Our Best Advice of 2025

Our Best Advice of 2025

A year that defied forecasts and reaffirmed disciplined investing

By James Parkyn - PWL Capital - Montreal

As 2025 comes to an end, it’s a great time to reflect on the year gone by. It’s been turbulent, to say the least.

But amid the volatility, investors enjoyed a third consecutive year of exceptional returns—especially if they ignored the noise and stayed anchored in a disciplined long-term approach.

Here are our best nuggets of advice from the past year—perspectives worth carrying with us into 2026.

1. Ignore the pundits

After two years of stellar equity gains in 2023 and 2024, many pundits predicted a “lost decade” ahead and warned of inflation, geopolitical threats and political turmoil. Markets defied the gloomy forecasts.

Equities posted a banner year. The Canadian total stock market gained an impressive 29.96% year-to-date, while the U.S. total market shot up 17.17% in U.S. dollar terms as of the end of November.

International and emerging markets also enjoyed superb returns. Developed market large and mid-cap equities rose 23.83%, while emerging market large and mid-caps boasted a 26.76% gain.

The lesson: Invest based on a long-term investing strategy—not forecasts or emotions.

2. Diversification works

After years of U.S. equity outperformance, it was time in 2025 for Canadian and international stocks to shine. This underscores our often-repeated advice about the importance of diversification.

We can’t predict the winners of tomorrow. But if we stay broadly diversified across assets and locations, we can be sure to benefit from their rise.

Research supports this approach. We devoted a blog article to the UBS Global Investment Returns Yearbook 2025. It found that globally diversified portfolios generated higher risk-adjusted returns over the past 50 years than investing in only domestic assets in the vast majority of countries.

3. Valuations don’t help you time the markets

Some investors in 2025 grew nervous about excessive valuations after two years of outstanding back-to-back equity gains. But past such periods don’t give solid clues about what comes next.

Research shows that stock markets don’t necessarily underperform after new highs. In fact, booming markets are more likely to continue doing well than giving up their gains. One study we cited found that after a stock market rise of at least 100% in a single year, markets doubled again 26.4% of the time in the next five years. Only 15.3% of the time did they give back the entire gain.

That said, it is a good idea to periodically review your holdings and rebalance them to stay aligned with your target allocations.

4. Think twice about alternative investments

High-net-worth Canadians are often approached by advisors trying to sell them on alternative investments such as hedge funds. Data on hedge funds suggests investors should exercise extreme caution and skepticism, according to Raymond Kerzerho, PWL’s Senior Researcher.

In a three-article series, Raymond reviewed numerous studies about hedge funds and found that the returns offer mediocre returns, have complex, hard-to-understand fees and limited diversification benefits.

“Financial success depends on disciplined saving and investing, not fancy investment products that promise high returns,” Raymond concluded.

5. Passive beats active

Actively managed funds tend to underperform their passive peers and benchmarks. Morningstar’s U.S. Active vs Passive Barometer Mid-Year 2025 report measured active fund performance against passive peers net of fees.

It found that only 42% of actively managed mutual funds and exchange-traded funds beat their passive counterparts in 2024. Over 10 years, the underperformance was worse. Just 22% of active funds survived and beat their passive peers.

Similarly, SPIVA Canada Scorecard found that over 80% of active funds underperformed their benchmarks in 2024. Over 10 years, 93% of active funds underperformed their benchmarks.

6. Equities outperform—but volatility is the price of admission

Since 1900, global equities have returned 9.7% annually, far outpacing bonds (4.6%) and T-Bills (3.4%), according to the UBS Global Investment Returns Yearbook 2025. Meanwhile, inflation was 2.9% per year.

But investors have to be prepared for a rollercoaster ride to enjoy the gains. Equities were the most volatile asset class (with a 23.0% standard deviation fluctuation), compared to 13.2% for government bonds and 7.5% for T-Bills.

While the annual U.S. equity real return was 8.5% on average, this included years with a loss greater than 40%. There were also six years with gains over 40%.

7. Patience pays off

A dollar invested in a diversified international equity portfolio would have grown to over $16 after inflation since 1970—an extraordinary return of more than 1,600%, according to research by our Raymond Kerzerho.

“The stock market is a money-multiplying machine for long-term holders of globally diversified equity portfolios,” Raymond said. “All investors had to do was defer consumption and accept that volatility is inevitable.”

How much volatility? Markets experienced six bear markets (a 20%+ real decline) in the past 55 years—or 1.1 such declines per decade on average.

“Investors should hold on to their portfolio and expect bear markets as a normal part of investing,” Raymond said. “These periods are the entry price to join the club of successful long-term investors.”

The real risk is sitting out. It’s fitting to conclude with some wisdom from Warren Buffett: “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

With this sage advice in mind, the PWL team wishes you a happy, healthy and prosperous holiday season—and a new year strengthened by the timeless lessons of discipline, patience and long-term perspective.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

The Value of Good Financial Advice

The Value of Good Financial Advice

By James Parkyn - PWL Capital - Montreal

September marked 25 years since a milestone in the world of financial advice. In 2001, the investment firm Vanguard released its “Advisor’s Alpha” study—research that redefined what it means for advisors to add value for investors.

Rather than viewing success as beating the market, the study suggested that advisors should focus on helping investors with portfolio construction, financial and tax planning, and discipline.

Vanguard later quantified that finding to show the impact it could have. The firm found that advisors who use wealth management best practices can add up to 3% or more in net annual returns for their clients. That added value compounds significantly over many years.

The value comes not from trying to predict the next market move, but from guiding investors to make good choices to achieve their financial goals.

Where does the value originate?

Behavioural guidance–up to 2% or more

One of a good advisor’s most significant contributions is coaching investors, Vanguard found. During market swings, fear and euphoria can push investors toward rash actions that undermine their plans. A knowledgeable, experienced advisor can help clients hold steady when markets fall and avoid overconfidence when they rise.

Vanguard’s research shows that investors who stuck with a 50-50% stock-bond mix through the 2008 financial crisis enjoyed a 209% return by 2024—versus a 16% loss for those who moved fully to cash.

Those who held a mixed stock-bond portfolio through the Covid crisis gained 31%, while investors who went to cash lost 12%.

“These figures demonstrate how a diversified investor has fared well by sticking with a balanced portfolio even through severe market downturns,” Vanguard said.

“Moving to a more conservative allocation… is a natural response. However, while it’s understandable to want to alleviate immediate emotional pain and anxiety, deviating from one’s long-term asset allocation after market declines has proven detrimental to the portfolio’s long-term growth.”

Emotional circuit breakers

This is a key insight. Since Vanguard’s report came out in 2001, many advisors were persuaded to shift their focus more toward educating clients. This is a role we strongly embrace at PWL.

As Vanguard puts it, “Advisors acting as ‘emotional circuit breakers’ for their clients can prevent significant wealth destruction. Advisors have increasingly helped their clients understand the rationale behind their asset allocation, the potential outcomes and the inherent risks. By setting realistic expectations, advisors have helped clients be in a better position to ‘tune out the noise’ and reach their investment goals.”

Tax-loss harvesting—up to 1.5%

Advisors can add up to a 1.5% net annual return for clients through tax-loss harvesting. This involves selling investments that have declined in value to realize a loss, which can offset taxable gains. Those proceeds are then reinvested to maintain exposure to the market.

Investment selection and asset allocation—up to 1% or more

Advisors can add 1% or more for investors by devising a broadly diversified, low-fee portfolio based on the client’s goals and risk tolerance. The exact amount of value varies widely based on the investor’s portfolio.

A well-diversified mix ensures that investors get exposure to top market performers, while avoiding chasing yesterday’s gains. As we reported in a recent blog, a tiny portion of stocks—just 4%—was responsible for all stock market wealth creation from 1926 to 2023 above a risk-free investment in Treasury bills. Slightly over half of stocks lost money over their life.

We can’t know what the winners will be in the coming years, but we can get exposure to them by holding broad index funds that own all the companies in various market indexes. We can further diversify by holding a mix of US, international and domestic stocks, along with bonds.

Withdrawal strategy—up to 1%

How to spend from your portfolio is a crucial question. Whether for retirement or another purpose, a planned sequence of withdrawals can minimize taxes and help assets last longer.

Advisors can make a big impact for investors. Vanguard found that a coordinated approach can add up to 1% to annualized returns compared with random withdrawals, while reducing the risk of depleting assets too soon.

Rebalancing—up to 0.12%

Good advisors help investors by regularly rebalancing their portfolio back to its target allocation. Rebalancing trims positions that have grown too large and reinvests in those that have lagged. The idea is to keep portfolios aligned with goals and risk tolerance and ensure exposure to market winners.

This can add up to 0.12% in value annually, Vanguard found. It might seem like a small impact, but the value becomes significant when compounded over many years.

Instilling confidence

Vanguard’s figures are impressive, but I believe they capture only part of what great advisors deliver. Much of an advisor’s impact can’t be captured in percentages. It shows up in better investor decisions, reduced stress and the confidence needed to maintain the discipline key to financial success.

We at PWL take pride in our craft, and Vanguard’s research underscores why. It’s about helping people build perspective, resilience and wealth that endures far longer than any market cycle.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

Investing in a Bubble: The Real Risk Is Sitting Out

Investing in a Bubble: The Real Risk Is Sitting Out

By James Parkyn - PWL Capital - Montreal

Investors are both giddy and nervous as stocks keep skyrocketing upward to new all-time highs.

Are we in a bubble? Is a crash coming? If so, what should we do to be ready?

Investors spend an inordinate amount of time worrying about catastrophic market collapses—and never more so than during a booming market.

Who can blame them? Imagine the shock of waking up to discover you’ve lost 10 or 20% of a lifetime’s savings overnight.

But fascinating research shows that true market crashes are exceedingly rare, much more so than commonly imagined.

Only four crashes since 1887

In fact, the fear of losing money in a major correction is a bigger risk than a crash itself. That fear keeps many investors on the sidelines during the good days, which make up the vast majority of the life of markets, as we discussed in our latest “Capital Topics” podcast.

Investors typically put the odds of a catastrophic crash in the next six months at 10 to 20%, according to a recent Wall Street Journal article titled “Financial Bubbles Happen Less Often Than You Think” by Yale University finance and management studies professor William Goetzmann.

How often do crashes actually occur?

Only on four days since 1887 did the Dow Jones Industrial Average fall more than 10% in a single day (two of those days occurring during the 1929 crash), Goetzmann found.

You read that correctly—four days out of 34,000 trading sessions.

Bubbles are the exception

Goetzmann studied 21 international stock markets from 1900 to 2014 to see how often bubbles occur that end in a crash. He defined a bubble as a rapid doubling of stock prices after which the market gives back all or more of its gains over the next five years.

“Looking at all of those possible five-year periods, bubbles only happened in less than one-half of 1% of them,” he found.

Bubbles stand out in our memories and market histories, but they’re by far the exception, not the rule.

An investor who stuck with a diversified global stock portfolio since 1900 earned a 9.5% annualized return despite the crashes of 1929, 1987 and 2000-02, the financial crisis and the Covid meltdown, Credit Suisse researchers found.

Markets shrugged off wars and crises

“Bubbles loom large in our historical understanding of the financial markets,” Goetzmann wrote.

“[But] one of the biggest mistakes an investor can make is to rely on a handful of colorful historical episodes and ignore the long intervals in between: the sequence of quiet gains that stock markets have made over the decades and centuries they have existed.”

As Warren Buffett put it, “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

Further gains more likely after a boom

But surely, you may ask, is there no reason to be more worried today after the remarkable market melt-up of the past three years?

It turns that booming markets are more likely to continue doing well than giving up their gains. In another study, Goetzmann found that after a stock market rise of at least 100% in a single year, markets doubled again 26.4% of the time in the next five years. Only 15.3% of the time did they give back the entire gain.

“Put simply, boom periods were almost twice as likely to lead to further gains as devastating crashes,” wrote financial journalist Robin Powell, summing up the findings.

Bubbles often spring from real innovations

This makes sense if we remember that multi-year market manias are often fuelled by technological revolutions that transform society and create legitimate value, even if they’re sometimes accompanied by speculative excess.

The infamous South Sea Bubble of 1719-20—often cited as the first big bubble—left behind expanded trade routes and infrastructure. The Roaring Twenties were driven by advances in radio technology and mass production of consumer goods.

The dot-com mania ushered in the internet age—revolutionizing communication, commerce and access to information.

Sitting out can be risky too

On the other hand, trying to time the market to avoid a crash is almost impossible and risks cutting you off from the days with the greatest upside.

Missing the 20 best trading days over a 20-year period typically reduces total returns by approximately 50%, Powell said.

“The most dangerous financial advice sounds perfectly sensible: ‘Don’t lose money,’” he noted. “Generations of investors have followed this wisdom religiously, keeping their savings safe in cash and bonds while waiting for the ‘inevitable’ market crash. They’ve successfully avoided every bubble, every correction, every moment of volatility. They’ve also missed 300 years of wealth creation, making safety the riskiest strategy of all.”

Focus on the long term

Should we do nothing at all then? No. Booming markets are a good time to revisit your portfolio to see if it’s still in line with your target allocations and rebalance if needed.

Should your financial needs or risk tolerance change, consider speaking with an advisor about possible tweaks to your investing strategy.

You can’t know how the market boom will end. But you can cultivate peace of mind by ignoring the daily noise, maintaining a disciplined focus and taking satisfaction in your steady long-term gains.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

High Returns Unlikely to Last

High Returns Unlikely to Last

By James Parkyn - PWL Capital - Montreal

Investors have had an incredible ride in the past decade. Stock markets soared, portfolios swelled.

It’s tempting to get complacent and expect this to be the new normal. Some investors may come to expect double-digit stock gains year after year. They may even reduce their savings or build lofty expectations of an early retirement.

Tap the breaks—the coming years are likely to be less generous.

4.5% real return on equity

Twice a year, PWL Capital updates our long-term view for how stocks and bonds are expected to perform over the coming 30 years. Our latest update found that investors can expect a 4.5% annual return for global stocks after inflation, and 1% for bonds.

The figure for stocks is far lower than the 8-12% real returns that many investors and advisors expect, according to a recent Natixis survey.

Such rosy investor expectations aren’t realistic, says PWL Senior Researcher Raymond Kerzérho. He co-authored the PWL update and discussed the findings on our latest Capital Topics podcast.

7% return for Canadian stocks before inflation

Raymond cautions that his figures aren’t a prediction, but rather a planning assumption. We use these numbers to help prepare long-term financial plans and retirement projections for our clients. The figures are also subject to a substantial margin of error. No one can predict the future!

That said, Raymond’s nominal return estimates are:

• Bonds: 3.5%

• Canadian stocks: 7%

• U.S. stocks: 6.5%

• International stocks: 7.3%

• Global portfolio of Canadian, U.S. and international stocks: 7%

Raymond also expects long-term inflation of 2.5%. In other words, real returns for equities are likely to be far below what investors and advisors expect.

“Dangerous delusion”

Equities are likely to face headwinds because valuations are historically high. The S&P 500 has returned 15% annually over the past decade, “far in excess of its long-term annualized return of 10.3%,” Wall Street Journal columnist Jason Zweig recently noted.

Taking high returns for granted can leave you with “a severe shortfall” if markets stumble, Zweig said.

The problem, he said, “is that a booming stock market breeds complacency. Huge returns make a comfy retirement for everyone seem within reach, without effort or sacrifice. And that’s a dangerous delusion.”

Homes aren’t a magic exception

Real estate isn’t immune from overly lofty expectations. Most people have a lot of money tied up in their principal residence. But in another eye-opener, Raymond expects a long-term annual price appreciation of just 1% for houses after inflation. This doesn’t even include home ownership costs such as taxes, insurance and maintenance.

The 1% figure may come as a surprise to Canadians used to skyrocketing house prices. As Raymond points out, the recent outperformance has been the exception, not the rule.

“When compared to stocks over the long term, housing does not compare well,” he told our podcast. “If you account for inflation and all the money you reinvested in it, the return on a personal residence is not great.”

Peers are more pessimistic

PWL isn’t the only one warning of lower future returns. In fact, our expectations are more optimistic than those of other major investment firms.

As Raymond noted last year, our long-term expectations for Canadian bonds and most equity markets are higher than those of four other firms we studied.

“Listeners may think we’re too conservative with our expected return assumptions, but in reality, we’re a bit more optimistic than some major investment firms,” Raymond said.

Investors expect 10.7% real returns

The sobering warnings stand in sharp contrast to investor expectations. Buoyed by years of high-flying stock gains, investors expect 10.7% annual after-inflation returns over the long term in stocks globally, according to the 2025 Natixis Global Survey of Individual Investors.

Expectations are even higher for U.S. stocks—12.6% annually. Even advisors expect 8.3% after inflation, the survey found.

“I was shocked when I read that,” Raymond said of the survey results. “That’s nonsense…. A 10.7% real return is not going to happen. Maybe for short periods it can happen, but in the long run, no way….

“It is your advisor’s job to educate you about the expected return of your portfolio. If your advisor has not set reasonable expectations with you, I think you should consider a change.”

Don’t steer by the rear-view mirror

The final verdict: The past doesn’t predict the future. You don’t drive a car by looking in the rear-view mirror. You shouldn’t make investing decisions that way either.

Be disciplined about sticking to your long-term investing plan. You or your advisor should periodically rebalance your holdings to align with your target allocations. Enjoy the gains of the past, by all means. But don’t build your future on them continuing.

Model portfolios and market statistics can be found on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website. Also find more commentary and insights on personal finance and investing in our podcast, past blog posts and eBooks.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

Time to reduce U.S. equity exposure?

Time to reduce U.S. equity exposure?

By James Parkyn - PWL Capital - Montreal

Is it time to scale back on U.S. stock holdings? Investor concerns have intensified about equity market performance and tariff-related volatility south of the border.

The U.S. total market gained a modest 4.2% in Canadian dollars in 2025 through the end of July.

This was well behind vigorous rallies in many other countries:

• The Canadian total market has soared 12% year to date.

• International developed large and mid-cap stocks have shot up 13.5% in Canadian dollar terms.

• Emerging market large and mid-cap stocks have surged 13.6% in CAD terms.

(See our Market Statistics page for more data.)

Winning streak over?

The U.S. slump is especially striking because Wall Street handily beat international stocks for most of the period since the 2008-09 financial crisis.

The U.S. total market returned about 13.5% annually between 2010 and 2024, vastly better than international stocks, which gained an underwhelming 4.8%, according to Morningstar Direct.

Does this year’s shift mean the era of superior U.S. returns is over? Should we reallocate away from U.S. stocks?

Compelling case for diversification

The short answer is no. As we said in our podcast on the same topic, there is a compelling case for diversification within stocks. Our model allocates 20% to Canadian stocks, 50% to the U.S. and 30% to international stocks.

The balance between U.S. and international stocks is in line with their share of global market capitalization.

As U.S. or other stocks have outperformed, we have rebalanced to maintain these target allocations.

U.S. equities still vital

Changing the model now smacks of market timing or trying to forecast the future. And the evidence is overwhelming this doesn’t work.

Regardless of any short-term underperformance, the evidence is clear that U.S. equity investments should be a major part of our clients’ portfolios.

As we noted in May, U.S. equities have returned an impressive 9.7% annually since 1900, according to the UBS Global Investment Returns Yearbook 2025.

“Never bet against America”

Warren Buffet famously put it like this in his 2020 letter to shareholders: “Despite some severe interruptions, our country’s economic progress has been breathtaking. Our unwavering conclusion: Never bet against America.”

Excellent U.S. returns are due in large part to the strong U.S. dollar and tech boom. This includes stellar gains in the “Magnificent Seven” mega-stocks, which we’ve discussed previously. As well, investors have proven willing to pay higher multiples for U.S. stocks.

But high returns come with a price: volatility. Since 1900, U.S. equities have seen six years with annual returns below negative 40%. Patiently waiting out these drawdowns is crucial if we want to enjoy the longer-term gains.

U.S. valuations at historic extreme

What can we expect from U.S. stocks in coming years? Some analysts predict slowing U.S. earnings growth in coming years. Others say U.S. equities could continue to underperform due to excessive valuations, even despite this year’s trailing results.

Valuations may reflect “overly optimistic expectations” about future growth and the U.S. return edge, according to investment firm AQR Capital Management.

“By the end of 2024, relative valuations were at a historically extreme level, and we argue that some mean reversion is a sounder assumption than extrapolation of further richening,” AQR said in a report.

Investors “should know that the US has underperformed the rest of the world for extended periods, for example the decades of 2000s, 1980s, and 1970s.”

International diversification paid off

But as we know, it’s notoriously difficult to forecast the markets. Analysts consistently get it wrong.

What we do know is that international diversification has paid off. This year’s developments in stock markets simply confirm that.

The UBS Yearbook 2025 provided more evidence. It found that globally diversified portfolios have generated higher risk-adjusted returns over the past 50 years than investing in only domestic assets in almost all countries.

Discipline brings peace of mind

Disciplined—relying on a broadly diversified long-term investing strategy and not chasing trends—allows us to capture returns when leadership changes.

Patience is also key. Avoid letting short-term swings or headlines dictate your moves. Markets reward those who stay invested from one cycle to the next.

Find market statistics, model portfolios, more commentary, past blog posts, eBooks and podcasts on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website. 

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.