podcast

Roller Coasters, Returns, and Staying on Track with ETFs

Published:18/06/2020


Investor Knowledge +clock10 Minutes = Confident Investing


These days roller coasters come to mind for two very different, yet related reasons.

Firstly, I have two young daughters, aged thirteen and ten, who asked me if we're going to be able to go to Canada's Wonderland given the COVID-19 concerns and restrictions. They really want to ride the Yukon roller coaster that was introduced last season. 

Secondly, the stock market certainly feels like a roller coaster this year, specifically the one mentioned above with vertical drops that are not for the faint of heart. Many of us experienced those drops through our investment portfolios earlier this year. Especially as this pandemic spread globally, affecting markets and shutting down economies along the way. 

I am not a fan of roller coasters myself. I can't help but think that anybody could fall out of them. It's a silly fear but it's real to me. I cringe when I think about anxious investors that jumped out of the market at the depths of March's lows. That move may have potentially hurt long-term wealth prospects, especially considering the market rapidly climbed up from those lows.

"Don't peek."

I received this advice from one of my investment idols, John "Jack" Bogle. He has doled out this advice many times in his illustrious career. He frequently refers to volatile markets and the desire to look at investment statements. Sound advice. I wish it worked on actual roller coasters.

Invest for the long term.

At TD Asset Management (TDAM), we focus on providing solutions to clients that are suitable during any market cycle, including this one. We also take a goals-based investing approach that helps our clients stay on track.

As someone who has worked with financial advisors for decades, I know how big a role an advisor can play in times like these. Early in my career, I asked an advisor why anybody should hire him to manage their wealth. His response sticks with me to this day:

"A large part of what I do is protect the 'you' of the future from the 'you' of today."

When you pair this advice with 30+ years of experience at TD Asset Management, the steward of hard-earned capital, and more experience navigating market highs and lows, you have a very powerful combination. 

I mentioned earlier that I am not a fan of roller coasters. There is another reason. When I was thirteen years old, I was a thrill-seeker who loved roller coasters. Until I rode The Bat roller coaster at Canada's Wonderland. For those of you who have never ridden The Bat, it was the first roller coaster of its time to go backwards. It gave me a big headache and motion sickness that lasted for days. It wasn't the last time I rode a roller coaster, but it was the last time I rode backwards. I think of this experience when I think about investing. A decline of 50% requires a return of 100% to break even. Riding backwards is not only unpleasant, it also makes it difficult to get back to where one started. 

As investors, it is important to understand the importance of preserving capital and maintaining growth to achieve long-term success.

Solutions that are relevant today.

We offer a suite of 27 ETFs, including five new ETFs that launched on June 2nd. These solutions provide investors of all types and net worth with diversified and balanced portfolios at a competitive price. They also work in combination with our expertise in index investing, quantitative investing, and fundamental active investing. 

At TDAM, we know the importance of preserving one's capital and successfully growing that capital over time. We do this effectively with a suite of investment solutions  designed to provide a smoother ride, fewer highs and lows relative to the broad market, and less backwards rides. I will share three of these solutions today: 

  1. Our Low Volatility solutions are designed to help provide a cushion when markets are declining (TCLV, TULV, TILV).
  2. Our Enhanced Dividend Strategies focus on investing in quality companies that pay consistent dividends, while generating additional income from writing options on these securities. These help soften the blow when markets are declining. They also enhance total returns (TGED, TUED).
  3. Our Global Infrastructure and Global Real Estate ETFs have become increasingly popular due to their lower risk profile, cash flow predictability, and diversification benefits compared to more traditional equity investments (TINF, TGRE).

Another one of our solutions is the TD Global Technology Leaders Index ETF (TEC). Although it was launched over a year ago, it has proven resilient and relevant in today's market. I expect it will continue to play a critical role going forward as technology keeps us connected and productive. This unique 'tech+' ETF has exposure to emerging and global technology leaders. This is a space that has thrived in this market and will continue to thrive as we adopt technology at a faster pace.

In conclusion, not everyone loves the fastest, scariest ride at the amusement park. The same can be said about investing. Some people love the thrill of the highs and lows. Some fear the motion sickness. The trick is to know what works for you. If you need help answering this question, reach out to your TD advisor or investment professional for guidance.

Jonathan Needham

Vice-President, ETF Distribution

TDAM

For more information on new TD ETFs, please visit TD.com/ETFs


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