I. The No Idea Approach to Investing ™
The first tenet of our approach is to rely as little as possible on speculation about the future. It is tempting to believe one could outsmart the stock market, but research reveals that even the most accurate predictions of profits and interest rates are frequently useless to forecast stock and real estate markets in the short run.
II. Undeniable Long-term Trends
Nevertheless, there are certain long-term trends that are pretty hard to dispute.
Never underestimate the ability of human beings to make a buck! History has favoured long-term investors.
The growing interest in Environmentally Sensitive, Socially Responsible, and Good Governance (ESG) investing.
The accelerating importance of technology in manufacturing, services, biotechnology, clean energy, education, etc.
III. Three D
Diversification by Asset Class – We believe it is helpful to include savings, stocks, bonds, insurance, and real estate in a financial plan to see the whole picture. Each asset class has strengths and weaknesses and a unique performance pattern. Diversification among asset classes adds stability and the opportunity to capture bargains through periodic rebalancing.
Diversification by Management Style – When it comes to equity investing (stocks) there are many different approaches. The two most common are Growth-oriented and Value-oriented. Growth-oriented investment managers tend to believe that a company’s stock price reflects its potential to continue growing in the future. Value investors seek out “bargain-priced” companies with a hidden, value that will be discovered eventually. Both of these approaches have performed well over time, albeit with different patterns of performance. Combining them in a portfolio creates added stability and growth potential through periodic rebalancing.
Diversification by Account Type - Some of the lowest hanging fruit i.e. easiest gains for investors can be accessed by simply taking advantage of available government programs such as capturing RRSP contribution room, using available TFSA room, setting up RESP accounts ASAP for children, RDSPs for family members with disabilities. These account types enjoy tax advantages, and government grants in many cases, that should not be overlooked. There are additional options available to high net worth and risk-tolerant investors, but these should be considered after the obvious advantages of registered plans have been captured.
The model portfolio is a balanced growth-oriented investment portfolio that reflects the investment philosophy outlined above. The rates of return are based on the real historical investment performance of segregated fund investments available to our clients. Past performance is no indication of future results and individual results will vary based on timing and other factors.
We use the model as a starting point from which to tailor a personalized investment strategy to better reflect your time frame, investment objectives, and risk tolerance. It might make sense to allocate a little more or less to certain asset classes and/or incorporate additional investment funds for greater diversification and growth potential depending on your needs. Contact us for a free personal financial planning discussion. Stay tuned for more information about the model portfolio that will be posted in the near future. Feel free to make an appointment or ask any questions using the form below.