Medvestment

October 18, 2021

Agenda

⚫ Investing Principles
⚫ Asset Classes
⚫ Stocks
⚫ Crypto
⚫ Macro Trends
⚫ How to get started
Investing Principles

⚫ Risk/Reward
⚫ Power of Compounding
⚫ Diversification
 Mackenzie Investments 4

Time Dampens Risk

S&P/TSX Calendar Year Total Returns Past 60 Years

Source: Bloomberg December 2020. Local currency. Calendar year total returns.
Power of Compounding
⚫ Interest on principal
plus interest earned
⚫ Rule of 72

Penny a day…or $1million?

⚫ The power of compounding was said to be deemed the

eighth wonder of the world - or so the story goes - by
Albert Einstein.
Diversification
"Don't put all your eggs in one basket."

⚫ Strategy of spreading your investment dollars

across various types of securities,
⚫ Either across assets classes or within a specific
asset class
⚫ several industry sectors (e.g., transportation,
technology, airlines, retail, etc.)
⚫ large and small companies,

⚫ growth and income stocks,

⚫ cyclical and non-cyclical stocks,

⚫ blue chip companies, and

⚫ international companies.
Asset Classes
➢ Equities - public or private stocks
➢ Fixed Income – bonds issued by a government
or corporation that promise to pay interest over a
fixed period and principal at maturity
➢ Cash – bank deposits, t-bills, etc..
➢ Alternatives – an investment that doesn’t fall
into the above categories. E.g. real estate,
infrastructure, commodities, art, wine, music
libraries, digital assets, etc
 Equities (aka Stocks)
⚫ A share in the ownership of a company.
100,000 shares outstanding in company
You own 1,000 shares (100,000/1000) = 1% ownership.

⚫ Types of Stock
⚫ Common Stock
⚫ Entitles the holder to one vote in the affairs of the company and
one vote to elect the board members.
⚫ Preferred Stock
⚫ Usually doesn't come with the same voting rights as common
stockholders.
⚫ Receive a share of profits before common stockholders.
⚫ In the event of company dissolution, preferred shareholders
have a prior claim to assets ahead of common shareholders,
but behind creditors.
Ways to own stocks

⚫ Direct
⚫ Mutual Fund - financial vehicle made up of a
pool of money collected from many investors to
invest in securities like stocks, bonds, money market
instruments, and other assets. Mutual funds are
operated by professional money manager
⚫ ETFs -security that tracks an index, sector,
commodity, or other asset, but which can be
purchased or sold on a stock exchange the same way
a regular stock can.
 Stock Classifications
➢ Blue-Chip Stocks biggest companies in the country
➢ Growth Stocks A growth company usually spends a lot
of money on research and puts all its profits back into the
company instead of paying dividends

➢ Income Stocks stable companies that pay higher-than-

average dividend

➢ Cyclical Stocks move up or down in sync with the

business cycle, i.e., autos, housing, commoditiesetc.

➢ Defensive Stocks unaffected by changes in the

business cycle,i.e., food, utilities. Etc.

➢ Value Stocks considered undervalued by investors

➢ Penny Stocks - low-priced, speculative stocks

➢ Meme Stocks - gain popularity due to an online trend
 Fundamental Analysis
Thorough review of company
⚫ Product/Service

⚫ Operating efficiency

⚫ Management

⚫ Financial performance

⚫ Profit/Loss, EPS, P/E, etc.

⚫ Position in Industry

⚫ Dividend history/policy
 Crunching the Numbers
⚫ Price/Earnings (P/E) Ratio - company's stock price
divided by its 12 month EPS.
⚫ High P/E means high projected earning
⚫ If a company has a PE of 10, that means that investors are willing
to pay $10 for every $1 of last year's companies earnings.
⚫ Compare the PE ratios of other companies in the same industry, or
to the market in general, or against the company's own historical
P/E ratio.
⚫ Beta – quantifies how volatile a stock is compared to
the overall market
⚫ A stock that rises or falls in value at the same rate as the market
has a beta of 1.0.
⚫ Beta below 1 - less volatile -- and potentially less risky
⚫ Beta above 1 - more volatile, meaning that investors might expect
its price to rise or fall more quickly.
 Technical Analysis

⚫ Used to evaluate the worth of a stock by

studying market statistics.
⚫ Stock and stock market trends

⚫ Charting
Supply and Demand

⚫ Stock prices change because of

supply and demand
⚫ more buyers than sellers – price goes
up!
⚫ More sellers than buyers – price goes
down!
 Market Exchanges

⚫ New York Stock Exchange NYSE

⚫ Oldest stock market in US
⚫ Auction market (with brokers on trading floor)
⚫ NASDAQ (National Association of Securities Dealers
Automated Quotation System), is an electronic stock
market
⚫ Toronto Stock Exchange – is Canada’s main stock
market
 Indices
⚫ A stock index is a measure of average stock prices
in a group of individual stocks.
⚫ Reflect how the market is doing as a group
⚫ Examples:
⚫ Dow Jones Industrials - which tracks 30 blue
chip stocks (price-weighted)
⚫ Standard & Poor's 500- which tracks 500
stocks from industrial, transportation, utility and
financial companies (market cap weighted)
⚫ S&P/TSX Composite- approximately 250 of
the largest companies listed on the TSX (market
cap weighted)
Bull and Bear
⚫ Bear market describes a period of
time when stock prices are falling.
⚫ Typically defined as a decline of 20% or
more from the previous peak
⚫ Bull market is a period when stock
prices are generally rising.
⚫ Typically defined as rise of 20% from the
previous trough
Bulls Outrun Bears Since 1945 (20%)
Avg. Return

122%

-33%

S&P/TSX Returns

Source: Bloomberg March 31, 2021. Local currency; price only returns, A bull (bear) market is
defined as a positive (negative) move greater than 20%.
 Market Crisis and Subsequent Returns

Crisis Market Low Related Market Decline Months to Recover 1 Year Later 2 Years Later
The Korean War 13-Jul-50 -14.0% 2 31.7% 49.7%
Cuban Missile Crisis 23-Oct-62 -26.4% 10 36.5% 59.2%
JFK Assassination 22-Nov-63 -2.8% <1 23.9% 31.6%
1969 to 70 Market Break 26-May-70 -36.1% 21 43.7% 59.7%
1973 to 74 Market Break 6-Dec-74 -45.9% 67 33.5% 59.3%
1979 to 80 Oil Crisis 27-Mar-80 -17.1% 3 37.1% 14.0%
1987 Stock Market Crash 19-Oct-87 -33.2% 21 23.2% 54.4%
Desert Storm 11-Oct-90 -19.9% 4 29.1% 36.3%
Soviet Coup D'état Attempt 19-Aug-91 -3.6% <1 11.1% 21.2%
Asian Financial Crisis 2-Apr-97 -8.1% 1 49.3% 72.5%
Dot-com Bubble crash 9-Oct-02 -49.1% 55 33.7% 44.5%
Sept 11th 21-Sep-01 -11.6% 1 -12.5% 7.3%
Invasion of Iraq 11-Mar-03 -14.7% 2 38.2% 49.9%
North Korean Missile Test 17-Jul-06 -6.9% 2 25.5% 2.1%
Subprime Mortgage Crisis 9-Mar-09 -56.8% 47 68.6% 95.1%
US Debt Rating Downgrade 3-Oct-11 -19.4% 5 32.0% 52.2%
China Yuan Devaluation 11-Feb-16 -13.0% 3 26.6% 43.2%
2018 Global Recession Scare 24-Dec-18 -19.8% 4 37.1% 57.5%
COVID-19 Pandemic 23-Mar-20 -33.9% 4 74.8% --
Average -22.1% 16 31.6% 44.2%

Snapshots in time of significant negative international events from 1950 to December 2019, and the subsequent change in market value from
the stock market low in that calendar year to one and two years after. Source: Datastream. Benchmark: S&P 500 Composite, US$ return.

19 For internal use only | Please see disclaimer on last page

Factors Affecting the Stock Market
⚫ Health
⚫ company
⚫ industry
⚫ economy
⚫ Global
⚫ Good News/Bad News
⚫ Microeconomic variables - factors that can
affect companies or industries
⚫ Macroeconomic variables - factors that
affect the economy
⚫ Consumer confidence
⚫ Investor perception
⚫ Efficient Market Hypothesis
Cryptocurrency
⚫ collection of binary data which is designed to work as a medium of
exchange wherein individual coin ownership records are stored in a
distributed ledger(blockchain) which is a computerized database using
strong cryptography to secure transaction records, to control the creation
of additional coins, and to verify the transfer of coin ownership.
⚫ does not exist in physical form (like paper money) and is typically not
issued by a central authority.
⚫ typically use decentralized control as opposed to a central bank digital
currency (CBDC).When a cryptocurrency is minted or created prior to
issuance or issued by a single issuer, it is generally considered centralized.
When implemented with decentralized control, each cryptocurrency works
through distributed ledger technology, typically a blockchain, that serves as
a public financial transaction database.
History
⚫ The first 50 Bitcoin were mined on January 3, 2009
⚫ Since then the digital asset market has reached US$2.1T
⚫ Bitcoin has become one of the largest assets by market value in
the world
⚫ Limited supply only 21 million bitcoins, 90% of which are in
circulation
More than just Bitcoin
Investment Characteristics
⚫ How can you determine if a crypto coin or token is
overvalued or undervalued?
⚫ You can’t! It has no intrinsic value!
⚫ Proponents of tokens look at its functionality,
adoption, and development to assess to assess
potential demand
⚫ Risks
⚫ Extreme Volatility
⚫ Regulatory
⚫ Environmental
⚫ Government
⚫ Invest only what you are prepared to lose
⚫ Could be a diversifier in a portfolio
Macro Trends

⚫ Fees – the march to zero

⚫ DeCentralized Finance/Crypto –
democratization of investments
⚫ Sustainable Investment
⚫ Post Pandemic – future of work,
monetary policy, fiscal policy, …..
Personal Investing

⚫ Through a broker/advisor
⚫ DIY
⚫ Banks – discount brokerages
⚫ Wealthsimple
⚫ Questrade
⚫ E-Trade
⚫ Etc….
Investing for the Long Term
1) start with a plan , gather knowledge
2) understand your risk tolerance
3) diversify
4) invest for the long term