Our Views

Why this time is not all that different

The euphoria and dizzying price multiples for certain momentum stocks of the past year have led to a lot of “This time it’s different” refrains. You sometimes hear that the “old rules” of valuation no longer apply and, even that, “Stocks only go up.”

And yet throughout history, whenever we hear those refrains – when a new premise captures the imagination and momentum of the investing public – it’s worth taking a pause. Because following the crowd is never a path to long-term investment success. Ultimately valuations matter. In decades past we’ve seen this in energy (1970s), real estate (1980s), and dot coms (1990s).

So, for anyone who has fear of missing out on the latest stock market gains, you’ll be reassured by this clever credo shared by one of our global equities managers, EdgePoint Wealth Management. It’s a perspective that’s worth reading now.

This time is different
And I refuse to believe that
Thinking like a rational business owner is the best way to invest
I realize this may be a shock but
Long-term compounding is more important than good short-term performance
Is a lie and
Investing with the crowd is the safest approach
So, in 30 years, I will tell my children that
Treating the stock market like a casino
Is a better way to invest than
Treating each investment as though it’s meant to feed, shelter and clothe your family
I tell you this
Entry price dictates returns
But this isn’t true
Valuations no longer matter
Experts tell us
There’s too much career risk in looking different
It’s clear that many believe
There is no edge in long-term thinking
No longer can it be said that
A good financial advisor is important
It will be evident that
I can do this without help
It’s foolish to presume that
To make money in the long term, sometimes you have to look wrong in the short term

Now read this from the bottom up.

Source: Cymbria Annual Report 2020. Cymbria is managed by EdgePoint Investment Group Inc., a related party of EdgePoint Wealth Management Inc. EdgePoint® is a registered trademark of EdgePoint Investment Group Inc.