Morningstar Minute - Lessons in investing

As the kids return to school, now is a good time to learn from the teachable moments we receive in the world of investing.

Michael Keaveney 8 September, 2017 | 5:00PM

 

 

Michael Keaveney: This week, millions of students have returned to school, and will, once again, crack open the books to advance their knowledge in a multitude of subjects. So, now seems like a good time for a reminder that investing is also a discipline where there's ample opportunity to learn.

Let's start with geography. The kids are learning that the world is a big place, and Canadian investors would be wise to get the same message. The Canadian Stock market is only about three and a half percent of the global share of equities, so the vast majority of public stock market opportunities are outside our borders. Further, at current valuations, Morningstar Investment Management believes that many of the best longer-term equity opportunities are in emerging markets, Europe and Japan.

Moving on to history, the wise investor has an appreciation for what has happened in the markets, while still acknowledging that past performance may not necessarily be repeated.

Take the Canadian equity market, for example. Over the past 30 years, the market has marched to new highs, and long-term investors have generally been rewarded. But not only has the market suffered the occasional steep drop, it's also true that nine of the past 30 calendar years have been negative; that's 30% of the time.

Even in the midst of a long-term increase, we need to be prepared for the inevitable occurrence of shorter-term downturns -- and a year can feel like a long time when you are living through it.

Investing well requires ongoing openness to learning, whether it is primarily to reinforce the fundamentals, or to examine new opportunities.

So whether it's geography, history, or the many other subjects that can apply to your money, take a page from the young scholars in your life, and make a conscious effort to learn from the teachable moments we receive in the world of investing.

For Morningstar Investment Management, I'm Michael Keaveney.

About Author

Michael Keaveney

Michael Keaveney  Michael Keaveney, CFA, is Director, Investment Management at Morningstar Associates, Inc.