Bruinsma urges investors to keep equity plans through downturn fears

Anita Bruinsma, a Toronto certified financial planner, said in an Oct. 18 opinion column that investors with horizons of seven years or more can still justify heavy equity exposure.

The argument matters because concerns about a possible stock-market decline and artificial-intelligence bubble have tested investor discipline after a strong run in equities, according to The Globe and Mail column.

Bruinsma said investors should set allocations across stocks, bonds and cash based on goals, time horizon and spending needs. She wrote that “a good investment plan accounts for market declines,” and said changing stock exposure because of fear can mean leaving a chosen asset mix at the wrong time.

For retirees or others drawing from portfolios, Bruinsma said cash-equivalent investments covering two to three years of income needs can reduce the pressure to sell equities during a downturn. She cited Yardeni Research data, via Yahoo Finance, saying bear markets have recovered within a median of about two and a half years.

The column also cited a 2023 analysis by three U.S. finance professors that compared portfolios and found a mix of domestic and international stocks produced the best outcome across four measures, regardless of age. Bruinsma added that investors still need to tolerate the volatility of an all-stock portfolio.

For medium-term needs of three to seven years, Bruinsma said investors should consider bonds or guaranteed investment certificates, known as GICs, which are fixed-term deposits commonly used in Canada. She said portfolio changes should be driven by personal or financial changes, such as illness, disability, higher spending needs or a property purchase.

The column did not provide a forecast for equity returns or a timing call for a market decline. Its central point was that market forecasts should not override an allocation plan designed around the investor’s own cash needs and investment horizon.

Source: opinion column, The Globe and Mail, Oct. 18