Five timeless principles for investing success

While investing in volatile times can sometimes challenge your discipline and commitment, there are timeless principles to include in your investment strategy that can help ease your mind and keep you focused on the long term.

1 - Think diversification

It’s rare for any investment to repeat as a top‑performer from one year to the next. Diversifying across various economies, businesses, countries and popular investment classes can help spread risk, remain more consistent and reduce the potential for underperforming assets to impact your portfolio.

Historical Asset Class Rotation, 2012-2021

Calendar year returns by class assets (%)

This chart shows calendar year returns by class assets between 2010 and 2020, and ranked worst to best.
Source: Morningstar Direct as of December 31, 2021. Returns in CAD $. Performance histories are not indicative of future performance. An index is unmanaged and cannot be purchased directly by investors. The indices cited are widely accepted benchmarks for investment performance within their relevant regions, sectors or asset classes, and represent non-managed investment portfolios. Although these indices are similar to the fund’s objectives, there may be material differences including permitted holdings or investment strategies, which may impact returns. Please refer to the Fund Facts of the fund for more information. Global bonds represented by Bloomberg Multiverse Total Return Index. Canadian Bonds represented by FTSE Canada Universe Bond Index. Canadian equities represented by S&P/TSX Composite Total Return Index. U.S. equities represented by S&P 500 Total Return Index. Global equities represented by MSCI World Net Return Index. International equities represented by MSCI EAFE Net Return Index. Emerging Markets equity represented by MSCI Emerging Markets Net Return Index. Diversified portfolio represented by a combined portfolio (15% S&P 500 TR Index, 10% S&P/TSX TR Index, 20% MSCI World Index, 15% MSCI Emerging Markets Index, 10% MSCI EAFE Index, 20% Bloomberg Multiverse Total Return Index and 10% FTSE Canada Universe Bond).

2 - Be rational, not emotional

In good times, investors are excited, they want to invest more and often “buy high”.

When markets turn negative, investors become fearful and decide to cut their losses and “sell low”.

Stay disciplined and committed to your long term investment plan to avoid riding the emotional rollercoaster.

An investor’s emotional rollercoaster
This infographic displays the emotional pattern that investors feel before, during, and after the point of maximum financial risk and point of maximum financial opportunity.
Source: Hays Advisory. This chart is an example and does not represent the performance of any actual investment. This is not meant as investment advice. For illustration purposes only.

3 - Missed days means missed opportunities

The difference between investment success and disappointment can boil down to a few days of being in or out of the markets.

By staying fully invested and not missing the best 20 investment days over the last 20 years, an investor would have more than doubled their investment.

Growth of $10,000 in S&P/TSX Composite Total Return Index from 2002-2021
This chart shows the returns for those who stayed invested, those who missed the 10 best days, and those who missed the 20 best days of the markets between 1999 and 2022. By staying fully invested and not missing the best 20 investment days over the last 20 years, an investor would have more than doubled their investment.
Source: Morningstar Direct, December 31, 2021. For illustration purposes only. Average 1yr return calculated by annualizing the average daily return assuming 250.4 trading days in a year. May not exactly match actual annualized returns due to calculation methodology. Past performance is not indicative of future performance. Index: S&P/TSX Composite Total Return Index. The index is unmanaged and cannot be purchased directly by investors. The rate of return shown is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the investment fund or returns on investment in the investment fund. © 2022 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar not its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

4 - Measure performance over time, not overnight

Accept the fact that markets will rise and fall but over time markets have always moved higher.

Taking a long‑term perspective can help you stay the course when markets move from crisis to opportunity and back again.

Keeping a long-term view

Despite setbacks, the S&P/TSX Composite Total Return Index shows growth over the long term

This chart shows the significant market setbacks between 1975 and 2022, and proves that despite these short-term losses, the market still displayed growth in the long-term.
Source: Morningstar January 1, 1975-December 31, 2021. For illustration purposes only. Blue circles indicate periods of market decline. Past performance is not indicative of future performance. S&P/TSX Composite Total Return Index. The index is unmanaged and cannot be purchased directly by investors.

5 - Turn market volatility to your advantage

By investing a fixed dollar amount in regular intervals dollar‑cost averaging can help you buy more units of an investment at lower prices, and fewer at higher prices.

This helps take the worry out of making a single lump sum investment at the wrong time.

12-month comparison:

$12,000 Single Lump-Sum Investment vs. $1,000 Monthly Investment using Dollar-Cost Averaging

This chart shows that By investing a fixed dollar amount in regular intervals dollar‑cost averaging can help you buy more units of an investment at lower prices, and fewer at higher prices. Over time, your average price per unit will be lower than if you invested all your money at one time.
For illustration purposes only.

Discover how timeless investment principles can help you manage risk through all market conditions and improve your investment results.

Contact your advisor.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the fund facts as well as the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Manulife, Manulife & Stylized M Design, Stylized M Design and Manulife Investments are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.

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Manulife Investment Management

Manulife Investment Management

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