With the TSX Index running over a few mild roadbumps this October, Canadian investors may be wondering what the smartest move is to make now that the stakes (and valuations are a bit higher), and we are closer to that next inevitable correction.
Though a correction can be quite scary to live through, they aren’t really game changers that should have you re-evaluating your investment strategy unless, of course, the magnitude of volatility will keep you up at night, or worse, have you selling your shares in the heat of a panic.
If you can envision yourself buying more shares of your favourite firms, though, I think it’s all right to stick with equities with your new buys. Sure, bonds, GICs (Guaranteed Investment Certificates), and cash are nice to have as well, especially for the emergency portion of your savings.
However, with lower rates after the latest round of cuts from the Bank of Canada (BoC), it should be no shocker as to why GICs have declined quite a bit in popularity over the past couple of quarters.
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The case for sticking with stocks despite all the negative bubble-focused commentary
Indeed, GICs may offer a risk-free return, but with the days of 5% or even 4% rates on such securities now in the rearview mirror, I’d argue that going with the bargains in the equity markets is a better move, even if the price of admission has gone up a bit in the past year.
Arguably, the growth trajectory and AI drivers look better today than they did at the start of the year. And while AI bubble concerns probably aren’t going to back down anytime soon, especially as the tech titans continue their glorious ascent higher, I think that a painful correction is in the cards for the broad S&P 500, rather than a catastrophic meltdown.
Indeed, a handful of speculative tech stocks imploding probably won’t completely derail the S&P 500, especially given how much weighting is in the Magnificent Seven stocks and a wider range of other blue chips that are growing earnings at an impressive pace. Not to mention their valuations are nowhere near the levels seen at the peak of the dot-com bubble.
Shopify stock is a great growth gem if you can handle the volatility
So, in short, don’t scare yourself out of the markets because you’ve read about an AI bubble one too many times. At the end of the day, long-term investors will do well, even with the odd correction or bear market thrown in. The key is staying cool when volatility strikes and staying in the game.
For investors with an extra $5,000 to put to work, I’d have a closer look at the likes of a Shopify (TSX:SHOP), an e-commerce AI innovator that recently broke out to new highs just north of $233 per share.
I think this is just the start, especially as large language models like ChatGPT look to change the way consumers shop online. Indeed, perhaps all it’ll take is asking your favourite AI model for a certain good before getting a list of items from a bunch of merchants built on the Shopify platform.
And perhaps further into the future, an AI agent will be able to find the stores and shop at them without having the consumer do any of the surfing. Indeed, Shopify stands out as a massive winner as we move to AI agents, and I don’t think investors have yet appreciated such a driver and the impact on the firm’s growth rate. While Shopify will be a choppy ride, long-term investors should stay aboard for next-level growth.
