates would finally hit bottom and start to climb.  Both issues caused us to be cautious with our clients’ capital in 2012.

    The threat of rising rates has been hanging over the heads of all investors for some time now.  Quite surprisingly, rates did not rise in 2012. In fact, they fell – about 0.60% in Canada. Why? Because more stimulus like the Federal Reserve’s bond buying programs was needed to re-ignite the economy.

    In anticipation of rising rates last year, we accelerated our plan to diversify our sources of yield for our clients.  We added more income-producing real estate, residential and commercial mortgages, corporate bonds and dividend-paying stocks.  With rates falling, these investments performed well in 2012. [read more >>]

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    Finding investment opportunities when the economy isn’t handing them out

    Posted By Peter Churchill-Smith On November 27th, 2012

    iStock 000014863867Medium priv eq banner 300x94 Finding investment opportunities when the economy isnt handing them outLast week, we organized a lunchtime panel with four outstanding financial minds that are part of the pool of talent we have to draw on for the management of client investment portfolios:

    • Maureen Farrow, (economist), President, Economap
    • Tye Bousada, (global equities), President & Co-CEO, Edgepoint Investment Group Inc.
    • Rick Grafton, (energy), CEO, Grafton Asset Management
    • Corrado Russo, (real estate), Managing Director, Global Securities and Investments, Timbercreek Asset Management Inc.

    It was a lengthy and meaty conversation about the state of the global economy, how Canada is faring and what it all means for clients of Newport Private Wealth. This summary won’t fully do justice to the depth and scope of the presentations, but we will try to boil a 90 minute discussion down to a readable blog post for you.
    [read more >>]

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    When will natural gas prices turn?

    Posted By David Cole On May 9th, 2012

    Record warm temperatures made for a comfortable Canadian winter this year. But they’ve caused a chill in the energy market. Particularly natural gas prices which dropped to a 15 year low.

    What’s the cure?

    “Low gas prices” is the standard response from industry experts. Low prices spur demand and cut off supply. It’s just a lesson in economics.

    [read more >>]

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    The 3 most common portfolio woes — and how to fix them

    Posted By Kelly Willis, Editor On April 12th, 2012

    tools 12Apr 150x150 The 3 most common portfolio woes and how to fix themEarlier this year, our Managing Director and Chief Wealth Management Officer, David Lloyd published a month-by-month Personal Finance Checklist to help readers organize and optimize their financial affairs and it’s been a popular post on this blog.

    April is a good month to review your portfolio after first quarter results are in: Perhaps a little ‘spring tune-up’ if you haven’t revisited your strategy in awhile?

    On that very subject, here’s a link to an article by Stephen Hafner, one of our Managing Directors & Portfolio Managers, written for the website Accretive Advisor. Stephen identifies the three
    most common portfolio problems we see — and how to fix them.

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    How (not) to choose a financial advisor

    Posted By Kelly Willis, Editor On March 5th, 2012

    Last week a friend of mine asked me for help with his portfolio. His portfolio hadn’t made any money in eight years and he hasn’t made RRSP contributions for the past two years because he’s been so unhappy with the performance. He’s already switched advisors once (in 2008). Right now he’s feeling stuck and wondering what to do next.

    [read more >>]

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    Reset your clock. Market timing doesn’t work.

    Posted By Mike Vanderburgh On March 1st, 2012

    I recently met with two of my clients, a retired couple, to review their investment accounts. They were pretty pleased with the performance so they asked me to take a look at an account they had managed elsewhere that hadn’t performed as well. After doing a bit of digging, it became apparent that a different strategy was being employed: market timing. This involves buying securities when you believe the market is about to go up and selling them when you believe the market is about to go down.

    Market timing, technical analysis, program trading, whatever terminology is used to describe the process, is a method that rarely benefits an individual investor and often serves to generate higher commissions for the advisor. Anyone who has taken an introductory finance course will remember that missing the ten best trading days in any year can result in an investor missing a substantial portion of their potential return. This is so often quoted that it is treated as gospel by advisors. So I decided to look at returns for the S&P TSX over the three-year period ending December 31, 2011, the same time frame that my client had asked about.

    i 3f601c535d40d856a000812be5f88c61 Ten Best Days Reset your clock. Market timing doesnt work.

    Over the three year period, the stock market generated a positive return of 29.47%. $100 invested on January 1, 2009 would be worth $129.47 on December 31, 2011. If an investor missed the ten best trading days in each of the 3 years, 30 days in total, they would have lost 41.1%. So the saying is true.

    However, when you look at the data, many of the worst performing days fall right around the best performing days. To be fair, a market timer probably isn’t only going to be out of the market on the 30 best days. If you had also missed the three days preceding and following the best performing days, you would have generated a positive return of 2.49% over the three year period. Much better than the loss of 41.1% but significantly lower than the buy and hold strategy.

    It is only natural that as investors we seek to outperform the market. However, over the long term the best strategy is to diversify your portfolio across a large number of investment categories in a manner that reflects your tolerance for risk and your objectives for your portfolio. Properly structured, you will be able to withstand any market volatility and remain invested, resulting in superior long-term returns.

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