Investment Planning Centre

Avoid the emotions of the market and reach your short- and long-term savings goals.

Building a Better Investment Portfolio

Research has shown that successful investing involves not only choosing the right investments but the right combination of investments. In fact, your investment mix, particularly the mix between income and growth investments, is the single most powerful factor driving your overall return.

Key Tools for Asset Allocation Planning

One of the key tools in asset allocation planning is the efficient frontier graph. It illustrates the trade-off between risk and returns when two investments are mixed in varying amounts. Analyzing Canadian bonds and equities over the past forty years has revealed two important lessons. The first is critical for conservative investors: combining bond and equity investments is actually less risky than investing solely in bonds.

This occurs because the benefit of diversification achieved by combining different types of investments more than offsets the added risk of equities in the portfolio. The second lesson is for more aggressive investors who seek to maximize returns by investing solely in equities.

By adding 20% bonds to an equity portfolio you will significantly reduce portfolio risk with only a slight loss of return potential. Doing this type of analysis requires extensive testing and sophisticated computer technology. This scientific approach is available to you when working with a financial advisor.

Diversify your Portfolio for Stability

When you invest in just one type of investment, or in investments that are very similar to each other, your investment returns will tend to fluctuate more widely. The key to stabilizing returns is to combine a variety of investments with different characteristics.

Get Started with an Investment Policy Statement

There’s an easy way to ensure you’re always making the best investment decisions with the information you have available?

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Download the guide on Why You Need an Investment Policy Statement (IPS) and the benefits of working with your financial advisor to create one.

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What’s New


Market Commentary | Q2 2022

Everyone has a right to an opinion about the markets, but not all opinions carry equal weight. Read the report and stay informed.

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A Guide to Tax-Efficient Investing

Gain a better understanding of how you can reduce or defer the tax you pay on your investment portfolio, thereby allowing you to grow your investments faster and reach your retirement goals sooner.

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Get the Fund Facts

The Fund Facts document provides valuable information about a mutual fund, including the performance history, investments and the costs associated with investing in a mutual fund. Looking to invest in a fund? Get the facts.

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Additional Information

Recent Articles

  • What to Do with Your Pandemic Savings

    What to Do with Your Pandemic Savings

    October 2021

    Throughout the pandemic, Canadians collectively have been spending less and receiving more money than ever from government support programs.

    As a result, we’re saving like never before.

    In fact, Canadians amassed $212 billion last year, versus $18 billion in 2019, according to Statistics Canada. That works out to $5,574 per Canadian on average in 2020, compared to $479 in the previous year.

    For many, the question now is, what to do with their unexpected savings?

    According to Equifax Canada, a good number have already decided how to spend at least some of their funds. The credit rating agency reports that credit card balances are down, fewer people are behind on payments and credit scores are up.

    Paying off any high-interest debt is a great idea. Bravo to those of you who’ve done so!

    Now, depending on how much money you have remaining, you might consider putting extra payments on your mortgage, doing home renovations or rewarding yourself with some time off and travel.

    And, of course, you know my view: You should always keep an eye on your most important financial goals. With this in mind, you might consider directing a portion of the funds towards your retirement savings.

    And if you have school-age kids or grandkids, another option is to invest a part of the money into a Registered Education Savings Plan (RESP) to help pay for their post-secondary education.

  • Canadians Saving 25% More

    Canadians Saving 25% More

    With the pandemic putting a damper on activities like dining out, attending concerts and vacationing abroad, Canadians are spending less and saving more. A lot more.

    Statistics Canada, in a report issued on August 28, 2020, provided a detailed picture of the sharp shift in Canadian spending and savings habits.

    From April to June, household spending in Canada crashed by 13.1%. Statistics Canada attributed the sharp drop to “substantial job losses, limited opportunities to spend because of closures of stores and restaurants and restrictions on travel and tourism.”

    Household spending declines sharply

    Some of the largest spending declines came in purchases of transportation services (-79.2%), food, beverage, and accommodation services (-45.6%), clothing materials (-38.3%) and new passenger cars (-37.8%).

    During this same period, employees’ compensation declined by 8.9%. In ordinary circumstances, a drop of this magnitude would be expected to hurt household savings. However, due to government transfers to offset the economic impact of COVID-19, household disposable income rose by 10.8%.

    This increase, coupled with a 13.7% decline in household spending (in nominal terms), pushed the household saving rate up to an astonishing 28.2%. That’s dramatically higher than the pre-pandemic savings rate in recent years of just 2% – 3% of disposable income.

    According to Statistics Canada, “the increased household savings rate is aggregated across all income brackets,” though, in general, “savings rates are higher for higher income brackets.”

    The Household Saving Rate in Canada increased dramatically to 28.20 percent in the second quarter of 2020.

    Another perspective on this trend is offered in an August 2020 report by Investor Economics, which is part of ISS Market Intelligence.

    Investor Economics estimates that Canadians added a stunning $127 billion to their savings and chequing accounts and term deposits in the first half of 2020. In comparison, the average amount of money flowing into savings, chequing and GIC accounts for the first half of 2017, 2018 and 2019 was $32 billion.

    Without a doubt, Canadian savers are sitting on a pile of cash. The question now is, how will they put it to use?

    Pay down debt or invest in retirement

    As Investor Economics details, a significant portion of these savings is currently parked in deposit accounts. While deposit accounts are a safe place to keep your money, they pay only meager interest rates. After taxes and inflation, you may earn next to nothing, and you could wind up losing money if the cost of living increases.

    One option for savers looking to put their funds to better use is to pay down debt. The less you owe, the better shape you’ll be in to get through a possible second wave of pandemic-induced economic slowdown.

    Another option is to invest it. If you divert a portion of your savings into a mutual fund or another investment vehicle each month for the duration of the pandemic, you’ll add to your retirement nest egg and develop a healthy savings habit at the same time.

  • Understanding Mutual Funds Fees

    Understanding Mutual Funds Fees

    For most investors, mutual funds are the investment of choice and an important part of achieving their financial goals in education and retirement planning or when saving for a large purchase.

    Generally, the fees you pay as an investor can be broken down into two parts:

    A) a fee representing your share of the fund company’s expenses to manage the fund, and
    B) a fee you pay to an advisor as compensation for financial advice.

    The fee you pay for fund management can be further broken down into three different expense categories:

    1. Management Fee

    Covers the expenses associated with:

    • Paying a portfolio manager to professionally manage the fund, which includes identifying investment opportunities and choosing the investments to buy or sell in the fund.
    • On average, management fees range from .25% to 1.25%

    2. Operating Expenses

    Covers the expenses associated with:

    • Overseeing and administrating the fund, which includes marketing, record keeping, reporting to investors, audit fees, legal fees and any applicable taxes.
    • On average, operating expenses range from .15% to .5%

    The combination of these two expenses makes up what’s known as the fund’s management expense ratio, or MER. The MER is expressed as a percentage of the fund’s average net assets for a year.

    3. Trading expense fees

    Covers brokerage commissions on the purchase and sale of securities as well as any research costs incurred by the fund manager.

    The cost you pay for advice can be charged to you in one of two different ways:

    1. Embedded fees

    A service fee, sometimes called a “trailer fee,” is included in the overall product cost and is paid to GP Wealth Management and your advisor.
    On average, the service fee ranges from .25% to 1.0%.

    2. Fee-for-service

    You pay an advisory fee directly to GP Wealth Management and your advisor, and the amount is expressed as a percentage of your total assets under management. Keep in mind that if you choose fee-for-service, you will not incur an embedded fee.
    On average, fee-for-service starts at 1.25% of assets and scales down to .25% as your assets under management increase.

    If you are looking for more information on fees, click the links below or contact us for help:

  • Use Pre-Authorized Contributions (PACs) to Accelerate Your Savings

    Use Pre-Authorized Contributions (PACs) to Accelerate Your Savings

    July 15, 2021

    If you find yourself with additional cash in your savings account, should you:

    a) splurge on something, or
    b) put the money towards your investment goals instead?

    You know what my advice would be, and here’s a strategy that can both create discipline in your savings habits and reduce the risk of buying into the market at the wrong time – that is, when prices are high.

    What is a PAC?

    A PAC is a recurring automatic withdrawal that transfers a pre-arranged amount of money from your bank account to an investment account, like an RRSP, TFSA, RESP or non-registered investment account.

    PAC benefits

    PACs make it easy to keep your retirement nest-egg contributions on schedule. Once your PAC is in place, there are no further updates to make and no risk of forgetting to make a transfer.

    Also, you have the flexibility to schedule your PAC to occur on a frequency that suits you best, such as weekly, bi-weekly, semi-monthly or monthly.

    Let’s say you have $12,000 in RRSP contribution room for the year and want to use it all. If your preference is monthly withdrawals, you would set your PAC to 12 monthly contributions of $1,000. Perhaps you get paid every two weeks and want to avoid the temptation of having extra funds sitting in your bank account. In this case, you could set your PAC to 24 semi-monthly contributions of $500. Either way, you’ll max out your contribution room for the year without having to think further about it.

    Dollar-Cost Averaging (DCA)

    If you’re putting your money into the markets, PACs also offer the benefits of dollar-cost averaging.

    The nature of the markets is that they’re constantly fluctuating up and down. Of course, the preference is to somehow time your purchases for when the market is down. But timing the market rarely works and could backfire. Imagine making a single lump-sum purchase when you were sure the price had reached a low and could only go up — only to discover that you bought at the high?

    Dollar-cost averaging avoids this type of costly mistake because it involves investing a fixed dollar amount at regular intervals. Over time as the market fluctuates, prices typically spend less time at the “high” and more time at lower levels. As a result, your individual transactions will buy fewer shares when prices are at their highs and more shares when prices are lower. It’s like waiting until something goes on sale and then buying. The result is that the average share price falls over time and more shares are accumulated.

    If you exercise this strategy on a long-term basis through pre-authorized contributions, it’s reasonable to expect steady growth in your investments over time.

    Example:

    Consider if your budget allowed you to put $200 per month for six months into an investment while prices moved up and down as shown below under “Unit Price.”

    MonthUnit PriceUnits BoughtAmount InvestedTotal Value
    1$15.00 13.33$200.00$200.00
    2$13.00 15.38$200.00$373.23
    3$14.00 14.29$200.00$602.00
    4$12.00 16.67$200.00$716.04
    5$16.00 12.50$200.00$1154.72
    6$15.00 13.33$200.00$1282.50
    TOTAL MONTHSAVERAGE COST / UNITTOTAL UNITS BOUGHTTOTAL INVESTEDTOTAL VALUE
    6$14.03$1200.00$1200.00$1282.50
    [table “59” not found /]

    Tips for setting up your PAC:

    Schedule your PACs for payday. That way, the money is transferred to your savings before you even notice it’s gone.

    • Increase your PAC whenever you get a raise.
    • Use separate PACs for your short and long-term goals.
  • What to Do With Your Quarantine Savings?

    What to Do With Your Quarantine Savings?

    Many Canadians have been pleasantly surprised at how quickly money has accumulated in their savings accounts during the stay-at-home lockdowns.

    However, cash generates only modest interest, and even low inflation will gradually whittle it away. Depending on your personal situation, these savings could be put to much better use. Here are three options to consider.

    Create or add to an emergency fund

    If an unexpected event upends your world, you may need money fast. In particular, if you’re concerned about your future job stability due to COVID, you should leave an appropriate sum parked in an emergency fund. Consider putting the money into a TFSA with a short time horizon.

    Pay down debt

    Paying down debt is just like getting a guaranteed, tax-free return equal to the rate of interest. The best use of your cash could be paying off high-interest debt such as credit-card purchases, lines of credit or student loans.
    While mortgage interest is typically at the low end of the scale, increasing your payments will reduce the principal faster and pay off your house earlier.

    Add to your investment portfolio

    If you have contribution room, you could invest in a tax-advantaged registered savings account such as an RRSP or TFSA.

    RESP: With an RRSP, your contribution will reduce your taxable income, resulting in a lower tax bill for the year, and your investment grows tax-deferred until withdrawal.

    TFSA: The money you invest in a TFSA is from your net income, so there’s no tax break at the time of contribution. But your earnings grow tax-free, so no taxes are owed upon withdrawal.

    If you’ve already maximized your registered contribution room, consider opening or adding to taxable accounts.

  • Managing Your Investments Through Times of Market Volatility

    Managing Your Investments Through Times of Market Volatility

    Volatility in markets can often cause investors to question the status of their portfolio and whether or not to make any changes. Many have recently experienced declines in the value of their investment portfolios, only to see a subsequent market recovery.

    While the current environment is naturally unsettling, the way that you respond at this time can be critical for staying on track and achieving your long-term investing goals. Each market downturn is unique and some last longer than others, but stock prices have always recovered over the longer term and gone on to post new highs.

    Causes of short-term market volatility

    Many different events can cause short-term volatility in stock prices, with infectious disease outbreaks recently emerging as one of the most common.

    Indeed, there have been six global outbreaks of infectious diseases since the SARS epidemic of 2003. Between SARS and COVID-19, the world also contended with the swine flu, MERS coronavirus, Ebola and Zika. Each of the previous outbreaks roiled the world’s markets, creating investor anxiety, and each time, the markets recovered and continued their rise once the issue was contained. The challenge presented by COVID-19 is larger in scale but by no means insurmountable.

    Massive amounts of money and the world’s best minds have been marshaled against the virus. It is only a matter of time until the threat is contained and people can return to normal life.

    The benefits of staying invested

    For most investors, the best response in uncertain times is to stay invested. Your instincts may be screaming at you to sell everything and stash the cash under the mattress, but rash attempts to time the market often make a difficult situation even worse.

    If you sell after prices have fallen, you risk missing the rebound and may find yourself buying back in at a higher level than when you sold. According to research by Fidelity Investments, an investor who missed just five of the best days of the S&P 500 stock market index between 1980 and 2018 would have ended up with 35% lower returns.

    The trouble with trying to time — in other words, outsmart — the markets is that you simply can’t know when the good days are going to happen.

    Rebalancing your portfolio

    Your portfolio should always be aligned with investment objectives and risk tolerance. It’s important to periodically review and, if necessary, rebalance your portfolio to ensure you have the right asset mix. If you’ve experienced a loss of income or changes in your family situation due to COVID-19, it may be time for a reassessment. Don’t hesitate to contact me to arrange a meeting.

    After rebalancing, stay the course

    After rebalancing a portfolio, it’s normal to be curious about the performance. You may feel the urge to check it frequently, even daily. However, may only cause you unnecessary stress, which could take a toll on your health. Like investing, rebalancing should be “set and forget.”

    You don’t want to bury your head in the sand, but at the same time, it’s necessary to give your new investment strategy time to succeed. Throughout history, stocks have generated long-term gains despite many short-term declines caused by unforeseen external events. The best way to weather the pandemic is to ignore the noise, keep your emotions in check and stay the course.

    Here’s where we can help!

    Do you have questions about the impact of COVID-19 on your investments? Want to discuss rebalancing your portfolio? Give us a call, we’re here to help.

  • Dollar-Cost Averaging

    Dollar-Cost Averaging

    Trying to “time” or “beat” the markets can be tempting, but it rarely works (and could backfire badly). Investing is most productive – and less volatile – when done over the long term.

    After all, in a long race, the tortoise invariably beats the hare. Rather than trying to time the markets, consider the more conservative and dependable strategy known as “dollar-cost averaging.” Dollar-cost averaging involves investing a fixed dollar amount at regular intervals scheduled on a weekly or monthly basis.

    Because market prices are continuously fluctuating, your individual transactions will buy more shares when markets are low and fewer shares when markets are high. The result is that the average share price falls as time passes and more and more shares are accumulated. By following this strategy, you may also reduce the risk associated with investing a large amount in a single investment at the wrong time.

    Instead, it’s like waiting until something goes on sale and then buying.

    Example:

    Consider if your budget allowed you to put $200 per month for six months into an investment while prices moved up and down as shown below under “Unit Price.”

    MonthUnit PriceUnits BoughtAmount InvestedTotal Value
    1$15.00 13.33$200.00$200.00
    2$13.00 15.38$200.00$373.23
    3$14.00 14.29$200.00$602.00
    4$12.00 16.67$200.00$716.04
    5$16.00 12.50$200.00$1154.72
    6$15.00 13.33$200.00$1282.50
    TOTAL MONTHSAVERAGE COST / UNITTOTAL UNITS BOUGHTTOTAL INVESTEDTOTAL VALUE
    6$14.03$1200.00$1200.00$1282.50

    Notice that your average cost per unit is lower than the average price of the fund. And the $1200 you invested over the six-month period is now worth $1282.50, a gain of 6.9 percent. If you had invested your total of $1200 in month one, you would still have only $1200 at month six because the price returned to your original $15 purchase price (providing, in the meantime, no dividends were paid by the fund and re-invested).

    This is a clear demonstration of how dollar-cost averaging can lower your average price and increase the number of units you can purchase.

    Markets Are Always Changing

    The following charts illustrate how dollar-cost averaging performs under different markets conditions. In a smoothly climbing market, the unit price rises steadily over the investment term, never falling below the initial cost per unit.

    With dollar-cost averaging, the investor buys more units at lower prices and fewer units at higher prices. The unit cost fluctuates as it rises over the term of the investment, enabling the investor to purchase units at various price points, instead of just one price. Due to a combination of dollar-cost averaging and the rising market, the units are worth more at the end of the investment period than when first purchased, allowing for a healthy profit.

    In the first half of the investment term, the market decreases and so does the unit price; in the second half of the investment term, the market and unit price both rebound back to their original levels. Due to dollar-cost averaging, the investor is able to purchase more units at a lower cost than if a large lump sum had been invested at one time when the unit price was high.

    Benefits of Dollar-Cost Averaging

    • You don’t have to guess when to buy, and you might be able to sleep better at night.
    • You don’t have to invest a large amount all at once; smaller amounts are easier to work into your budget.
    • There is no need to study trends or be a market expert – professional money management is what the mutual fund provides.
    • Most importantly, dollar-cost averaging eliminates the temptation to buy wildly when the price is increasing and stop buying when the price is going down.

    A disciplined investment strategy

    Dollar-cost averaging imposes discipline because you keep investing the same amount every week or month, no matter what happens in the market. It helps you overcome the temptation to stay out of the market when conditions are uncertain, which can cause you to miss out on a market rebound.

    In fact, dollar-cost averaging works best in volatile markets. Dollar-cost averaging follows the classic advice of “Buy low and sell high.” It’s a great way to begin a regular investment plan, and it can be very productive in the long run.

  • Understanding Embedded Fees Vs. Fee for Service

    Understanding Embedded Fees Vs. Fee for Service

    Paying advisor compensation is an integral part of receiving financial advice. To make informed decisions about your investments, you need to understand how your advisor is compensated and what you receive in return.

    Embedded Vs. Fee for Service

    As a client, no matter what financial products you purchase – whether it’s mutual funds, segregated funds, GICs or something else – there are two basic ways that you can pay for your financial advisor’s services: through “embedded fees” or “fee for service”. Here’s an easy-to-understand breakdown of how the two compensation models work and the type of clients they best serve.

    Embedded Fees

    A service fee, sometimes called a “trailer fee,” is included in the overall product cost. For example, if you buy a mutual fund, a trailer fee would be paid to GP Wealth Management and your financial advisor for their ongoing account services and investment advice. The service fee represents a portion of the total product cost, referred to as the Management Expense Ratio (MER), that the fund manager charges you.

    Fee for service

    You pay an advisory fee directly to GP Wealth and your financial advisor based on your assets under administration (AUA).

    Cost Comparison

    Let’s compare the average cost of advice based on the two compensation models

    • The Embedded-commission model ranges from .1% to 1.50% of AUA
    • The fee-for-service model ranges from .5% to 1.25% of AUA

    Which compensation model is best for you?

    Under fee for service, your fee will be reduced as your account grows. This is because the more assets you have invested, the lower your costs as a percentage of total assets. Conversely, the embedded-fee model will generally favour an investor with a modest amount of assets to invest.

    Determining which compensation model would suit you best requires a thorough review of your personal circumstances and investment goals.

  • The Advantages of Staying Invested

    The Advantages of Staying Invested

    Setting the path for your investment success

    Some people react to the market’s ups and downs by making emotional decisions, buying investments when prices are nearing a high, and selling them when they’re reaching a low. This type of emotional investing can lead to a person sitting on the sidelines during some of the market’s biggest gains.

    The challenge is that, once you’ve sold, you need to decide when to reinvest – and timing the market is extremely difficult. When prices start to climb, market timers often miss the initial rise because they’re uncertain that the recovery is real.

    Buy and hold investing

    There’s a school of thought that, rather than jumping in and out of the market, investors should remain invested for the long term, only withdrawing their funds when they need to. For many investors, a traditional buy-and-hold approach to investing can achieve a positive outcome over the long term as the accompanying chart indicates.

    That said, it may not be the best option for all investors. That’s where working with a financial advisor to develop a customized portfolio suited to your needs makes sense.

    Need Advice?

    Are you thinking of creating or revising your investment policy statement? We encourage you to talk to us. If you have any questions, give us a call, we would be pleased to answer them.

  • Tax-Efficient Investing

    Tax-Efficient Investing

    Taxes are inevitable, but you can minimize the amount you have to pay by strategically making tax-efficient investment decisions. It starts by understanding that the amount of tax you pay on non-registered investments can vary according to the type of income or growth your investments generate.

    How Investment Growth Is Taxed

    Investment income can be divided into three main areas, each of which is treated differently by Canada Revenue Agency.

    Interest and Other Income

    The highest rate of tax is paid on interest income, which is generated when an investor loans money to a person or an organization. Investment vehicles that generate interest income include GICs, bonds, mortgages and bank savings accounts.

    Dividend Income

    Through dividend payments, a company can share its profitability with its shareholders, without the shareholders needing to sell shares. Dividend income is taxed at a lower rate than interest income.

    Capital Gains Income

    This form of income refers to the difference in the amount you pay for an asset and the price at which you sell it (assuming a positive return). Of the different types of income, capital gains income is taxed at the lowest rate. When your investment earns you $100, here’s what you’ll have after tax (assuming you’re in the highest tax bracket):

    Source: Combined Top Marginal Tax Rates for Individuals in Ontario, 2018, and rounded to the nearest dollar.

    How to Maximize your Registered Savings Accounts

    Begin by understanding the difference between Registered and Non-Registered Accounts Canada’s federal and provincial governments have created savings programs that provide tax advantages and incentives for Canadian investors.

    The main ones are RRSPs, RRIFs and TFSAs, but there are also registered education savings plans (RESPs) and registered disability savings plans (RDSPs). These accounts are referred to as “registered” accounts, and they allow you to either defer or avoid paying tax on your investment income or growth. Registered accounts have various restrictions, such as how much money you can contribute and how long the account can stay open.

    Conversely, non-registered accounts have no contribution or time limits. Typically, the income generated in non-registered accounts is fully taxable in the year it is earned. That’s why it makes sense to ensure non-registered accounts are as tax efficient as possible. When investing in a registered account like a tax-free savings account (TFSA), you don’t have to be concerned about the nature of the income earned.

    That’s because investment income is not taxed when earned inside any of these accounts. However, once you’ve maximized your contributions to your registered plans, or if you want additional flexibility in accessing your money, you may wish to invest in a non-registered account. Here are a couple of options to consider deferring and reducing the tax you pay on investments:

    Corporate Class Investment Funds

    A corporate class fund is designed as a holding corporation, set up by a fund company to invest in a group of mutual funds. The result is that corporate class funds tend to pay out distributions that are more tax-efficient to the investor.

    Plus, as long as your money remains invested in a corporate class fund, the tax payable on any gains is deferred. This allows your money to grow faster and more efficiently through the power of compounding.

    Learn more

    T-Series Investment Funds

    These funds are attractive to investors because they distribute return of capital (ROC). This form of distribution is not taxed until your investment capital is depleted. In other words, not until the adjusted cost base (ACB) reaches zero or the units are sold. In some T-series funds, the ROC distribution makes up all or most of the expected return, enabling you to maintain your original investment in the fund.

    LEARN MORE

    Here’s where we can help!

    We prepare and review a comprehensive investment plan to help you reach your goals, we then help you decide on the best options for investing and building your portfolio.

  • Understanding Your Personalized Rate of Return

    Understanding Your Personalized Rate of Return

    You may have noticed that your year-end account statement has been enhanced with additional information that includes the performance of your investments. These enhancements are aligned with the financial industry’s new regulatory reporting requirements. A key aspect I want to highlight for you is how your investment performance is calculated.

    In keeping with the performance reporting requirements, we use what’s known as a money-weighted rate of return calculation, also known as Internal Rate of Return (IRR). This method takes into account any contributions or withdrawals you’ve made in your portfolio during the time period reported.

    This is important because the movement of money (both the amount and the timing) into, or out of, an investment can change an investor’s personal return in a big way. Independent from us, you may also receive performance reports from each of the fund managers that hold your investments. These reports usually (though not always) use a time-weighted rate of return calculation. This method of reporting reflects the performance of the funds during the time period reported.

    However, it’s essential for you to know that it may not accurately reflect your personal investment performance.

    Quick Summary

    • The timing of cashflows that you direct, such as contributions (which includes transfers in-kind) and withdrawals, can affect your portfolio’s rate of return
    • Money-weighted rate of return includes the effect of these cash flows
    • The time-weighted rate of return does not include the effect of these cash flows
    • If there are no cashflows, the two methods will produce the same rate of return

    An Example of Widely Differing Results

    If there are no subsequent cashflows into an account after the initial investment, or if the cashflows are small relative to the initial investment, the money-weighted rate of return and time-weighted rate of return methods will return similar results.

    But when there are large cashflows relative to the initial investment amount, the two methods can produce quite different results. The following scenario reflects the activity of a client account opened in March 2009, with the performance reporting period ending September 2010. The Account Activity table on the client statement shows the activity since inception:

    TransactionsAmount
    Beginning market value $25,000.00
    Contributions $425,000.00
    Redemptions($5,000.00)
    Gain/loss $12,970.02
    Ending market value$457,970.02

    For this investment period, the time-weighted rate of return for the account is 20%. From the client’s point of view, this rate of return is not very intuitive. Over 18 months, the client invested a net amount of $445,000 and realized a gain of about $13,000 — which is not even close to a return of 20% (typically, clients do a mental calculation of dividing 13/445, resulting in a total return of about 3%). The reason for the disparity is that the time-weighted rate of return method does not account for the cashflows.

    Digging deeper, we see that much of the return was realized in 2009 when the amount invested was only $25,000. Incidentally, March 2009 was the market low after the 2008 financial crisis, so this was an excellent time to invest.

    This graphic of the account history helps illustrate the timing of the cashflows

    Paris

    The calculated money-weighted rate of return for the account since inception is 4.9%, considerably less than the time-weighted rate of return. We can visualize the calculation of the money-weighted rate of return using the following table, which shows each cashflow, the number of days it was in the performance period (cashflow days), and the resulting contribution to the ending value (money-weighted rate of return cashflow).

    Note that the ending market value is shown as a negative cashflow

    DateAmountCashflow Money-Weighted Rate of Return Cashflow
    2009/03/09$25,000.00570$26,928.62
    2010/02/22$370,000.00220$380,766.21
    2010/08/20$50,000.0041$50,267.99
    2010/08/27$5,000.0034$5,022.21
    2010/09/07($5,000.00)23($5,015.02)
    2010/09/30($457,970.02)0($457,970.02)
    TOTAL MONEY-WEIGHTED RATE OF RETURN CASHFLOW0.0
    Clearly, from an intuitive perspective when considering the performance of the investment, the 4.9% return matches more closely with the returns experienced by the client. If you are looking for more information on the enhanced performance reporting in your account statements, download our Account Statement Guide.

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    Getting Started

    Get started by calculating how much you may need to retire comfortably. Then you can decide on the type of retirement products that are best for your retirement portfolio.

    RETIREMENT CALCULATOR

  • Why you need an Investment Policy Statement

    Why You Need an Investment Policy Statement

    What Is an Investment Policy Statement?

    The best investment decisions are based on sound strategy and planning. An investment policy statement (IPS) is a tailored investment strategy that you create in collaboration with your financial advisor. Your IPS should detail your investment goals and outline the rules you want your advisor to follow in managing your portfolio.

    A well-thought-out IPS provides a solid framework for all of your investment decisions. This agreement between you and your financial advisor is both a blueprint for action and a report card measuring your investment performance.

    It Starts With You

    The first step in creating an IPS is to identify who you are as an investor. Your financial advisor will ask you to fill out an investor profile questionnaire.

    This questionnaire is designed to determine your financial situation, your investment goals, how long you plan to invest and how much market volatility you are willing to accept.

    Key Components of an IPS

    The information you provide through the questionnaire will enable your financial advisor to create your IPS. Your investment policy statement should:

    • Detail your investment objectives, time horizon and risk tolerance
    • Stipulate the investment strategies to be used in obtaining your objectives
    • Specify your return expectations
    • Specify the types of investments that are permissible and how accessible your funds should be
    • Describe how your portfolio will be monitored, reviewed and rebalanced

    Your Investment Roadmap

    Building a Better Portfolio

    An IPS is a powerful investment tool that can help you build a better investment portfolio. Whether you’re just starting out or you’re managing a large portfolio for yourself and others, an IPS forces you to think carefully about your options.

    Research has shown that successful investing involves choosing not only the right investments but the right combination of investments. In fact, investment mix (particularly the mix between income and equity investments) is the single most powerful driver of overall investor returns.

    Other Factors to Consider

    Here are some other factors to consider before creating your IPS:

    • The stability of your job
    • The correlation of your job to your investment holdings
    • How much you’ll need to invest each month to meet your goals
    • Your access to emergency reserves

    Your Financial Advisor’s Role

    Your GP Wealth financial advisor can play a critical role in the development of your IPS by ensuring you fully understand your needs, goals, time horizon and tolerance for risk. Once your IPS is completed, your GP Wealth financial advisor will continue to add value by implementing your strategy, monitoring your investments and working with you to revise the policy as required.

    An IPS can be as simple or comprehensive as your circumstances dictate. We encourage you to treat your IPS like a living document. By keeping it up to date with changes in your finances, you’ll maintain greater control over your savings – and you’ll be more likely to achieve your long-term financial goals.

    Other Services Provided by your Financial Advisor Can Include:

    • Comprehensive financial planning
    • Investment planning
    • Retirement planning
    • Education planning
    • Estate planning
    • Advanced tax planning

    Download the brochure version of this article

    Why you need an Investment PolIcy statement

    Get Started

    Your first step is to complete an investor profile questionnaire to help prepare an investment plan. Then you can decide on evaluating your investments.

    investor profile questionnaire

  • Expectations for Investment Returns

    Expectations for Investment Returns

    When you invest your hard-earned money, what rate of return should you expect from your investment? We all want to see strong returns, but you should avoid the mistake of expecting unreasonably high returns. If you’re counting on unrealistic returns to fund your desired retirement lifestyle, you run the risk of being sorely disappointed.

    Projection Assumption Guidelines

    In Canada, financial advisors who develop financial plans for their clients base their rate-of-return expectations on a broadly accepted set of industry guidelines known as the Projection Assumption Guidelines.

    Every year, the guidelines are updated by the Financial Planning Standards Council (FPSC) and Institut Québécois de planification financière (IQPF). Each projection is developed by actuarial and financial planning professionals, drawing on multiple independent, reliable data sources. The sources include the Canada Pension Plan actuarial report, the Willis Towers Watson annual Canadian investment perspectives survey and historical market data.

    Significantly, by using the guidelines, we’re able to make long-term (10 or more years) financial projections that are free from potential biases, both our own and those of our clients. According to the Projection Assumption Guidelines for 2017, conservative long-term investors should expect annual returns of 3.25 percent, while balanced investors should expect 3.92 percent and aggressive investors 4.75 percent, all after fees.

    The clear takeaway from these projections is that you cannot expect the returns on your investments to make up for insufficient retirement savings. In developing your financial plan, you simply must put appropriate emphasis on deposits to your account to achieve your retirement goals.

    Summary of the projections for 2017

    • Inflation: 2 percent, down from 2.1 percent last year
    • Short-term debt: 2.9 percent, down from 3 percent last year
    • Bonds: 3.9 percent, down from 4 percent
    • Canadian stocks: 6.5 percent, up from 6.4 percent
    • Foreign developed market stocks: 6.7 percent, down from 6.8 percent
    • Emerging market stocks: 7.5 percent, down from 7.7 percent

    These projections were used to generate sample portfolio guidelines for conservative, balanced and aggressive investors:

    Conservative portfolio

    5% short-term bonds, 70% diversified bonds and 25% Canadian stocks

    Balanced portfolio

    5% short-term bonds, 45% diversified bonds and 40% Canadian stocks and 10% foreign stocks

    Aggressive portfolio

    5% short-term bonds, 20% diversified bonds, 35% Canadian stocks, 25% foreign stocks and 15% emerging market stocks.

    Getting Started

    Get started by calculating how much you may need to retire comfortably. Then you can decide on the type of retirement products that are best your retirement portfolio.

    Retirement Calculator

  • Responsible Investing Through ESG Integration

    Responsible Investing Through ESG Integration

    January 2022

    Would you like to build your nest egg and invest in a sustainable future at the same time? ESG is short for environmental, social and governance investing. Led by Millennial and Gen Z investors, more and more Canadians want their portfolios to serve these dual purposes.

    The good news is that it’s very doable when you put your money into investment options that integrate ESG factors.

    Like its close cousin socially responsible investing (SRI), ESG is about investing in companies that match your values. But while SRI tends to focus on particular moral or ethical issues, ESG is a broader approach that considers all the ESG practices of a company. For example, how well the company manages its carbon footprint, how it treats its employees, and the level of transparency it provides in areas like accounting practices, board actions and general ethics.

    A growing number of funds are incorporating ESG values in their processes for selecting investments, and many are demonstrating their commitment to ESG by becoming signatories to the United Nations-supported Principles for Responsible Investment (PRI).

    ESG and investment returns

    From a fund performance standpoint, research shows that embedding ESG factors into investment decision-making can have a positive effect on investment returns.

    Indeed, the performance of ESG index funds demonstrates that they have kept pace with or outpaced their traditional index peers. A good example is the MSCI Canada ESG Leaders Index, which has outperformed the MSCI Canada Index in 10 of the past 12 years.

    Bottom line, you can grow your money for your retirement while simultaneously encouraging sustainable business practices for the benefit of your children and grandchildren.

    Need Advice?

    Are you reviewing your investment plan? We encourage you to contact us to arrange a no-obligation meeting to discuss your options.

    contact us

  • Investing with a Purpose: Understanding Socially Responsible Investing

    Investing with a Purpose: Understanding Socially Responsible Investing

    April 2022

    Concerns about climate change have been increasing in recent years, and consumers, more and more, are leveraging their purchasing power to encourage big corporations to move in a green direction.

    But the opportunity for you to use the power of your wallet to influence positive change in the world isn’t limited to what you choose to load into your shopping cart.

    You can take the same approach when choosing your investments.

    Through sustainable or socially responsible investing, you can put your investment dollars to work not only to generate financial returns but also to make a meaningful impact on the world and our collective future.

    Types of socially responsible investing

    There are different investing styles under the sustainable investing umbrella. At the more moderate end of the spectrum is the use of environmental, social and governance (ESG) factors to assess risk and enhance risk-adjusted returns by avoiding companies that have low ESG scores.

    At the other end is impact investing, whose principal goal is to bring about some form of positive societal impact while also delivering attractive returns.

    Substantial growth

    Whatever the particular approach, the practice of investing in a way that considers how the companies contribute to significant social and environmental issues has grabbed the interest of a large number of investors, and the trend continues to grow.

    In July 2021, the Global Sustainable Investment Alliance (GSIA) reported that the sustainable investing sector grew to more than US$35 trillion in 2020.

    The report also revealed that Canada recorded the largest proportional gain in ESG assets between 2018 and 2020, with a 48% jump to $2.4 trillion.

    Moreover, the report found that Canada now has the highest proportion of sustainable investment assets at 62%, well ahead of second-placed Europe at 42%. The U.S. total is 33%.

    How does socially responsible investing work?

    In line with your priorities, your approach to responsible investing will typically use one or more of the following strategies:

    ESG Integration

    The portfolio manager explicitly combines ESG data with traditional financial metrics when assessing a company’s value.

    Thematic investing

    Investments in specific concepts or areas of focus such as women in leadership, clean technology, alternative energy and cybersecurity.

    Shareholder engagement

    Use of shareholder power to influence corporate behaviour directly to improve their sustainability or ESG performance.

    Negative screening

    Exclusion of certain companies, such as tobacco manufacturers, that are known to cause harm or lack transparency in their business values.

    Positive screening

    Inclusion of certain companies that are known to be sustainability leaders and that show positive ESG performance compared to industry peers.

    Impact investing

    Targeting companies that operate in challenging but high-impact industry sectors, such as microfinance, affordable housing and renewable energy, with the goal of generating both a financial return and measurable social or environmental improvements.

    Benefits of responsible investing

    Depending on what you value, you can support companies that engage in social justice, environmental sustainability, alternative energy or clean technology, promoting women’s leadership, or enhancing diversity initiatives. Conversely, you can also ensure that you don’t support companies that engage in non-environmental practices, such as coal mining, or that enable addictions to products like alcohol or tobacco or to gambling.

    From this perspective, one of the main benefits for you of aligning your investment dollars with your values is that, perhaps, you will sleep better at night.

    But responsible investing can also lead to improved risk management and more sound investment decisions. When you look beyond the performance metrics to determine whether a company’s activities align with your values, you can get a broader, more holistic picture of the company, including how it’s managed, how it acts, and what its long-term prospects are for success.

    Socially responsible investing also encourages positive social changes that could have taken longer to materialize or may never have come about. This happens, in part, because companies that are leaders in sustainability have more capital to work with. As well, a company’s sustainability performance can be improved through shareholder engagement. For example, shareholders can ask a company to report regularly on its responsible investment plans. This allows for tracking and measurement, and good results can attract other like-minded investors.

    Socially responsible investing and investment returns

    From a fund performance standpoint, research shows that embedding ESG factors into investment decision-making can have a positive effect on investment returns.

    Indeed, the performance of ESG index funds demonstrates that they have kept pace with or outpaced their traditional index peers. A good example is the MSCI Canada ESG Leaders Index, which has outperformed the MSCI Canada Index in 10 of the past 12 years.
    Bottom line, you can grow your money for your retirement while simultaneously encouraging sustainable business practices for the benefit of your children and grandchildren.

    Challenges surrounding socially responsible investing

    Socially responsible investing is a positive development for society and the planet, but if an investment fund promises more than it can deliver, investors are apt to feel cheated and lose confidence in these types of investments.

    Greenwashing is a term used to describe when a company purports to be environmentally conscious but isn’t making any notable sustainability efforts.
    Other terms used to describe the same behaviour include “sustainability washing,” “impact washing,” and “SDG washing,” referring to misleading claims about an investment fund’s adherence to the U.N.’s Sustainable Development Goals.

    The good news is that government regulators and industry groups are rising to the challenge of bringing greater transparency to the responsible investing sector so that investors can feel trust in fund disclosures and believe they have the information needed to make informed investment decisions.

    In January 2022, the Canadian Securities Administrators (CSA) issued guidance for investment fund providers specifically aimed at improving disclosure practices for ESG matters.

    The CSA initiative follows the CFA Institute’s release in November 2021 of voluntary Global ESG Disclosure Standards for Investment Products. The CSA Institute is an industry body representing financial professionals.

    In addition, the Canadian Investment Funds Standards Committee (CIFSC) is working to develop a framework to identify Canadian investment funds that sufficiently practice responsible investing (RI).

    Concerns that well-meaning investors are being misled have lit a fire under regulators and industry watchdogs worldwide. It’s not yet clear if enough is being done in Canada to bring the desired specificity and clarity to ESG disclosures, but, at the very least, the industry has started moving in the right direction.

    Need Advice?

    Are you reviewing your investment plan? We encourage you to contact us to arrange a no-obligation meeting to discuss your options.

    contact us

  • Managing Risk in Volatile Times

    Managing Risk in Volatile Times

    July 2022

    When markets are volatile, everyone’s pleased with the upswings, but the downswings can be another story.

    Some investors react to the market’s ups and downs by making emotional decisions. Often, this leads to attempts to “time the market,” buying when prices are making new highs due to fear of missing out and selling when prices are correcting out of fear of financial loss.

    Unfortunately, you simply can’t know when the good days will happen. Almost inevitably, if you give in to your emotions when making investment decisions, you’ll find yourself booking unnecessary losses and missing out during some of the market’s biggest gains.

    Stay invested and make regular deposits through dollar-cost averaging

    During the wealth accumulation years, the best response to market volatility is to stay invested and continue making regular deposits.

    Rather than trying to time the markets, you should consider the more conservative and dependable strategy known as dollar-cost averaging. Dollar-cost averaging involves investing a fixed dollar amount at regular intervals, typically weekly or monthly.

    Since prices are constantly fluctuating and spend more time below their peak than at the peak, your transactions will buy more shares when markets are lower and fewer shares when markets are at their highs. Consequently, your average cost per share will fall over time, and you’ll acquire more shares.

    Also, dollar-cost averaging imposes discipline because you keep investing the same amount every week or month, no matter what happens in the market. It helps you overcome the temptation to stay out of the market when conditions are uncertain, which can cause you to miss out on a market rebound.

    Benefits of diversification

    Another proven strategy for overcoming the challenges of market volatility is to diversify your portfolio.

    Diversification involves spreading your investment dollars across a variety of investments. A well-diversified portfolio is constructed with investments that react differently to economic conditions, which smooths out returns and reduces portfolio volatility over time.

    The accompanying table is highly instructive with respect to how diversification can benefit investors. From year to year, the various investments rise and fall unpredictably. Indeed, four different indexes held the market-leader position over the six years represented in the table.

    By diversifying, you have a greater chance of gaining exposure to the best-performing markets and minimizing your exposure to the laggards.

    Market leaders change year to year

    Financial market indexes ranked in order of performance


    Canadian Equities: S&P/TSX Composite Index | U.S. Equities: S&P 500 Index | International Equities: MSCI EAFE Index | Emerging Markets Equities: MSCI Emerging Markets Index | Canadian Bonds: FTSE Canada Universe Bond Index | U.S. Bonds: Bloomberg U.S. Aggregate Bond Index | Global Bonds: Bloomberg Global Aggregate Bond Index
    All returns are in Canadian dollars. This table is provided for illustrative purposes only. Note that it is not possible to invest directly in an index. Source: Morningstar Research Inc., December 31, 2021.

    Need Advice?

    Are you reviewing your investment plan in preparation for the potential higher price volatility that could accompany the coming rise in interest rates? We encourage you to contact us to arrange a no-obligation meeting to discuss your options.

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