Now that the TSX Index has taken a few mild bumps in 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 the next inevitable correction.
While a correction can be quite scary to experience, they aren’t exactly game changers that should make you reevaluate your investment strategy, unless of course the magnitude of the volatility keeps you up at night, or worse, you panic sell your stocks.
However, if you can imagine yourself buying more shares of your favorite companies, I think it’s fine to stick with stocks for your new purchases. Sure, bonds, GICs (Guaranteed Investment Certificates), and cash are nice to have too, especially for the emergency portion of your savings.
However, with lower interest rates following the Bank of Canada’s (BoC) latest round of cuts, it should come as no surprise why GICs have declined quite a bit in popularity in recent quarters.
GICs can indeed offer risk-free returns, but with the days of 5% or even 4% interest on such securities in the rearview mirror, I’d say it’s a better move to get in on the stock market bargains, even if the price of entry has risen a bit over the past year.
The growth trajectory and AI drivers undoubtedly look better today than they did at the start of the year. And while AI bubble concerns aren’t likely to subside anytime soon, especially as the tech titans continue their glorious rise, I think a painful correction, rather than a catastrophic collapse, is in store for the broad-based S&P 500.
A handful of speculative tech stocks imploding likely won’t completely derail the S&P 500, especially given its weighting in the Magnificent Seven stocks and a broader range of other blue chips that are growing profits at an impressive pace. Not to mention that their valuations are nowhere near where they were at the peak of the dot-com bubble.
Shopify stock is a great growth gem if you can handle the volatility
In short, don’t scare yourself out of the markets because you’ve read about an AI bubble too many times. Ultimately, long-term investors will do well, even with the occasional correction or bear market. The key is to stay calm when volatility hits and stay in the game.
For example, for investors with an extra $5,000 to put to work, I’d take a closer look at one Shopify (TSX:SHOP), an e-commerce AI innovator that recently reached new highs just above $233 per share.
I think this is just the beginning, especially as major language models like ChatGPT look to change the way consumers shop online. Perhaps all you need to do is ask your favorite AI model for a particular good before you get a list of items from a number of merchants built on the Shopify platform.
And perhaps in the future, an AI agent will be able to find the stores and shop there without the consumer having to surf. Shopify stands out as a huge winner as we transition to AI agents, and I don’t think investors have yet appreciated such a driver and the impact on the company’s growth rate. While Shopify will be a choppy ride, long-term investors should stay on board for next-level growth.
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