By John Ardill
Let me take a wild guess: the two “Is” – inflation and interest rates – are on your mind.
Mine too. They certainly were in 1981, just two years after I began my career in financial services, when Canadian interest rates hit their highest point in modern history: an annual average of 16.63%.
It was a phenomenon I will never forget, and yes, I did see some financial train wrecks. But this year and the coming years will be nothing like that.
So, how big a problem will the two Is be?
Some of you listen to all the experts who are making educated guesses. Have you ever noticed that no matter who you listen to, you are never any better off in terms of knowing what to do?
The best advice I can give you as a lonely personal investor is this: I am not licensed anymore and cannot recommend things for you, that’s Ian’s job (and he’s doing a great job) – but I can tell you what I am doing personally.
First, we have to stop worrying about all the things we cannot control. Fact is, you are not going to get a definitive answer about the two Is. But I still have good news for you: I think that interest rates will not go anywhere near as high as 1981, and I think inflation will stay in the low single digits.
Second, this is not a suitable time to add greater debt, unless you have lots of cash flow.
Third, take stock of your investments. Some investments perform well when the two Is are running high. A philosophy that has worked well for me is to structure my portfolio to be flexible in various economic circumstances. This is a strategy that we have been promoting for years at the Ardill Group.
Fourth, if you are mainly into public stock, then your fate is in the hands of the money managers, and we have an excellent ecosystem of excellent managers.
Finally, I like real estate in times of higher inflation. Not just any real estate, but specifically apartment buildings (see this fantastic interview Ian had with the CIO of Avenue Living, a major apartment building REIT many of our clients are invested in). Another asset possibility is gold, but that’s not something I’m into, because I want to understand the business model an asset is based on, and gold is not based on a business model at all.
If your portfolio is structured to be flexible, then you will sleep better at night. Want to make sure it is? Call Ian for a review.
I want to end this article with this thought: we have survived two years with Covid, and I don’t think it’s going away anytime soon. So we need to figure out how to live with it, and be happy.
And on that note, I wish you happiness overall, and also in your financial decisions.
John Ardill
Founder and Mentor
Ardill Group
Direct: 1 416 400 5882
Office: 1 905 907 7000
