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.

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.

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.

Our best investment advice of 2024

Our best investment advice of 2024

By James Parkyn - PWL Capital - Montreal

The year gone by was extraordinary for stocks. In 2024, investors shrugged off high interest rates and warnings of a possible economic slowdown, boosting equities to multiple new all-time highs.

In the first half of 2024, the S&P 500 Index had its 13th best yearly start since 1950. By the end of December, the U.S. total market index had soared 34.31% in Canadian dollars, while Canadian equities shot up 21.65% and international large and mid-cap stocks gained 12.63% in Canadian dollars.

As we embark on a new year, we wanted to look back at some of our most popular blog posts of 2024.

1. Yesterday’s home runs don’t win today’s games.

   We reminded readers to keep Babe Ruth’s classic advice in mind when they heard tongues wag about the “Magnificent Seven” stocks that did so well last year.

   So-called “Mag 7” stocks such as NVIDIA, Microsoft and Apple performed exceptionally. But this was far from the first time a small handful of darling companies had turned heads or dominated markets.

   A Wall Street Journal analysis of 10 market-cap leaders found that these companies underperformed the U.S. stock market by 6 percentage points in the five years after they hit No. 1. As we often say at PWL, don’t chase past returns!

2. Patience pays: Warren Buffett’s advice to investors.

   We shared investing wisdom from Buffett’s annual newsletter to the shareholders of Berkshire Hathaway. The world’s most famous stock investor believes that success comes from patiently riding out market volatility and holding positions for the long term, not trying to time markets.

   “It’s harder than you would think to predict which [companies] will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen,” Buffett said.

3. As stocks rocketed to new highs, we talked about how investors should respond.

   Should you wait for a correction before adding to investments? Should you take profits?

   Evidence suggests that rising stocks are a normal and healthy sign of a strong economy. The broad U.S. equity market has made 1,250 new highs since 1950, or 16 per year, according to RBC Global Asset Management.

   Markets don’t necessarily retreat after record highs. In fact, RBC’s report and a second study from Dimensonal Fund Advisors found that returns after all-time highs weren’t materially different than those from investing at other times.

4. Almost all wealth creation typically comes from a tiny number of stocks.

   How tiny a number?

   New research shows that just 4% of stocks accounted for all stock market wealth creation above a risk-free investment in Treasury bills from 1926 to 2023. A majority of stocks—51.6% to be exact—actually had negative compound returns in this period. In other words, most stocks lost money over their life.

   Since we can’t know the future stars ahead of time, study author Hendrik Bessembinder concluded that it’s best to own the entire market through broad index funds. The research gives powerful support for investing strategies that focus on passively owning a well-diversified portfolio of stocks with a long-term horizon—the approach we use at PWL.

5. Can a crystal ball make you rich? Not necessarily, we reported in our blog.

   An experiment set out to see how 118 U.S. university graduate students—90% in finance or MBA programs—would do in the markets if they had access to the previous day’s Wall Street Journal.

   Not so well, it turned out. The students had an average return of just 3.2%—statistically indistinguishable from breaking even. Just under half of students (45%) lost money, while 16% went bust. They made winning trades only 51.5% of the time.

   These middling results were actually much better than those of 1,500 people who tried the same experiment on the study authors’ website. Their median result was a 30% loss, while 36% lost everything.

   The results are 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. It can actually be ruinous for some.

   As we often say at PWL, timing the market is a gamble. Data shows you’re better off with long-term investment plan that you stick to with discipline.

On behalf of PWL Capital’s Parkyn-Doyon La Rochelle team, we wish you and your family good health, prosperity and happiness in all you do in 2025!

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.

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.