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Posted by Brett Gustafson on Mar 14th, 2024

Portfolios With a Purpose – High-Quality Investing

"We do not learn from experience… we learn from reflecting on experience." – John Dewey.

A wise man once said to me, "Managing a portfolio is similar to exercise. If it feels effortless and devoid of pain, you're likely not doing it correctly." And while there has to be a layup somewhere in there regarding 'gains,' I'll leave that to the creatives to add that relation.

The fundamental truth in investing is that no matter your expertise, you won't always make the correct call, whether it's a company or an overall portfolio tilt. Nor should you want to. Aiming for a perfect track record in investment decisions isn't necessarily ideal. It could indicate that you're not taking enough calculated risks within your decision-making process.

It is no secret that losses feel worse than gains. Loss Aversion is likely one of the few prominent investment biases out there that we are constantly aware of. In short, loss aversion is feeling the pain of a loss two times more than the joy of a gain. Without a process in place, this bias can cause suboptimal performance for portfolios. A loss-averse investor may sell winning investments too early to capitalize on gains while simultaneously holding onto losing investments to avoid the loss and hope for a rebound.

Accepting that not every call is going to be the right one opens doors for investors to learn from those mistakes. With the knowledge gained from those mistakes, you will be able to potentially prevent or reduce the number of wrong decisions in the future. Again, as improbable as it is to avoid every incorrect decision, investors can enhance their chances of success by embodying certain qualities.

Discipline & Reflection

Having a process seems very straightforward and is not a shock for any investor, but the particular focus of the process to focus on here is referred to as a postmortem. A postmortem is what it sounds like, except there is no dead body, and instead, it is your portfolio on the slab. It is an exploratory process to dive deep into previous portfolio decisions, now with the benefit of hindsight into what happened in the markets and the performance of the portfolio. The objective is to learn from both past mistakes and correct decisions to aid in future decision-making.


Increasing our knowledge of investment biases creates a more disciplined and objective approach to investing. By understanding how our judgment is being influenced, we can mitigate some effects and focus on being objective and less emotionally invested. For example, let's say a loss-averse investor is sitting on a loss in Chinese Equities in their portfolio. To hang onto that investment, they enact their confirmation bias and seek out the evidence they want to believe to justify the reason Chinese equities will recover. Instead, seeking out facts about why these equities may not recover will improve our ability to maintain an unbiased opinion.

confirmation bias


There are unpredictable elements to investing that are out of your control. Even if you could have anticipated the Bank of Canada executing one of the fastest rate hiking cycles in history, it would not be prudent to shift the entire portfolio over to cash and sectors expected to do better as rates rise. Diversification remains a cornerstone of sound investing. Sometimes diversification implies holding some positions in case you are wrong about how the markets will behave.

BoC O/N rate

In addition, even if your portfolio positioning appears well-suited to handle a certain type of event, setbacks such as underperformance from a selected fund manager can always occur. Making impulsive changes to the portfolio based on rare economic events may end up being the right call, but it is important to maintain confidence in the process that led to those manager selections and evaluate if the position/manager is appropriate for the outlook.


We all know that the average holding period for US equities has dramatically reduced since the 1970s for many reasons, such as ease of access and social media, etc. However, what it truly comes down to is an impatient society, and for advisors, the difficulties of patience are only amplified through client discussions. That is why patience is the most underrated and difficult attribute of successful investors. If an investor believes that they have an investment approach where the probabilities are on their side, then they must give it time to play out.

NYSE average holding period

Patience and loss aversion are often intertwined, but the main difference lies in the conviction of the original rationale. Depending on the depth of the loss, waiting patiently for the thesis to come to fruition is appropriate if the original rationale remains viable. If the outlook for the position has dissipated, and the investor hangs onto the investment, that can be considered loss aversion. Knowing when to stick it out or when to bail on an investment is challenging, but if the thought process remains intact, patience is a virtue.

The longer invested, the greater the likelihood of success

Final Thoughts

Successful portfolio management requires a combination of discipline, self-awareness, adaptability, and patience. These are all qualities that many individuals desire simply in their day-to-day lives. No one said investing was easy, but even if a few of those qualities are implemented into the process investors will be able to acknowledge that missteps are inevitable, which will ultimately allow for an environment that fosters learning, refining strategies, and improvement in decision-making.

Remember: No Pain, No Gain.

— Brett Gustafson is a Portfolio Analyst at Purpose Investments

Insights with Purpose

At Purpose, we are attempting to change the status quo within the investment industry – mainly the enigmatic standards by which the industry operates. We are an open book when it comes to portfolio design and discussions surrounding our outlook and strategies. We want to make managing portfolios simpler for advisors and act as a sounding board for ideas. We start by running portfolio comparisons between your portfolios and ours. Not to say ours is right and what you are doing is wrong, but to understand the differences and have discussions surrounding the rationales. We aim to keep this discussion going quarterly; this is not a one-and-done service. We want to build our relationships with advisors so that the end client has a satisfactory investment experience.

If you want to know what exposures your portfolio is tilted toward, feel free to reach out to our team. As the great Peter Lynch once said, “Know what you own and why you own it.” 

Sources: Charts are sourced to Bloomberg L.P.

The content of this document is for informational purposes only, and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold, or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice.

Commissions, trailing commissions, management fees, and expenses all may be associated with investment funds. Please read the prospectus before investing. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. Certain statements in this document are forward-looking. Forward-looking statements ("FLS") are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as "may," "will," "should," "could," "expect," "anticipate," intend," "plan," "believe," "estimate" or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Brett Gustafson

Brett is a Portfolio Analyst at Purpose. He is responsible for relationship management and advisor support and focuses heavily on portfolio analytics for advisors, our own proprietary models, as well as equity research. With over nine years of experience in the investment industry, Brett started his career out as an Investment Advisor at a Canadian independent asset management firm where he cared for several high-net-worth families. Brett graduated from the University of Calgary with a Bachelor of Commerce degree. He is currently pursuing his CFA designation with the goal of becoming a Portfolio Manager.