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It’s been a year since most of the world went into lockdown. What have we learned since then? Stu Kedwell, Co-Head, North American Equities, looks back at the lessons investors can take away from lockdown. Stu also explains how having a strategy, such as dollar-cost averaging, can help investors remain disciplined and find opportunities in times of uncertainty. [7 minutes, 58 seconds] (Recorded March 16, 2021)


Hello and welcome to The Download. I'm your host, Dave Richardson, and it is (S)Tuesday! Stu Kedwell, Co-Head of North American Equities at RBC Global Asset Management, is with us today. Stu, how are you doing?

Great Dave. Thanks for having me, as always.

How's your hair today Stu?

Well, I'm sporting a new baseball hat. So, there you go. I need to keep it in form.

It still looks like he's about to hop on a combine and go out in the backyard and do some work. And it's a different look. But he will no less be insightful in his sporting the new cap. And Stu, it was a year ago today— for me anyways, and I think you're probably in around the same time frame—, my last day going into the office. For many people, towards the front end of March, 11th or 12th is when things really started to hit home in terms of the pandemic and lockdowns. The market was about a week away. March 23rd is where most stock markets around the world bottom out. But what are your reflections a year later on what we've been through and some of the lessons that investors can take away?

Well, when I sit and think back over the last year, there's a couple of things that pop to mind. The first is that the largest opportunity comes when you feel the least certain about what the outcome might be. The second is, when you feel the most uncertainty, it's a good reminder that the people in charge, whether or not it's the central bankers, the government people, business people, everyone is fixated on how do we fix this problem. So, the same thing that creates the maximum amount of uncertainty almost ensures that there's likely to be a solution to that very uncertainty that is crippling people. I really think back, as we ended the month of March or in the latter half of the month of March, there was one week where some of the central bank facilities had been announced, but they hadn't been enacted yet. There was a couple of days delay. And markets were really illiquid for a couple of those days. That brings me to the third thing, which is when markets are really illiquid and are impacted by the price discovery that's going on in markets, which is not very pleasant to watch during illiquid periods. The people that are driving that price discovery are not doing it on their own will. It's because they have a fair amount of leverage. It's because the margin clerk has said we need to adjust your portfolio for you because of the uncertainty. And that price action scares a lot of people. But it is the function of someone having to buy and sell, not necessarily wanting to buy and sell. So, I try and think a lot about those three things, and in my career, they've presented themselves almost once a decade. But during those periods of time when uncertainty is high, the people transacting are not doing it by free will, and the central banks and the governments are very focused on how do we get the economy back on the road so that we can get unemployment down, we can get consumption back up and we can get the economy going. Those are without fail the most spectacular times to be putting capital to work in the stock market.

But it's so hard because they're such emotion attached to it and I think it's so important for investors. One of the reasons, I think, why we're reflecting on it today— is remembering those times and now sitting here a year later and you just shake yourself and go, wow, why couldn't I pull the trigger right at that point in time when we now know with 20/20 hindsight that was exactly the time that we should have been buying. And so, we don't want to be timing the market as investors to begin with, but it's at those points of maximum pain where we've got to remember not to do the opposite and bail out when, as you say, some of the reason that some people are bailing out is because they're forced to. And if you're not forced to, you can ride things out a little bit better than those who are.

I think that's one hundred percent. And yet we can all look back on with hindsight and say, I should have bought more or what have you. But the other thing that we've been huge fans of on this podcast—and I'm a huge fan just in my financial planning—, is dollar-cost averaging. And if you're on the program and you're just running it through every couple of weeks, when you think about how many effective shares per dollar or units per dollar you were getting in March, it was a real addition to the long-term portfolio. And the beauty of dollar-cost averaging is that I stick to the plan. I know that it works for me emotionally. I know that it's going to work for me from a financial planning standpoint. But when things are in disarray, I get more for the dollars I'm putting away and when things are really good— and they might stay good for some time—, but I’m buying slightly less because I'm using the same dollars, I'm just getting fewer shares when things are really robust. That averaging is not just the commitment to biweekly purchases or monthly purchases. It's also that notion that when things are bad, my purchases are going farther and that's really what builds over time. I was looking at a statement; my grandfather gave me a share of Imperial Oil for my birthday and for Christmas between the ages of 13 and 19. And so I think I was given eighteen shares of Imperial Oil and now I have around four hundred. And when I look at the price of Imperial Oil, just as an aside, right now it's around 30 dollars and I think it saw the high teens during the middle of last year. I bought the most shares of Imperial Oil on the dividend reinvestment plan that I had in probably 10 years. When I sit here a year later, Imperial Oil is not at an all high, but that account is doing very well because of the discipline of that dividend reinvestment, which is very similar to the dollar-cost averaging.

I got a G.I. Joe, I think, for that birthday, and it is not worth anything right now! In fact, I think my little brother broke it into pieces. Talk about better gifting in your family.

Well it might be, Dave. Some things have really gone bananas on the Internet, some old playing cards and things like that. So maybe that G.I. is worth something.

No, it's not Stu. But I mean, if you're looking at this in the context of this crisis, March 12th last year, the TSX is down 12%, the biggest drop it’s had since 1940. So, you're going back to historic level drop. But if you have that dividend reinvestment program for the middle of the month in March or you had a regular investment program or a dollar cost averaging program, you are in buying that day. It's that discipline that regular investing and dollar-cost averaging puts in place for you and your investment program, which allows you to get those bargains even if someone would have almost had to put a gun to your head to get you to go and buy that day, because the emotions were so high. And that's the lesson you learn, right?

It’s a great point Dave.

All right. Well Stu, maybe I'm going to go try and find that G.I. Joe and see if it's worth anything. Congratulations on the Imperial Oil that's doing well. And thank you for joining us on Stu’s days again.

Great. Thanks, Dave. Take care.


Recorded: March 16, 2021

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