On Expertise: Insights for Achieving Your Financial Goals

On Expertise: Insights for Achieving Your Financial Goals

By James Parkyn - PWL Capital - Montreal

One common trait of highly successful individuals is that they possess the discernment to acknowledge not only their own expertise but also recognize and leverage the expertise of others. This ability enables them to build strong networks, delegate effectively, and make informed decisions that propel them further towards their goals.

Importance of understanding and recognizing expertise

Genuine expertise transcends simply possessing all the answers; it entails understanding how and where to source the correct solutions when necessary. This is important for several reasons:

• It allows you to identify and leverage your strengths: Knowing your areas of expertise empowers you to focus your efforts and achieve better results.

• It helps you recognize the expertise of others: By understanding what others are skilled at, you can build strong teams, delegate effectively, and learn from valuable mentors.

• It allows you to navigate complex situations: Expertise provides a framework for making informed decisions and solving problems efficiently.

Benefits of cultivating expert networks 

Successful individuals cultivate extensive networks of skilled professionals, recognizing that leveraging the expertise of others is key to achieving their goals.

For more than 25 years, we've collaborated closely with accomplished executives, entrepreneurs, healthcare professionals, business owners and academics, both locally in Montreal and across Canada.

As an integral part of our clients' network of experts, we prioritize seamless coordination and comprehensive support. We maintain close collaboration with various professionals, including accountants and lawyers, to ensure that we consistently offer the most appropriate next steps within the broader context.

Our overarching objective remains consistent: to empower individuals to excel in their respective fields by simplifying and optimizing their financial decision-making processes.

>>>See our investment philosophy

What to look for in a financial advisor: 5 indicators of expertise

Here's how we help successful professionals like you:

• We understand your complexities. Your financial picture is multifaceted. You may have a complex business structure, a growing family to consider, and a desire to give back meaningfully. We take the time to understand your unique circumstances and goals.

• We speak your language. Financial jargon is our second language. We translate complex concepts into clear, actionable plans that fit seamlessly into your busy schedule.

• We value your time. You don't have time to wade through mountains of financial data. We provide concise, insightful reports and regular communication, keeping you informed and involved without overwhelming you.

• We focus on the growth of your wealth. We develop proactive strategies that align with your risk tolerance and ambition, allowing your wealth to work as hard as you do.

• We offer comprehensive solutions. From unbiased investment management, tax planning and estate planning to retirement strategies and philanthropic giving, we address the full spectrum of your financial needs.

>>>Learn more about what we do

Parkyn – Doyon La Rochelle: More than just financial advisors, trusted partners

We understand that financial security is about more than just numbers; it's about peace of mind and the freedom to pursue your passions. By taking the weight of wealth management off your shoulders, we free you to focus on what truly matters – driving innovation, leading your team, and making a lasting impact on the world.

Leverage the expertise of the Parkyn – Doyon La Rochelle team to simplify the journey to achieving your many goals.

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Does holistic financial advice translate into higher returns?

Does holistic financial advice translate into higher returns?

By James Parkyn - PWL Capital - Montreal

For the longest time, wealth management services were confined to building and managing financial portfolios for clients. Then came a holistic approach to financial planning, which promised superior outcomes by looking beyond simple portfolio returns to consider all aspects of an individual's financial life. But how exactly does holistic financial planning play out and does it really translate into higher returns?

In this post, I delve into the details of holistic financial planning to help you decide if working with a holistic financial advisor makes sense for you – and when you should make the switch.

What is holistic financial advice? 

Holistic financial planning (or comprehensive wealth management) considers all aspects of an individual's financial life. This goes beyond traditional advice on investments and retirement planning to encompass areas such as budgeting, debt management, insurance, tax planning, and estate planning. The goal is to create a tailored strategy that aligns with the client's overall financial goals and values.

Promised benefits of holistic financial planning 

The Parkyn—Doyon La Rochelle team has been staunch advocates for holistic financial advice for over 25 years. Based on our experience, we have seen that superior outcomes can be achieved by recognizing the interconnected nature of all financial decisions. 

How holistic wealth management works

All holistic financial advisors take a comprehensive view of the client’s financial life, but each team will have its own approach and skillset. That being said, there are some key steps that are typically involved in holistic wealth management services:

• The advisor will first meet with you and take the time to analyze your goals, values, financial situation, time horizon, and risk tolerance and capacity to tailor recommendations that optimize and simplify your financial life.  

• The advisor will then propose a multi-pronged approach that includes investment management, financial and tax planning as well as inter-generational wealth transfer & philanthropic planning.

• This multi-pronged approach will typically include a comprehensive roadmap that meticulously addresses and plans for major life events as a unified whole to optimize your financial well-being and overall quality of life.

• Once the approach and roadmap have been agreed upon, your financial expert becomes your trusted “quarterback”. They will often collaborate closely with your chosen accounting, legal, and insurance advisors to optimize financial efficiency, while balancing both your personal and business goals.

• Your advisor will continue to provide ongoing guidance and support that adapt to your ever-evolving circumstances, understanding that your financial, family and professional situations will not remain static over time. 

When is the right time to switch to holistic financial planning?

Most conventional financial planning will overlook at least a few key aspects of your financial life. If you are losing sleep over these missing aspects, it’s probably a sign that your current financial plan is not as comprehensive as it should be. This can be a good time to talk to a holistic financial advisor.

We have clients that come to us in their early twenties right up to the cusp of retirement. They may be just starting to think about their financial future, or at the point where they’re ready to solidify the legacy they will be leaving for future generations.

While the decision to switch financial advisors should never be taken lightly, it need not be painful or difficult. A good financial advisor will know how to guide you in the secure transfer of your assets and do all the heavy lifting, collaborating closely with the legal, tax and other advisors you know and trust. At the same time, they’ll ensure you retain full visibility and control over your finances.

By meticulously addressing and planning for life events as a unified whole, holistic financial planning can optimize your financial well-being and elevate your overall quality of life. Just like the harmony of a well-composed piece of music, success is achieved when all elements come together.

>>>See all our holistic wealth management services

The history of holism

The year is 1926. South African Prime Minister and natural science enthusiast Jan Christian Smuts coins the term ‘holism’ in his book Holism and Evolution. In it, he defines the concept as: "the tendency in nature to form wholes that are greater than the sum of the parts through creative evolution.”

The word ‘holistic’ was born out of this philosophy, and is employed today in many fields, to illustrate the importance of considering the whole, in lieu of focusing only on individual parts.

That same year, in London, England, Sir George Martin was born. Soon renowned for his musical brilliance and prowess as an arranger and producer, he earned the moniker of the "fifth Beatle." Martin's extraordinary knack for recognizing and amplifying the individual talents of John, Paul, George, and Ringo, transforming them into a cohesive force, became the stuff of legend. Understanding that the collective impact of the Beatles transcended their individual abilities, he played a pivotal role in shaping their enduring musical legacy, which continues to captivate audiences over six decades later.

The whole was always going to be bigger than the sum of the parts.

Want to know more about our approach to holistic wealth management?

For more commentary and insights on investing and personal finance, be sure to listen to our latest Capital Topics podcast and subscribe to never miss an episode. And download your free copy of our popular eBook Seven Deadly Sins of Investing. 

Can a crystal ball make you rich?

Can a crystal ball make you rich? 

By James Parkyn - PWL Capital - Montreal

Markets are tough to predict even with advance information 

Imagine owning a crystal ball that lets you see tomorrow’s news in advance. You could cash in and get rich! 

Not so fast, says statistician and financial writer Nassim Nicholas Taleb, author of best-seller The Black Swan: The Impact of the Highly Improbable. “If you give an investor the next day’s news 24 hours in advance, he would go bust in less than a year,” he warns. 

Taleb’s assertion now has backing from a study by Victor Haghani and James White of financial management firm Elm Wealth. 

WSJ trading experiment 

They did an experiment with 118 U.S. university graduate students—90% in finance or MBA programs—to test Taleb’s claim. 

The students each got $50 and the front page of the Wall Street Journal (with market price data blacked out) published on 15 random days from 2008 to 2022. They then got the chance to bet on how the S&P 500 Index and 30-year U.S. Treasury bonds would do the next day.  

They could go either long (that is, bet the market would go up) or short (bet that it would go down). They were also allowed to use leverage of up to 50 times—meaning they could borrow to increase the size of their trades to potentially make (or lose) more money. 

Students broke even 

The study’s “Crystal Ball Trading Challenge” (which you can try yourself here) showed how hard it is to predict the markets—even if you have advance knowledge. The students grew their $50 to $51.62, meaning an average return of only 3.2%. The result was statistically indistinguishable from breaking even, the paper noted. 

Just under half of the students (45%) lost money, while 16% went bust. The players made winning trades only 51.5% of the time. 

While students bet on the direction of bonds correctly 56.2% of the time, they were right about the S&P 500 in just 48.2% of the trades. Moreover, they compounded their errors by using more leverage in their stock’s bets (where they were wrong more often) than in bonds trades. 

Ordinary participants lost 30% 

As middling as these results were, however, the students fared much better than the roughly 1,500 people who played the game on the study authors’ website. These participants’ median result was a 30% loss. Only 40% made a profit, and 36% lost everything. 

The study, titled “When a Crystal Ball Isn’t Enough to Make You Rich,” also included results from a select group of five very seasoned and successful traders from top organizations. They all made a profit, with a median gain of 60%.  

But even they were often wrong. They placed losing bets 37% of the time. The study found that they did better than the students mostly because of how they strategically used position sizes to place bigger bets when they had more confidence. 

“Taleb is right”  

These seasoned professionals’ superior results suggested that “there are teachable skills involved in successful discretionary investing,” the study said. 

But for the vast majority of people, “by and large we think Taleb is right,” the authors concluded. 

“It’s very humbling,” Haghani was quoted saying about the results. “Even if you have the news in advance, it’s still really hard to do asset allocation or whatever with a high chance of being right, let alone not knowing what’s going to happen.” 

Timing the market is a gamble 

The study is just another good example of how hard it is to guess what markets will do. Even advance information appears to be unhelpful for most people, and it may actually be ruinous for some.  

And in the real world where we don’t have the next day’s news, timing the market is even more of a gamble. 

Investing shouldn’t be about gambling. Data shows you’re better off with a diversified portfolio and long-term investment plan that you stick to with discipline. This can help you tune out the headlines and better capture the returns that the markets have to offer. 

We can leave the crystal balls for the carnival. 

Read more commentary and insights on personal finance and investing in our past blog posts, eBooks and podcast on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website.   

TAKE ADVANTAGE OF THE EXPERTISE OF JAMES PARKYN, Portfolio Manager at PWL Capital Montreal to determine the best solution for you.

Lost Decade Ahead?

Lost Decade Ahead?

By James Parkyn - PWL Capital - Montreal

Stay the course with a diversified portfolio and long-term mindset  

Are we headed for a lost decade in equities? It’s a question on many lips after the stock market’s incredible multiyear bull run.

The worries got amplified in October when Goldman Sachs issued a grim report predicting a meager 3% annualized return for U.S. stocks over the next 10 years (or only 1% after inflation).

The report noted that the S&P 500 Index has boasted a 13% annualized return during the past decade. But high valuations and extreme market concentration—both near 100-year highs—will make it hard for stocks to repeat the same gains through 2034, the report said.

S&P 500 likely to trail bonds: Goldman Sachs

“It is extremely difficult for any firm to maintain high levels of sales growth and profit margins over sustained periods of time,” Goldman Sachs said. “The same issue plagues a highly concentrated index.”

The investment bank said the S&P 500 has a 72% probability of trailing bonds and a 33% chance of lagging inflation during the next decade.

The report prompted nervous news headlines. “Goldman Sachs Is Forecasting a Dead Decade for the S&P 500. Should You Sell Your Stocks?” one investing site pondered. “For a generation of investors accustomed to boom times, the new paradigm being contemplated would be harsh and unfamiliar,” The Globe and Mail said.

Lost decades predicted before 

But as The Globe went on to note, analysts have been warning of a “lost decade” since the start of the current equity bull market.

“We may be looking at a lost decade,” financial historian Niall Ferguson said in 2009. The S&P 500 went on to gain 16.6% a year in the decade that followed.

In 2013, economist John Hussman said “dismal investment returns” were so certain during the ensuing decade that they were “largely baked-in-the-cake.” In fact, annual S&P 500 returns averaged 11.8%.

Booms often end in busts

Giving heed to bearish fears can lead to serious portfolio underperformance. But does that mean we should ignore Goldman Sachs’ predictions altogether?

There’s no doubt equity returns have been above average. Historically, above-average performance is often followed by periods of more modest returns or even losses. A decade of 1% real returns is improbable, but it’s not impossible.

The Roaring Twenties were followed by the dismal 1930s. The great 1942-1965 market run ended with 15 years of doldrums in which the S&P 500 saw -1% real annualized returns from 1966 to 1981. After the remarkable 1982-1999 bull we had the misery of 2000-2008.

Market turns can’t be predicted   

Does this mean it’s time to pull out of stocks and hide under a rock? No one knows what the market will do. Even experts like Ferguson and Hussman get it wrong. Stocks could continue to soar. Or they could sell off or move sideways. Trying to time markets isn’t investing; it’s called gambling.

If we can’t predict the market’s turns, what can we do? At PWL, we’ve studied the data and determined that the best response is to diversify, maintain a disciplined long-term investor mindset and leave the forecasts to the horoscope pages.

Stick to the plan

Diversification also plays another role. It accounts for the fact that most wealth creation in equities comes from a tiny number of companies. Just 4% of stocks accounted for all U.S. stock market wealth creation from 1926 to 2023 above a risk-free investment in Treasuries, according to a recent study.

We can’t know which companies will be the future 4-percenters. But we can be sure to own them by buying broad index funds that hold all the companies in various markets.

No bull market lasts forever. But a long-term mindset and an investment strategy suited to your objectives and risk tolerance can give you the confidence to ignore daily market noise and not worry about whose prediction is right.

Read more commentary and insights on personal finance and investing in our past blog posts, eBooks and podcast on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website.   

TAKE ADVANTAGE OF THE EXPERTISE OF JAMES PARKYN, Portfolio Manager at PWL Capital Montreal to determine the best solution for you.

4% of Stocks Created Wealth

4% of Stocks Created Wealth 

By James Parkyn - PWL Capital - Montreal

How to ensure you own tomorrow’s winners  

It’s well known that owning stocks can generate great returns over the long run. Less known is the fact that almost all of that wealth creation typically comes from a tiny number of stocks. 

New research shows that $1 invested in the U.S. stock market in 1926 would have grown to an impressive $229.40 by 2023. That’s a cumulative compound return of 22,840%.  

Even more remarkable, however, is that just 4% of stocks accounted for all stock market wealth creation above a risk-free investment in Treasury bills. In fact, a majority of stocks—51.6% to be exact—actually had negative compound returns from 1926 to 2023. In other words, slightly more than half of stocks lost money over their life. 

The median stock lost 7.41%  

These are some of the fascinating conclusions of Arizona State University economist Hendrik Bessembinder.  

In a new paper, Bessembinder analyzed the retrns of 29,078 publicly listed common stocks from 1926 to 2023. His findings give powerful support for investing strategies that focus on passively owning a broadly diversified portfolio of stocks with a long-term horizon—the approach we use at PWL. 

Here are some of Bessembinder’s other conclusions: 

• Companies remained publicly listed for only 11.6 years on average.  

• Just 31 stocks remained publicly listed in the database for the full 98 years.  

• The median cumulative compound return of all the stocks was -7.41% per year.  

Top performer gained 266 million percent 

How is it possible for the median return to be negative when the mean compound return was 22,840%? This is because of the magic of averaging. The mean average return is skewed heavily upward by massive gains of a small number of companies. These are the companies it’s essential to own for our investments to make money. 

As Bessembinder put it in a recent interview, “Long-run wealth enhancement in the public stock market is concentrated in relatively few stocks.” 

Among the best 30 performers: Emerson Electric Co., in 30th place, with a cumulative return of 2.4 million percent, and top dog Altria Group (formerly Philip Morris), with an otherworldly 266 million percent gain.  

Those aren’t typos. Stated differently, $1 invested in Emerson Electric would have become $24,098, while a dollar invested in Altria/Philip Morris stock would have grown to $2.66 million. 

Compounding led to massive profits 

These astonishing profits, incidentally, show the value of patiently accumulating compounded returns over the long run.  

Interestingly, Emerson Electric made its gains with what Bessembinder calls only a “moderately high” annualized compound return of 13.57%. The key was 79 years of compounding at this rate.  

Altria, for its part, had only a somewhat higher annualized compound return of 16.29%. But when compounded over 98 years, this yielded an extraordinary gain.  

Five firms accounted for 11.9% of gains   

Bessembinder’s findings confirm his earlier landmark research in which he found that just five of 26,168 publicly listed firms accounted for 11.9% of net U.S. shareholder wealth creation of $47.38 trillion from 1926 to 2019. 

This concentration is increasing. In 2016-2019, just five firms accounted for an even bigger slice—22.1%—of shareholder wealth creation. 

“This tendency for wealth creation to be concentrated in a few stocks has grown even stronger in recent years,” Bessembinder recently said. 

How to own the next winners  

What does all this mean? A tiny number of stocks is responsible for almost all wealth gain in the stock market. If you didn’t own those stocks, you would have lost money. How do you know which stocks to buy? You don’t. No one can know in advance which companies will be the best performers.  

The answer is not to gamble your savings and legacy on trying to find the hot new trend of the day, but to be sure you own the next Altria, Emerson or Google by owning every stock. This can be accomplished through broad index funds that hold all the companies in various market indexes, such as the S&P 500 Index or S&P/TSX Composite Index. 

As Bessembinder put it, “The only way to be certain of owning the stocks that turn out to be the future big gainers is to own all the stocks” in a broad index fund.  

At PWL, we couldn’t agree more. This is the approach that is at the core of our data-driven strategy focused on the long term. 

Fads and companies come and go, but a disciplined approach of owning the entire market ensures you’ll benefit from the winning companies of the next 98 years. 

Read more commentary and insights on personal finance and investing in our past blog posts, eBooks and podcast on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website.   

TAKE ADVANTAGE OF THE EXPERTISE OF JAMES PARKYN, Portfolio Manager at PWL Capital Montreal to determine the best solution for you.