Ask the Money Lady: Plan for end of year investing

 In Opinion

Dear readers,

I have received so many emails about what to invest in, how to invest, and what to ask advisors – so I wanted to give you a low-risk investment strategy and discuss what you can expect in the markets as we move through the last quarter of the year.

Often investors who feel like they are to face future uncertainties in the market switch their portfolios to a weighted average strategy which can be used to evaluate the performance of your stock portfolio.  To calculate the true VWA (volume weighted average) you would need to calculate the financial investment weight and return.  Of course, this is not something most investors will want to do, so instead here is a structure that can mimic this strategy and protect your investments during market volatility.

When we experience selloffs in the market it tends to raise the anxiety level of the average investor, reigniting fears of a severe and prolonged price decline.  In reality, selloffs are a healthy part of the stock market since after a dramatic price pullback, comes a recovery that usually morphs into a higher high than economists normally would have predicted.  That being said, when investors are forced to contend with volatile markets it is always recommended to use a weighted average investment approach.  

This investment strategy combines high quality dividend payers and high-quality growth names equally and can be used in really any type of environment; especially given the current high inflation and interest rate hikes.  A weighted average strategy typically outperform during volatile periods and limits losses during market declines, but it also provides one more thing:  an attractive longer-term risk and return profile relative to the overall market.  Here’s how to approach this with your advisor.  Equity investments should be used with high quality dividend paying stocks on the “defensive” side of the portfolio and then high-quality growth exposure stocks are on the “aggressive” side of your portfolio.  One of the most attractive attributes of this strategy, from a historical performance perspective, is the ability to limit losses during market declines, yet also participating in the upside during periods of market strength.

Also, a word to the wise, September historically has always typically been the worst month for US stock from a performance standpoint with the S&P500 logging an average loss of 0.6% going back to 1945.  Do not be surprised if your portfolio struggles a little in the last quarter.  Third quarter results tend to exhibit weaker price returns historically.  Instead, think of this as a “market sale” and a good time to buy high quality stocks at a cheaper price.  Top up your RRSP or TFSA.  Late November and the month of December are typically the best times of the year for price performance and historically average gains of 1% to 1.6% are usually seen during the last few weeks of the year.  

Christine Ibbotson is an author, finance writer, national radio host, and is now on CTV Morning Live, and CTV News. Send your money questions through her website at


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