During volatile market periods, I find it helpful to revisit the wisdom of Warren Buffett. The buy-and-hold strategy of my own investment portfolio is modelled off many of Warren Buffett’s great pieces of advice. And when the market is not going in the direction that you’d like it to be, it’s important to remind yourself exactly what your portfolio’s long-term strategy is.
When looking at the entire market, Canadian investors have had an enjoyable year so far. The S&P/TSX Composite Index is now up more than 5% since the beginning of 2021.
The recent volatility has come from the tech sector. Investors have seen a steep sell-off in many top tech companies over the past several weeks.
A sell-off like this shouldn’t come as a surprise, though. Even amid a pandemic, the tech sector has an incredibly strong showing in 2020. Valuations are starting to catch up to many of those top tech stocks, which has caused part of the sell-off.
For long-term investors, I wouldn’t be worried about the recent volatility. Rather, I’d be looking to pick up shares of top companies that are trading at rare discounts.
Warren Buffett: Investing in index funds
Contrary to what some may believe, as Warren Buffett is one of the most famous stock pickers, Buffett is a huge fan of index funds. The Oracle of Omaha has many times reiterated that index funds are the best way to go for most people.
If you don’t have any interest in spending hours each week managing your portfolio, which is totally fine, then index funds are perfect for you. They provide diversification, growth, and potentially passive income, all at a very affordable price.
The best part about managing your own portfolio is that you don’t need to choose between index funds or individual stocks. Having the option to own both types of investments allows you to enjoy the benefits of both.
Owning shares of index funds provide your portfolio with plenty of diversification. That allows you to not need to focus as much on diversification when it comes to picking individual stocks. If you’re like me and are slightly over-indexed towards the tech sector, owning a few different index funds can help provide your portfolio with the diversification it needs.
Investing in renewable energy
The tech sector made all the headlines last year, but I think we’re going to see renewable energy stocks receive a lot more attention in the near future.
Green energy stocks quietly had a strong year in 2020. The tailwinds for the sector have been building up for years and they were on full display last year. The best part is, I think that the growth is just getting started.
Owning a broad index fund could provide exposure to the renewable energy sector through a variety of different companies. But if you’ve got the time and interest to pick individual stocks, this is one sector that you’ll want to own a few companies in.
Brookfield Renewable Partners
My top green energy pick this year is Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP). I have a few renewable energy stocks on my watch list I’ll be looking to pull the trigger on this year, but as the base to my portfolio’s green energy basket, I feel very confident about holding this stock.
The $15 billion company provides shareholders with instant diversification to the growing sector. Brookfield Renewable Partners has a global presence, with facilities across North and South America, Asia, and Europe. In addition to that, it provides its customers with a wide range of renewable energy, including wind, hydroelectric, and solar energy sources.
Over the past five years, shares of the green energy stock are now up more than 150%. That’s good enough for almost tripling the returns of the broader Canadian stock market.
If you’re looking to pull the trigger, now would be a good time. The company is trading 15% below all-time highs right now. You might not get another buying opportunity like this for a while.
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Fool contributor Nicholas Dobroruka owns shares of Brookfield Renewable Partners.
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