The next item at the Opening Ceremonies of the Money Show for 2015 was a Globe and Mail Panel. This panel was called "What Investors Need to Know Right Now". Scott Barlow, Market Strategist; Rob Carrick, Portfolio Strategies Columnist and Jennifer Dowty, Equities Analysts were on the panel.
Scott: What new investors should be in are stable companies with steady and stable cash flows over a long term period. These will outperform in a financial crisis. These are good companies that are Blue Chip. Why you should look for stable long term cash flow is because cash flow does not lie.
Jennifer: Investing takes time. You should stagger investments. You should always have an exit strategy. Know what down side risk that you are willing to stand. You want companies for which analysts are revising estimates up. You want companies that are diversified, that is has lots of customers. Look at fundamentals and the management team.
She gave a site of www.sedi.ca to check insider information, but I must admit when I looked at this side I found it hard to use and not useful at all. I have access to INK Reports and I have no trouble finding information on these reports.
She says what you should be looking for is whether insiders are accumulating or selling shares. She says that you should use technical analysis to determine when to get into or out of a stock.
Question: What about Cash as a Portfolio Allocation?
Scott: Cash is like a put option on the market. Warren Buffet has currently lots of cash. This is even true when interest on cash is just 60 basis points.
Jennifer: Cash is something that investors should consider. Cash is the outperforming investment this year.
Rob: Online Brokerages is so cheap, so you can buy investments in small bits. Use Investment Savings Accounts in your trading account.
Scott: Do you look at cheap trading as the ability to trade more. This is a mistake. Do not trade too much. Overtrading is a mistake.
Question: Is it a stock pickers market?
Rob: Currently Mutual Funds are outperforming the market.
Scott: It is not a stock pickers market. Active management tends to outperform in down markets. It is a macro driven market, this are themes.
Jennifer: Thinks it is a stock pickers market. It is a broad based market.
Question: Is there is also a bond bubble?
Rob: The Fed will raise interest rates.
Scott: China is selling US treasuries. They are selling a lot of them but it is having no effect on the market. Going for yield is not a good thing in the long term. A lot of shale oil companies cannot pay interest on their debts. There is no bond bubble
Jennifer: What you should have is dividend stocks and a few bonds. Dividend stocks are not necessarily safe. Dividends on oil companies are in decline. Even bank stocks have risk. Royal Bank (TSX-RY) is down.
Scott: The higher the yield the higher the risk. Do not chase dividends.
Jennifer: Higher yields are not higher risk. It depends on the company. For example REITs have higher yields but are not risker. Look at the companies.
Scott: Utilities and telecoms etc. are sensitive to interest rates and he does not think that they will climb much.
Question: Diversification: What does it look like today? (60 - 40)
Scott: The reason to diversity is to reduce risk. It is better to have bonds and stocks. We could go grinding on or we could do very well. We do not know what will happen.
Jennifer: Age or risk tolerance is what we should take into account re diversification. Have no more than 10% of portfolio in one stock. Diversify by industry and country.
Rob: If you have a defined benefit pension, you should consider it as a bond.
Scott: You should still buy US stocks. We have long periods when the Canadian Market outperforms the US. Now we are into a period when the US will outperform. This will be perhaps for 10 years. He likes tech stocks. Health Care stocks will have a demographic push.
Jennifer: Hold investments outside Canada. Does not see the CDN$ to US$ rebounding in the near term. Canadian market is 30% resources so it will underperform.
Rob: Should we hedge re foreign stock?
Scott: He is not in favour of hedging for individuals. Also Mutual Funds cannot predict currencies so they should stop hedging.
Jennifer: This time there is a lot of fear in the market. There is a market sale going on. When 40% bearish, 40% neutral and 20% bullish, it is a positive indicator. CNR had a break out today. A theme of emails is loss aversion. People do not want to accept a loss. There is the cockroach rule. If there is one there are lots. If a company has a problem, there may be more problems.
Scott: Selling is very difficult. The more exciting the portfolio, the more risk. A portfolio should be boring.
Jennifer: If an investor has a concern, they should email the public relations of the company. You should also listen to the conference call.
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