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 may often “buy high”.

When markets turn negative, investors become fearful and decide to cut their losses and may “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 opportunity 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 average annual return.

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 - Over time markets have been strong

Accept the fact that markets will rise and fall but over time markets have been strong.

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.

The above results are hypothetical and are intended for illustrative purpose only.

A widespread health crisis such as a global pandemic could cause substantial market volatility, exchange-trading suspensions and closures, and affect portfolio performance. For example, the novel coronavirus disease (COVID-19) has resulted in significant disruptions to global business activity. The impact of a health crisis and other epidemics and pandemics that may arise in the future could affect the global economy in ways that cannot necessarily be foreseen at the present time. A health crisis may exacerbate other preexisting political, social, and economic risks. Any such impact could adversely affect the portfolio’s performance, resulting in losses to your investment.

This material was prepared solely for educational and informational purposes and does not constitute a recommendation, professional advice, an offer, solicitation, or an invitation by or on behalf of Manulife Investment Management to any person to buy or sell any security. Nothing in this material constitutes investment, legal, accounting, or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you.

Investing involves risks, including the potential loss of principal. Financial markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments.

Past performance does not guarantee future results, and you should not rely on it as the basis for making an investment decision.

Diversification does not guarantee a profit or protect against loss in any market.

Neither Manulife Private Wealth nor any other companies in the Manulife Financial Corporation (MFC) group are acting as an advisor or fiduciary to or for any recipient of this report unless otherwise agreed in writing. Neither Manulife Private Wealth or its affiliates, nor any of their directors, officers, or employees, shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained here. Manulife Private Wealth does not provide legal or tax advice, and you are encouraged to consult your own lawyer, accountant, or other advisors before making any financial decision. Prospective investors should take appropriate professional advice before making any investment decisions.

The opinions expressed are those of the author(s) and are subject to change without notice. These opinions may not necessarily reflect the views of Manulife Investment Management or its affiliates.  The information and/or analysis contained in this material has been compiled or arrived at from sources believed to be reliable, but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness, or completeness and does not accept liability for any loss arising from the use of the information and/or analysis contained. The information in this material may contain projections or other forward-looking statements regarding future events, targets, management discipline, or other expectations, and is only as current as of the date indicated. The information in this document, including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Manulife Private Wealth disclaims any responsibility to update such information. Should you have any questions, please contact or ask to speak to a member of Manulife Private Wealth.

Manulife Private Wealth is a division of Manulife Investment Management Limited and Manulife Investment Management Distributors Inc. Investment services are offered by Manulife Investment Management Limited and/or Manulife Investment Management Distributors Inc. Banking services and products are offered by Manulife Bank of Canada. Wealth and estate services are offered by Manulife Investment Management Limited.

Manulife, Manulife & Stylized M Design, Stylized M Design, and Manulife Private Wealth are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license. This information does not replace or supersede KYC (know your client) suitability, needs analysis or any other regulatory requirements.

Manulife Private Wealth

Manulife Private Wealth

Manulife Private Wealth

Read bio