Investment Strategies
Some advisors will tell you that they can beat the market but the reality is that most don't. We take a more conservative approach to investing by using a pension style approach. That gives our clients a portfolio with less volatility and therefore a smoother ride.
We determine which investment stage you are in and then we work with the investment company to create a portfolio that is right for you. The investments are then diversified by asset type, geography, and investment style.
Russell Investments Canada has created a very good overview of this pension style of investing.
Investment Stages
The first step in determining how to invest your money is to figure out which investment stage you are in - accumulation stage, preservation stage or income stage. The accumulation stage is when you are investing on a regular basis with an emphasis on growing your pool of capital. Once you have achieved your pool of capital, the next stage is preservation. Your goal is no longer to achieve maximum growth, it's to preserve what you have and achieve steady growth. The last stage is the income stage, which is when you want to take a set monthly or annual income from your investment pool. For example if you are saving for retirement, you might be in the accumulation stage from age 25-50, then the preservation stage from age 50-65, and then in the income stage after retirement at age 65. The ages for each stage obviously change for each person depending on their goals for retirement. The stages also change depending on what you are saving for. The investment stages when saving for your children's education will obviously be shorter than when saving for retirement.
Asset Allocation
There are 3 main ways to diversify your portfolio. The first is it allocate your investments by asset type - equity, fixed income or cash. This is one of the most critical decisions you will make when investing and is the main factor when achieving investing success. We work with you to determine the correct asset allocation based on your individual risk tolerance and goals. We also outline how this allocation will change over time as you get older and your investment stage changes.
The second way to diversify your portfolio is by geography. Because we live in Canada, we also tend to focus our investments mostly in Canada. But the reality is that Canada makes up only about 4% of the world stock markets and it makes sense to diversify your investments around the world.
The third way to diversify your portfolio is by investment style. You can choose between traditional mutual funds and ETF mutual funds, funds that invest in large companies or small companies and also funds that invest in specific sectors, like resources, financials or real estate.