Services
We offer many services to meet your investing needs.
Mutual Fund Selection
In contrast to the early 1980s, there are now a large number of mutual funds for clients and advisors to chose from, many offering different investment styles and focuses. The benefit of being independent is that the firm is free to choose from amongst the most successful fund managers available in Canada to build a portfolio for clients that will match their tolerance for risk and achieve their investment objectives.
With interest rates currently quite low, the risk of investing in Government bonds has become quite high. This is because if you purchase, for example, a Government of Canada bond with a 7 year maturity today you would only be earning 1.70% in interest. While your risk for default is low – the Government of Canada will pay you back in 7 years – you are taking a price risk on your bond should interest rates rise. Say rates went to 5% than your bond would be marked down in price as the 5% alternative would be more compelling..
The appeal for investing in funds which focus on corporate bonds is that the spread they are paying over and above Government bond yields is quite high at about 4%. As well, the default rate should be relatively low as many corporations have excess cash and hopefully the financial crisis of 2008 is behind us. But you have to be careful.
Over the past few years Canada has experienced one of the most favorable equity markets in the world as our banks have not experienced a mortgage crisis as in the United States nor the "fallout" of the European banks.
Investing in funds concentrating on the United States has been quite profitable over the past 10 years as the U.S. economy has been supported by fiscal and monetary policy and lower rates has made equities more attractive. We have also had the depreciation in the Canadian dollar helping us though this has changed recently as our dollar has climbed to 80 cents from 71 cents in January of 2016..
Investors should be investing for the future and the best results are often achieved by being contrarian in nature. Having the ability to invest during periods of pessimism is difficult but pays the greatest rewards. Having a long term focus is also important as short term games are more results of speculation than investment. Investing is never easy. Humility is a prerequisite for success.
Asset Allocation
Proper investment allocation is both a result of individual preference and tolerance for volatility as well as relative value for the asset class and individual security. Generally, as one nears retirement the appetite for taking on risk becomes less attractive and the need for capital preservation enhanced. As well, the goal of saving and growing your investments may become secondary to the need for income from your investments to enhance your income.
Investing should be focused towards providing the client with above average results along with minimal risk. At times, an asset class such as equity might become exaggerated in price due to good economics or market exuberance or both. It would be wise to lessen this risk by reallocating from equities to protect the overall portfolio. Also, valuations in an asset class might become very compelling based on historical prices and an over allocation in this area might become warranted. For example, when Government of Canada bonds were yielding 18% in 1981 there would be no need to invest in any other asset class.
If you maintain an appropriate allocation between different asset classes and investment styles you should be able to achieve superior investment results with a low degree of risk. This should also give you more control over your investment decisions rather than being reactionary to the fears and greed inherent in investing.
Retirement Planning
Any plan that is drawn up to provide you with financial independence in your retirement years should have a savings component, assumptions for rates of return, and provide tax free compounding if possible. Unless you are relying on your pension plan proceeds to pay for your future obligations, you need to save.
Rather than the illusion of financial freedom at 55, the fact is that 60% of Canadians who are fully retired were in the two lowest income brackets in 2009.
From my 35+ years of experience, I have found that people who can save 10% of their earnings on a regular basis, minimize their taxes through the use of RRSPs and Tax Free Savings Accounts and manage their capital well are able to retire with a higher lifestyle than those who do not. A full 1/3 of Canadians aged 55 and older who are not yet retired have a mortgage on their home. Just having a plan to pay off their mortgage will free up these payments when they retire.
The two benefits for RRSPs are tax free compounding and having a lower tax rate when the money is pulled out than when it is deposited. The disadvantage to using an RRSP to save for retirement is the possibility of withdrawing the money at a higher tax bracket – and future clawbacks of other income. A tax free savings account is a better option if you believe your tax bracket will be higher when you retire than it is when you save. Sometimes it is better then to start saving for retirement when you are young with a tax free savings account than with an RRSP. One must also be aware that an RRSP is fully taxed at death – which can bump up your tax bracket, unless it can transferred to a surviving spouse.
Education Planning
With the help of a Registered Education Savings Plan you, as a parent, friend or family member, can start putting aside money for a child's post-secondary education. Your contributions can grow surprisingly quickly when you use this special savings account, as the Government of Canada offers the Canada Education Savings Grant and the Canada Learning Bond exclusively to RESP subscribers.
Mutual Fund Selection
In contrast to the early 1980s, there are now a large number of mutual funds for clients and advisors to chose from, many offering different investment styles and focuses. The benefit of being independent is that the firm is free to choose from amongst the most successful fund managers available in Canada to build a portfolio for clients that will match their tolerance for risk and achieve their investment objectives.
With interest rates currently quite low, the risk of investing in Government bonds has become quite high. This is because if you purchase, for example, a Government of Canada bond with a 7 year maturity today you would only be earning 1.70% in interest. While your risk for default is low – the Government of Canada will pay you back in 7 years – you are taking a price risk on your bond should interest rates rise. Say rates went to 5% than your bond would be marked down in price as the 5% alternative would be more compelling..
The appeal for investing in funds which focus on corporate bonds is that the spread they are paying over and above Government bond yields is quite high at about 4%. As well, the default rate should be relatively low as many corporations have excess cash and hopefully the financial crisis of 2008 is behind us. But you have to be careful.
Over the past few years Canada has experienced one of the most favorable equity markets in the world as our banks have not experienced a mortgage crisis as in the United States nor the "fallout" of the European banks.
Investing in funds concentrating on the United States has been quite profitable over the past 10 years as the U.S. economy has been supported by fiscal and monetary policy and lower rates has made equities more attractive. We have also had the depreciation in the Canadian dollar helping us though this has changed recently as our dollar has climbed to 80 cents from 71 cents in January of 2016..
Investors should be investing for the future and the best results are often achieved by being contrarian in nature. Having the ability to invest during periods of pessimism is difficult but pays the greatest rewards. Having a long term focus is also important as short term games are more results of speculation than investment. Investing is never easy. Humility is a prerequisite for success.
Asset Allocation
Proper investment allocation is both a result of individual preference and tolerance for volatility as well as relative value for the asset class and individual security. Generally, as one nears retirement the appetite for taking on risk becomes less attractive and the need for capital preservation enhanced. As well, the goal of saving and growing your investments may become secondary to the need for income from your investments to enhance your income.
Investing should be focused towards providing the client with above average results along with minimal risk. At times, an asset class such as equity might become exaggerated in price due to good economics or market exuberance or both. It would be wise to lessen this risk by reallocating from equities to protect the overall portfolio. Also, valuations in an asset class might become very compelling based on historical prices and an over allocation in this area might become warranted. For example, when Government of Canada bonds were yielding 18% in 1981 there would be no need to invest in any other asset class.
If you maintain an appropriate allocation between different asset classes and investment styles you should be able to achieve superior investment results with a low degree of risk. This should also give you more control over your investment decisions rather than being reactionary to the fears and greed inherent in investing.
Retirement Planning
Any plan that is drawn up to provide you with financial independence in your retirement years should have a savings component, assumptions for rates of return, and provide tax free compounding if possible. Unless you are relying on your pension plan proceeds to pay for your future obligations, you need to save.
Rather than the illusion of financial freedom at 55, the fact is that 60% of Canadians who are fully retired were in the two lowest income brackets in 2009.
From my 35+ years of experience, I have found that people who can save 10% of their earnings on a regular basis, minimize their taxes through the use of RRSPs and Tax Free Savings Accounts and manage their capital well are able to retire with a higher lifestyle than those who do not. A full 1/3 of Canadians aged 55 and older who are not yet retired have a mortgage on their home. Just having a plan to pay off their mortgage will free up these payments when they retire.
The two benefits for RRSPs are tax free compounding and having a lower tax rate when the money is pulled out than when it is deposited. The disadvantage to using an RRSP to save for retirement is the possibility of withdrawing the money at a higher tax bracket – and future clawbacks of other income. A tax free savings account is a better option if you believe your tax bracket will be higher when you retire than it is when you save. Sometimes it is better then to start saving for retirement when you are young with a tax free savings account than with an RRSP. One must also be aware that an RRSP is fully taxed at death – which can bump up your tax bracket, unless it can transferred to a surviving spouse.
Education Planning
With the help of a Registered Education Savings Plan you, as a parent, friend or family member, can start putting aside money for a child's post-secondary education. Your contributions can grow surprisingly quickly when you use this special savings account, as the Government of Canada offers the Canada Education Savings Grant and the Canada Learning Bond exclusively to RESP subscribers.
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Contact
Suite 256, Bonnie Doon Shopping Centre 82 Avenue & 83rd Street Edmonton, Alberta T6C 4E3 Phone | (780) 433-5449 |
Copyright © DW Good Investments Co. Ltd. 2015
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