TSX TrendWatch Weekly

NOTE: With this week’s update we’ve shifted to a different blogging platform, which we hope will be more robust than what we were using before. It’s unclear at this point whether we’ll be able to migrate our previous archives to the new software, but we’re certainly going to try.

They say that “investors climb a wall of worry”, and that’s quite an appropriate expression. We worry that we may not pick the right stocks. We worry about market crashes. We worry about recessions and how they will affect our stock prices. We worry about what we would do if we lost large sums of money by investing, instead of parking our savings in the bank. The list goes on and on.

The reality of course is that investments in equities outperform just about any other asset class by a wide margin in the long run. There will be set-backs and occasional wrong decisions, but that’s life.

In fact many have argued that it pays to be a worried investor. A worried investor…

• does more thorough research
• closely monitors his or her portfolio to weed out the losers and let profits run
• has a better awareness of who or what to listen to or read as credible sources
• is general more tuned in to the key criteria for making investment decisions

The complacent investor is generally less vigilant, and the happy-go-lucky investor has probably just stumbled into a buoyant market where “all boats rising with the tide”. It’s amazing how many investors suddenly become arrogant “geniuses”, when the reality is that even randomly picked stocks will typically do well in very bullish circumstances.

So, it pays to stay worried within reason. After all, you still want to be able to sleep at night (unless you have a passion for night-trading currencies!).

Over the past two weeks since our last update, the percentage of stocks trending upward has declined, but not appreciably.  The odds of choosing stocks that will continue to appreciate is still in our favour.

The S&P/TSX Composite index exceeded last years highs briefly, before settling back-1.7% over the past week. The index is still comfortably close to 15,000 for those of you who like round numbers.

ENERGY continues to be the place to be, in spite of increasing talk of an energy bubble. CONSUMER DISCRETIONARY stocks are clearly to be avoided unless you identify a special situation. We certainly don’t see any right now.

So, let’s continue to be worried investors and let the profits add up!