Why Investors Should Aim For Lower-than-Market Returns Right Now

If you’re an investor beating the S&P 500 or NASDAQ indices right now, I would make the argument that your portfolio is perhaps far too risky in nature.
Valuations across the board are approaching absolutely ridiculous levels.

Personally, in my investing career, I’ve never seen valuations this high. The extreme levels of greed and exuberance in the stock market today is driving stock prices to new all-time highs on what seems like a weekly basis. All this is happening while a global pandemic rages on and the tally of lives lost accelerates weekly.

I think the central bank stimulus we’re seeing is not likely to stop any time soon, and investors have good reason to put their money into the stock market relative to the bond market or other fixed income instruments for yield right now.

That said, investing too heavily in the pricey growth names could be catastrophic if we do indeed see a massive correction. We haven’t see a meaningful correction since the pandemic-driven lows we saw last March.

If you’re an investor worried about the potential for an even worse dip, given where economic fundamentals are right now compared to overall corporate performance in Canada and the U.S., tilting one’s portfolio toward defensive companies and taking a lower return today could pay off over the next few years.

Personally, I’m willing to accept a lower rate of return right now for the safety a defensive portfolio provides. I would highly recommend readers do the same. Beating the market shouldn’t be the goal right now – capital preservation should be.
Invest wisely, my friends