Life Is a Highway

RBC Dominion Securities Inc.

LIFE IS A HIGHWAY

May 2014

A few years ago, on my way back from dropping my daughter off at dance, another driver blew a red light and drove into the side of my SUV. Now, I say that it was my SUV, but my wife had an unusually strong attachment to this vehicle. It wasn’t until a few weeks later when I got the deductible back and it was determined that the accident was 100% the other driver’s fault, that my wife finally asked me if I had been hurt in the accident. The real injury I sustained was mostly emotional knowing that my wife’s love hierarchy was/is 1) our children, 2) the Durango, 3) our cats, and 4) maybe me, not sure.

The damage on the vehicle was excessive and the vehicle was written off. Secretly, I couldn’t have been happier (please don’t tell my wife, maybe there’s a valid reason DON JOLICOEUR, C.G.A. why I’m #4). The 5.7 litre Hemi was hard on gas. It was costing us about $100 a Investment Advisor week for my wife to drive the girls to school each week. We had decided to sell our 204-982-2689 travel trailer a few months earlier so we no longer needed this powerful vehicle and [email protected] this was the only way I was ever going to get my wife into a smaller more fuel efficient vehicle.

Now I have to tell you, the crash was scary. About 10 years earlier, I was involved in another accident (again, not my fault) and I have come to the realization that crashes are a normal part of driving. You drive carefully and hopefully you won’t get into a serious accident. We all understand the dangers, but we all continue to drive .

Because we want to get where we want in a reasonable amount of time, we have accepted the risk of death or serious injury whenever we drive or ride in a car. We cannot imagine living life without driving, even though we know it can kill us.

Well, here’s another fact. There will be another stock market crash. But you know what? It’s still the fastest, most reliable way to get where you want to be financially. Let’s look at the period from the end of 1993 to the end of 2013 (twenty years). This period includes two of the biggest stock market crashes ever (2000 to 2002, a drop of 49.1% and 2007 to 2009, a drop of 56.8%*). Take a look at the chart below which is the returns of the S & P 500, including dividends.

I have compounded the returns from 1993 all the way through to 2013. After the first market crash that ended in 2002, returns had still compounded at 9.3% since 1993. A few years later, at the end of 2009, after a second major crash, the compounded rate of return was still more than 6.5% since 1993. Even after two major stock market corrections, this is much higher than what you can get from GICs or other “safe” investments.

Year % change in Value of compounded S & P 500 portfolio at the rate of return dividends end of the included** year since 1993 1993 $100,000.00 1994 1.3% $101,300.00 1.3% 1995 37.6% $139,388.80 18.1% 1996 23.0% $171,448.22 19.7% 1997 33.4% $228,711.93 23.0% 1998 28.6% $294,123.54 24.1% 1999 21.0% $355,889.49 23.6% 2000 -9.1% $323,503.54 18.3% 2001 -11.9% $285,006.62 14.0% 2002 -22.1% $222,020.16 9.3% 2003 28.7% $285,739.94 11.1% 2004 10.9% $316,885.60 11.1% 2005 4.9% $332,412.99 10.5% 2006 15.8% $384,934.25 10.9% 2007 5.5% $406,105.63 10.5% 2008 -37.0% $255,846.55 6.5% 2009 26.5% $323,645.88 7.6% 2010 15.1% $372,516.41 8.0% 2011 2.1% $380,339.25 7.7% 2012 16.0% $441,193.53 8.1% 2013 32.4% $584,140.24 9.2% * Stock traders Almanac 2013 **From Warren Buffett’s letter to shareholders 2013

This information is not investment advice and should be used only in conjunction with a discussion with your RBC DominionSecurities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on thelatest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC DominionSecurities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ®Registered trademarks of Royal Bank of Canada. Used under licence. © 2013 RBC Dominion Securities Inc. All rights reserved.

Below are some tips to ensure that you get to your destination safely. (Investment tips are in parenthesis).

Some driving tips

1) If conditions are icy or dangerous (stocks are overvalued, economy near recession), slow down (move to fixed income), it’s even ok to pull over (go to cash). Just don’t be too cautious as you’ll never get to where you want to be.

2) Drive carefully, don’t speed (stay away from momentum, flavour of the day, or speculative stocks).

3) Make sure your car is safe (strong growing companies that you understand and have very little debt).

4) Make sure the driver has a valid license (credentials you would like to see would be CMA, CGA, CA, CFA, FCSI, CMI, or FMA.).

5) If other drivers are driving too fast (there are times in the market when speculation is popular and solid investments will lag. That’s ok, better to be safe than sorry), let them pass you, you’ll get to where you want safely and the other drivers may not.

6) Respect the road and don’t make any big mistakes. If you’re not careful, you can end up seriously injured (financially stressed).

7) Not only do you need a good driver (investment advisor), you also need other members of the team such as a mechanic and navigator (financial team members such as the financial planner and estate planner). These team members will ensure a smooth ride.

Life is a highway folks, enjoy the ride.