Investment Philosophy

Fisher Investments Canada offers portfolio management services which utilises decades of capital markets research to take a dynamic investment approach based on forward-looking views of the market. For example, if we expect shares of large companies to do better than smaller ones, bigger firms will be emphasised in your portfolio. Over time, we believe this dynamic approach benefits your long-term goals.

Fisher Investments Canada’s approach is also driven by its investing philosophies. Since Fisher Investments was founded in 1979, it has developed these philosophies to guide its decision-making. These philosophies are backed by the firm’s proprietary research as well as nearly four decades of experience.

Capitalism Is Generally a Source of Societal Good

Capitalism of one form or another is the world’s prevailing economic system for a reason: it recognises the unrivalled power of human ingenuity and seeks to harness this for profit, with individuals and companies controlling trade and industry rather than the state. This is generally a good thing: capitalism and the profit motive have provided humanity with unparalleled levels of growth and creativity. Of course, no economic system is perfect, but we believe capitalism is the best possible economic system in an imperfect world. Other economic systems that feature heavy government involvement don’t work as well—government tinkering inevitably leads to unintended consequences, which are, more often than not, negative.

Our investment philosophy recognises that in order to incentivise innovation and the possibility of profit, the potential rewards should connect to the level of risk involved: the higher the level of risk, the greater the potential reward. Of course, the reward isn’t as valuable if it’s taken away from the profit-seeker, which is why stable property rights are an important feature of any capitalist system. When it comes to investing and financial markets, we look for ways economic systems and policies affect the profit motive found in capitalism. Economic systems or policies that distort or remove the profit motive tend to be headwinds to markets, and systems that encourage profit seeking tend to be tailwinds.

Wall Street’s “Wisdom” Frequently Isn’t Very Wise

For many investors, it may be tempting to recognise your shortcomings and defer to the “wisdom” of Wall Street. However, this is rarely wise. Many of the old adages dominating Wall Street’s groupthink are actually false, and rigorous analysis will always be preferable to “we all know” generalisations. Yet many of these have become generally accepted, and too few of today’s investors and professionals are prepared to challenge them. When considering investment opportunities, we challenge accepted “wisdom” by questioning and analysing it rigorously—this underpins every aspect of our investment philosophy.

Supply and Demand Determine All Prices—Including Equities and Bonds

While we don’t believe consistently timing daily, weekly or monthly market moves is possible, we do believe cyclical changes are foreseeable. Often, such changes are driven by events the vast majority of investors either overlook or interpret incorrectly: disconnects between fundamental reality and the investing public’s perception of reality. Successful forecasting requires assessing both. Stocks are forward-looking, yet most investors’ feelings are heavily influenced by the recent past. Bull markets tend to begin during recessions—when people feel most bleak—and end during euphoric “booms.”

Asset Allocation Is Critical, Yet Many Investors Err When Making Their Selection

Asset allocation—how much to invest in equities, bonds, funds or other securities—is in our opinion the largest determinant of portfolio returns, and your asset mix and overall investment philosophy should depend on your goals, objectives and time horizon. Yet many approach this critical decision incorrectly, resulting in a suboptimal investment portfolio for their situation. One huge problem, which has only been exacerbated by the fact life expectancy continues to increase, is that people often underestimate their investment process time horizon. Life expectancies across Western countries have increased for decades, and there’s no sign of that stopping anytime soon—so even if your parents lived to a ripe old age, you can reasonably expect to live longer.

Another common shortcoming is that investors often lack discipline and may base their allocations on how they feel. This can lead to short-term chasing of a “hot” investment or trendy investing style, investing too conservatively or having no defined process to underpin this crucial factor. Prudent investment decisions and asset management should take full account of time horizon alongside personal financial goals and objectives, and all of these things should be underpinned by a disciplined strategy.

While Market Cycles Can Be Forecasted, Their Short-Term Fluctuations Cannot

Consistently timing daily, weekly or monthly market moves is not possible—short-term market timing is folly and often comes at the expense of long-term objectives—but cyclical changes are often foreseeable. Such changes can be driven by events the vast majority of investors either overlook or interpret incorrectly: equating to a disconnect between fundamental reality and the investing public’s perception of reality. Successful forecasting requires assessments of both. Equities are forward-looking, yet most investors' feelings are heavily influenced by the recent past. Bull markets tend to begin during recessions—when people feel most bleak—and end during euphoric booms.

No Investment Category Is Inherently Superior

Different categories of securities outperform at different times. For example, smaller equities sometimes outperform larger ones (and vice versa) and domestic outperforms foreign (and vice versa). Fisher's strategy is informed by the belief that no style or class of security is permanently superior—historically, leadership rotates irregularly. Our investing philosophy stands in contrast to other firms who focus on a certain size, style or type of security—believing these factors are inherently superior.

Global Diversification Is Preferable

Finance theory holds that correctly constructed equity indexes will have very similar returns over long-term time frames. But these similar returns have very different journeys: the narrower the index, the greater the volatility (typically), while a broader focus helps smooth the journey. A global investment approach is more diversified than a country-specific one as it mitigates country-specific factors. Moreover, a global outlook is a practical strategy which accounts for performance rotation. No nation’s or region’s companies are inherently superior. Just as with investing styles and security classes, leadership rotates regularly. We believe a global approach to investment strategy increases your opportunities while reducing the impact of country-specific political or legislative risks.

To Beat Indexes, You Must Look Beyond the News

If you’ve ever kept track of equities at the time earnings reports are released or mergers are announced, you will know how they can move almost instantaneously. Markets are incredibly efficient at pricing in widely known information. Gaining an edge over the market requires seeing the world differently and more correctly than the crowd. If major financial media outlets are reporting something, it’s probably already reflected in market prices by the time it reaches you and everyone else. A sound investing strategy must account for more than just short-term market moves.

We (And You) Might Be Wrong

Even with the best and most rigorous research, it is still possible to be wrong. While we emphasize areas of the market we expect to do best—placing more client assets in those categories relative to their benchmark index—we typically maintain some exposure to areas of the market we don’t expect to do as well. If you invest with the belief that you will always be right, you will risk potentially big losses when you’re wrong.

Find Out How Our Investment Philosophy Could Benefit Your Portfolio

If you would like to know more about how our investment philosophy could be applied to your portfolio, contact Fisher Investments Canada today. We will be happy to review your investment portfolio, recommend a custom asset allocation and connect you with ongoing management services with the ultimate aim of helping you build the portfolio best suited to your needs.

Investing in stock markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns.