What 40 Years of Trading on the Canadian Market Taught Us

Canada has long been one of the world's top ten largest economies, a position built on a solid foundation of natural resources and key trade relationships, especially with the United States. Its banking sector is famously stable, having weathered the 2008 financial crisis with remarkable strength. This economic resilience is reflected in its stock market, the TSX index, which has shown a steady, upward climb over the years. This makes it an interesting subject for anyone interested in .

So, we decided to put a specific trading strategy to the test, analyzing its performance on the TSX from 1982 to 2023. The results offer some valuable lessons for those looking at different ways of for the long haul.

The Overall Performance

Over four decades, our strategy involved making 11 key investments. We started with a total capital of $27,500, and by the end of the period, it grew to an impressive $96,946.95. That’s a total return of over 252%, a solid performance that places the Canadian market in a respectable position compared to other global indices.

What’s really interesting is how this was achieved. It turns out that nearly all 11 of our buy signals occurred at or very close to significant market lows. This effective timing gave us an average purchase price of 5,717.26 points on the index, creating a comfortable buffer against market volatility. For anyone new to , this highlights the power of a disciplined entry strategy.

A Closer Look at the Highs and Lows

Not all trades are created equal, and digging into the specifics reveals a lot. The single most profitable signal came during the 2020 pandemic turmoil, which delivered an annualized return of 11.08%. Even in a moment of global uncertainty, the strategy found a prime opportunity.

On the other end of the spectrum, the least profitable signal was from a 2001 entry, which still yielded an average annual return of 4.69%. What’s truly remarkable is that even this lowest-performing investment consistently outpaced bonds over the decades. This kind of stability makes a strong case for using the TSX to build reliable over time.

While this strategy on the TSX might not produce the explosive growth some investors chase, its stability is its greatest asset. It proves to be a dependable vehicle for capital diversification, making it a worthy consideration for anyone looking to build a balanced portfolio. This is a crucial takeaway for and seasoned pros alike.