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What's your vintage year?

August 21, 2015

The recent higher return, lower volatility environment has the average investor over the moon. But historically speaking, this scenario is about as commonplace as a blue moon.

Since 1950, there have been 33 years when the S&P 500 Index experienced a double-digit plunge and only seven years when it didn’t see a correction of at least 5%. Despite all of these drawdowns, the S&P 500 returned 11% (compounded annually) over the period.

These ups and downs – and the long-term reward for sticking them out – are simply part and parcel of investing.

Your EdgePoint investment isn't the market. We work hard to think independently and look different from the crowd. This doesn’t make us totally immune to broader market moves. A rising tide lifts all boats, ours included. And while pretty much no one is troubled by their investments only going up, we’re the exception.

Newbies take note

If you’re from the EdgePoint class of ’13, ’14 or ’15 (meaning you started investing with us in one of those years), generally you’ve seen only positive performance from us.  While we’re happy to have been able to deliver these returns, we also worry that this recent history sets up unrealistic expectations for our relationship with you.

Industry regulations may prohibit us from making promises about our future returns but we’re here to tell you that we anticipate both more volatility and more moderate results going forward.

Question is, can you handle that?

Reality check

The average investor is regrettably their own worst enemy, jumping in and out of their investments at precisely the wrong times and effectively sabotaging their chances for a satisfactory long-term outcome. They tend to chase short-term performance and buy high, then panic when that performance wanes and sell low.

If you were compelled to sign up as an EdgePoint investor because of who we are, what we stand for and how we invest, you truly understand us. As a result, you’ll be able to withstand and hopefully embrace the volatility that's starting to reappear since you also get that long-term investors regard market declines as good fortune, a time to capitalize on cheaper stock prices by loading up on favoured businesses.

On the other hand, if you’d be shocked by a downturn in your investments, then we’re definitely not for you. Nor is the market, for that matter. To earn a higher return than so-called safer investments like cash, you have to be willing to take advantage of downside volatility along the way.

If you have a view, as we do, on what a company can be worth in the future, the short-term movements in its stock price provide little worthwhile information but plenty of opportunity to buy the business when it’s “on sale.”

Sure, embracing stock price movements with the right attitude and investment approach can be financially rewarding. It’s still not for everyone. Your investments shouldn’t keep you up at night and we’ll all sleep better knowing we’ve partnered together for the right reasons.

Making friends with volatility

Celebrate volatility? We say yes! Follow the below links to learn more about our unique perspective on the real risks of investing and using temporary dips in stock prices to your long-term benefit.

Adding value a fraction of the time

The trouble with simple stories

Be unmoved by market moves

EdgePoint Global Portfolio, Series A
YTD: 17.09%; 1-year: 32.55%; 3-year: 30.00%; 5-year: 19.66%; since inception: 19.62%
Source:, “To win you have to be willing to lose”. Drawdowns calculated at a peak-to-trough loss any time throughout the year, not a loss figure from the start of the year.
††As at July 31, 2015.