The columnist Pierre Foglia used to respond to readers of La Presse in a section he called the “knee mail”. Looking for a title to respond to the readers of this section, I decided to use it here and adapt it. So here is the “amygdala mail”, named for the part of the brain that regulates fear, pleasure and anger – in short, you see me coming, emotions that are often associated with money .
Let’s start with Benoit, whom I annoyed when I rejoiced at the rise of the Stock Exchange this year at the beginning of the summer. “I thought you’d be the first to know it could change quickly,” he wrote to me. Given the rise, do you intend to sell your investments to secure your gain? If so, when do you plan to redeem? »
If I rejoiced, it’s because it takes someone to rejoice… Have you noticed that the stock market crashes grab the attention, but the bulls go unnoticed?
Hearing about the stock market only when it falls creates a distortion in people’s minds, and causes fear (and the famous amygdala). Mentioning the gains since the beginning of 2023 was my (small) contribution to try to correct this imbalance.
As for the idea of selling to “secure my earnings”, I never sell anything in my portfolio.
Having said that, on the substance of your question, it is true that investors have always dreamed of selling their assets at the top and buying them back after a drop.
Unfortunately, all the studies on the issue show that this gesture, called synchronizing the markets, is impossible to achieve in a sustainable way, and that trying to do so impoverishes us in the long term.
The only thing we know is that seven out of ten years have historically ended higher in the stock markets of developed economies.
Then a reader sent me an article titled, “Bank of America warns that the tried and true 60/40 portfolio strategy is on its deathbed.” Since I sometimes talk about this strategy, I imagine that he wanted to warn me.
What is a 60/40 portfolio? Quite simply, a portfolio made up of 60% exchange-traded funds (ETFs) that track the Canadian, US and international markets, and 40% government bonds from developed countries. In short, it is the basic investment strategy for a mid-term investor who is looking for long-term growth, but who also wants to have some protection during market downturns.
The problem with articles announcing the death of the 60/40 wallet is that they are clickbait published every year for a long time. For example, Bank of America issued this warning in 2013, 2015, and 2018.
In my inbox, Denis asks, “We are a retired couple of 70 and 69. We want to move in two or three years after selling our current property. We wonder whether our next roof should be a purchased condo or a rental condo. The proceeds from the sale would be around $500,000, which we could invest in safe GIC-style investments and draw rent checks from them each month. What do you think ? »
Yes, definitely, that’s an idea. Guaranteed Investment Certificates (GICs) can help. Currently, a GIC can give you a return of 4.65% per year for two years. If $500,000 is invested, the interest paid will be approximately $23,000 per year, which will be taxed at your marginal tax rate. It’s not huge for housing, but it all depends on your needs and aspirations, and also your other income.
Renting a condo gives you peace of mind when it comes to costs. Condo taking on water? Does the building need expensive repairs? It’s not your problem.
As for buying, it can also be a good option, as long as you plan to live there for at least 10 years, because the costs of buying and selling real estate are high.
Be that as it may, the site The Young Retired has created an Excel tool that allows you to compare the purchase and rental of a property.
Speaking of property, I asked you in June if you were experiencing stress related to the economy.
Hélène replies, “Yes, I live under stress. We just signed our 5 year variable rate mortgage renewal contract. ‘That’s the best rate, ma’am! Yes yes ! And that’s it, the rate hike, ma’am. Yes yes !” My mortgage is $200,000, but I’m paying more per month than when I started! I’m tired of no longer planning nice projects, but just calculating the maximum amount we’ll be able to pay in interest to live in our house. »
I sympathize with your situation. The fact is that over the past decade, interest rates have been abnormally low. In English, they were called emergency rates.
Debt was painless, so the appetite for debt exploded. And our bank was our friend, the great and sympathetic ally of our real estate enrichment.
Today, the bank seems to eat our salary. It is not pleasant. At least the masks have fallen.
