Those Spooky October Stock Market Corrections and the Balanced Portfolio.

This week offered one of the more significant stock market pullbacks of the last year or more. The scary headlines roared …

Dow Plunge

That headline was courtesy of the Financial Post. The article offered …

The broad selloff took the S&P 500 to the lowest in three months, the Dow Jones Industrial Average plunged as much as 836 points and the Nasdaq 100 Index tumbled more than 4 per cent. All 30 members of the blue-chip index retreated, with Boeing and Caterpillar dropping at least 3.8 per cent. Computer companies led the S&P 500 to a fifth straight loss, the longest slide since Donald Trump’s election win.

Canada’s main stock index had its worst day in more than three years. The S&P/TSX composite index closed down 336.65 points to 15,517.40.

Yup, the Canadian markets had its worst day in 3 years. As a patient investor, I did not know that ‘scary fact’. I was also driving to Prince Edward Island mid week and my mind was certainly was not on all things stock market, nor investing. In fact being agnostic to the short term market gyrations and economic and political noise is a good practice to embrace for your entire investment career. Set it and forget it. Get in the right investment mix and then wind it up and let it go. Why would we focus on events that we can’t control? We can’t control the bond markets that just spooked the stock markets. We can’t control the stock markets that just got spooked. It’s October and the month of Halloween, and I could certainly find many more spooky headlines. We could even find headlines that talk about October as the ‘scariest’ month for stocks, but we don’t need to go there. Stock market noise and fear mongering comes in many shapes and sizes.

We focus on what we can control; our asset allocations (our investment mix) and our fees and our investor behaviour. That investor behaviour mention means you stay the course through all of the market noise and gyrations. It’s all noise, or news that’s fit to ignore. The stock markets have seen it all before, from wars to recessions, to health crises to political unrest. Uncertainly is the norm, and through it all stock markets have delivered wonderful long term gains.

Here’s those US stocks from 1972, turning $10,000 into over $1,000,000. Chart courtesy of As always, past performance does not guarantee future returns.

US Stocks 1972Of course if you want to grab some of those wonderful investment gains, you have to be able to hop on that stock market roller coaster that goes up into the sky. We can see that it can be quite the ride at times, and the key is that we have to be able to hold on as we get to the apex and then start one of those speedy descents. The thing is, with stock markets, we never know if we are at an apex (stock market top) that precedes a pending drop. Stock markets mostly go up over time so we are usually at or near an all-time high. We also never know how steep a roller coaster/stock market decline might be or how long a ride might have to stomach on the way down.

We focus on the long term trend. While there are no guarantees of future performance, the stock markets of developed nations have gone up, tremendously, over time.

Of course if you want to turn that hair raising stock market roller coast ride into a Kiddie Coaster, that might be possible. You create or own a Balanced Portfolio. We put some shock absorbers on that roller coaster to smoooooooth out the ride. In the appropriate investment mix, we might find that peace of mind.


This week on The Hub, Jonathon Chevreau posted an article from Scott Ronalds of Steadyhand. The article was entitled What a Market Decline Looks Like for a Balanced Investor.

The Steadyhand article was originally from January of 2018, and it was a timely repost given the market events of the week. We see that this kind of advice or mindset is timeless when it comes to sensible investing. This from Mr. Ronalds …

I have no greater insights than you do on what the markets might do over the next several months. But it’s been a while since we’ve had any kind of meaningful pullback in stocks and we’re due at some point. It may not happen next quarter, next year or even this decade. But as I noted in my last post, declines and bear markets are a normal part of investing. Are you prepared?

Love it. Two key parts in that paragraph are the words ‘normal’ and ‘prepared’. Again, all of the stock market moves and gyrations and even major corrections are normal and expected. Now that doesn’t mean that because it’s normal does not mean that corrections are not trying on the nerves. But it can lessen the blow to know that ups and downs are the norm, and again if we choose we can lessen the blow by creating that Balanced Portfolio.

Again from Mr. Ronalds …

The thing about bear markets, though, is you never know when they’re going to happen and how they’ll play out. As your investment manager, a key part of our job is preparing you for both the good times and bad.

A key (OK let’s write an absolute must) is matching your risk tolerance level to your investments so that you can stay the course. If you have a higher risk tolerance level, and you have a longer time horizon you might take on that additional risk (more stocks) for the potential of those greater returns. If you want or need a lower risk portfolio we add those bonds. This week, I continued my outlines or overviews for the ETF Model Portfolios on Cut The Crap Investing with The Classic Canadian Balanced Portfolio. Stocks for Growth, Bonds for Ballast.

When we self direct and create own ETF portfolio we have to ensure that we get into, or create the right portfolio at the appropriate level of risk. In my ETF series I hope to better frame that risk and return proposition for self directed investors.

It’s important to know the potential long term gains weighed against how much the portfolio ‘might go down’. We also want to be prepared for how long a portfolio might be under water. These are the questions answered or addressed in that Balanced Portfolio review.

Once again, there is perhaps nothing more important than investing within your risk tolerance level. If you are not comfortable managing your own investments there are many wonderful and simple Managed Portfolio options that includes Steadyhand and the Canadian Robo Advisors. With the robo advisors you will complete an online investor profile that will measure your tolerance for risk and suggest the appropriate investment mix.

If you have any questions feel free to send a note to

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