We’ve all been there.
In the heat of the moment, a text or email is sent in haste and out of frustration or anger.
A 10-minute reprieve from your device to go for a walk, clear your head and reply with a measured response could’ve turned a sour moment into a resolution – and it’s inevitably always the best course of action.
For David Wright, the exact same approach is needed perhaps now more than ever with respect to how to invest and where, given the geopolitical instability south of the border.
Wright is a senior wealth advisor and portfolio manager with Wright Wealth Management - BMO Nesbitt Burns. And he’s big on the analogies and scenarios.
To that point, he likens investing like a trip to the grocery store where simply going down one aisle will leave you with little. The same concept applies to investors who want only Canadian options, or no U.S. options at all.
“Instead of going down aisle five or seven and picking a few items, I say buy all the items in the grocery store ” Wright says. “Let’s say the auto or mining sectors are doing well, a diversified investor will have those items in their shopping basket and they may grow faster than some of the other items, leading to better performance on average.”
Wright notes that one of the challenges with only picking certain sectors is that if clients miss sectors that are thriving, it can have outsized effects on their portfolio.
And what happens in the likely scenario that most companies underperform and just a small percentage do well?
“You may actually underperform quite substantially,” Wright explains. “It’s very difficult in advance to know which companies are doing well, but if you didn’t have Nvidia, Meta or any of the big tech names down in the U.S. in recent years, you could have seriously underperformed.”
Enter the globally diversified index option, which spreads investments across huge swaths of different economies. While not fool-proof, this option protects against a Canadian economy that could weaken, which it has in the past and it will at some point in the future. It’s a plan that ultimately ensures a client’s financial future isn’t tied just to one small economy on the global scale.
Wright encourages clients to keep a good portion of their investments in Canadian dollars. “Since most people’s day-to-day expenses and financial obligations are in Canadian currency, it just makes sense. Otherwise, you’re adding foreign exchange risk that could throw off your plans.”
That focus on Canadian content is where Wright sees the most benefit for his domestic clients. Rather than forgoing U.S. investment options altogether, he sees more sense in buying Canadian at the grocery store, or avoiding travel down south.
Conversations about politics and investing can, at times, get heated and it’s here that Wright emphasises decisions made with the head rather than the heart.
“If you didn't have any U.S. exposure in your portfolio over the last 20 years, you missed out on huge gains that could’ve resulted in early retirement, more travel or doing stuff with your family,” Wright says. “You need to take the emotion out of these decisions as much as possible so we can establish a good plan that the client will stick to.”
Visit nesbittburns.bmo.com/davidl.wright or call David Wright at 778-785-2584 for more support with navigating the complexities of today’s financial climate. Note this article does not constitute trading advice.
