2021 Annual Letter to Our Clients
Christine Fortin - Jan 21, 2021
Our 2021 letter to clients, managing finances in the gig economy and the exciting updates on the team accreditation.
Part One: General Principles
- It will be worth restating, even in the context of a letter primarily focused on the year just past, our overall philosophy of investment advice. It is goal-focused and planning-driven, as sharply distinguished from an approach that is market-focused and current-events-driven. Long-term investment success comes from continuously acting on a plan. Every successful investor I've ever known was acting continuously on a plan; failed investors, in my experience, get that way by continually reacting to current events in the economy and the markets.
- You and we are long-term equity investors, working steadily toward the achievement of our most cherished lifetime goals. We make no attempt to forecast, much less time, the equity market; indeed we believe these to be fool’s errands.
- Once a client family and our team have a plan in place—and have funded it with what have historically been the most appropriate types of investments—we will rarely ever recommend changing the portfolio so long as your long-term goals haven't changed. As a general statement, we, The Fortin Wealth Advisory Group, have found that the more often investors change their portfolios (in response to the market fears or fads of the moment), the worse their long-term results.
- By our count, there have been 16 “bear markets” in equities since the end of WWII – and average of one every five years or so. The average depth of these declines was something on the order of 30%. But in September 1945 the forerunner of the S&P500 Stock index was about 16*; the index ended this past year at 3756.07. Thus, at least historically, the permanent advance has triumphed over the temporary declines.
- In sum, our essential principles of portfolio management remain unchanged. (1) The performance of a portfolio relative to a benchmark is largely irrelevant to the long-term financial success. (2) The only benchmark we should care about is the one that indicates whether you are on track to accomplish your financial goals. (3) Risk should be measured as the probability that you won't achieve your goals. (4) Investing should have the exclusive goal of minimizing that risk.
Once in a very great while, there comes a year in the economy and the markets that may serve as a tutorial—in effect, a master class in the principles of successful long-term, goal-focused investing. Two thousand twenty was just such a year.
On December 31, 2019, the Standard & Poor's 500- Equal Weighted Stock index closed at 8485.96. This past New Year's Eve, it closed at 9574.87 according to the S&P Dow Jones website. This is some 11% higher in CAD$ terms. From these bare facts, you might infer that the equity market had, in 2020, quite a good year. As indeed it did. What should be so phenomenally instructive to the long-term investor is how it got there.
The term “gig” is something that we all know from past norms as in “I got a gig”. However, this is a very real economy now and it impacts our young people mostly. Finding long term dependable employment is largely a think of the past.
Our team continues to work from home and we obviously don’t have any photographs of far away places that we have visited.
Spencer has completed all of the educational requirements, exams and case studies as well as professional experience and has earned his Certified Financial Planner (CFP) designation. And he is just finishing his insurance piece to be able to support Christine and Jamie in the tax planning with respect to insurance trusts.