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By: Shawn Todd, CFP

Many of you will know that throughout my life, I haven’t minded risk at times.  Before I was 35 yrs. old, I was a police officer, I was a diver with the OPP Underwater Search and Recovery Unit, and I was an Explosives Disposal Technician. I’m currently a business owner [a lot of business owners have an appetite for risk]. I downhill ski, I have a motorcycle, and I’ve climbed Kilimanjaro with my spouse Michele.

I imagine many of you have your own interests. You enjoy sailing, or camping, or travelling overseas. Flying to see family, swimming at the cottage, or having a steak on the BBQ. Some may enjoy biking in the city, ice skating on the canal, or smoking a cigar. Risks show up all over, and we all don’t enjoy talking about it.  We like the excitement of a ski weekend getaway in Tremblant, but we don’t enjoy talking prior to the trip about the potential of breaking our leg.

When I first came into the financial planning and advisory business eighteen years ago, that version of myself believed that insurance would be the least interesting part of my work. I spent hundreds of hours researching investment portfolio theory, financial planning, marketing, building a business, but the very last thing that I felt was needed by most up and coming young professionals was some of the insurance products that I was learning about.

I was dead wrong.

Five years into my financial planning career I had a terrible ATV accident while out with friends and clients. I broke my back in five places, split my liver, broke three ribs, tore my adrenal gland and almost died in a field in Calabogie, Ontario.  It was the scariest moment of my life. I had just met the person I have always wanted to be with, and I had children to care for.

Today, eighteen years after beginning as an advisor, I have had had several important and close clients experience terrible and demanding situations. I’ve lost some great clients and friends to a variety of illnesses, accidents, and situations. No one was planning on not being here in 20 years.

One of the things that strikes me as incredibly common about both my experience, and the experiences that I have had with clients, is that its difficult to talk about what might happen if we get sick, or if we die. It’s terrifying.

In my time as a financial planner, I have picked up a great deal of more experience and knowledge since my beginning days as a new advisor. I have seen well planned out life insurance policies provide enough income to a family after the unexpected loss of spouse. I have watched planned gifting to children and grandchildren that has allowed full lives after a loved one’s passing. Business owners have used it to ensure security while their business started, and while success ebbed and flowed. Professionals have used it to protect their occupation and income. Tax planning has allowed it to be used as a formative tool in dealing with business owners, passive income strategies, or dealing with terminal tax.

There are a few distinct things that talking about risk, and protecting ourselves, can provide.

• It can remove a lot of stress from your life. No more worrying about what happens [even if you don’t want to talk about it normally]
• It can help provide income to you or family members if you are sick, injured or die.
• Some may be able to pay off debts.
• During key parts of a financial plan, it can provide a great deal of stability for income and assets needed to achieve goals.
• It can be used as an opportunity to diversify how you invest or use business capital.
• Its usage may help in minimizing taxes – both now, and later
• During business growth periods it can provide a great deal of security to the business, the shareholders, and their families.
• For some it can offer an ability to gift to children, grandchildren, or even charities that are important to you.

While 92% of people believe talking with family and loved ones about the end of their life is important, only 32% do. [ Seattle Times – “Why don’t we talk about death” May 2019]

To conclude…

It may well be time to begin opening the conversation about your own risks. What risks do you have in your life that you are most concerned about? How would they affect your financial plan, or financial integrity? Are there opportunities you should consider for your business, your own portfolio, our own situation? If you didn’t speak about your risk concerns – would the situation have changed for the worse of the better in ten years time?

Speaking about risk, and what may come may be difficult for most. There is never a better time to start this conversation than today.

Just my thoughts for the day.

By: Shawn Todd, CFP

Most of us have golfed at one point or another during our lives. It may have been once, or it may have been many times throughout the summer. No matter how often you have golfed you will always remember the feeling of a firing a shot into a bunker [when you were going for the green], or just firing a ball into the water on a par 3. It’s tough, and it really starts to take the fun out of the game.

Most of the people reading this will have also invested at one point. Your home is one of your largest investments, and you may have several other investments in your portfolio. If you’ve been doing it as long as I have, then you also will have memories of the tech wreck, the financial crisis, and the market correction during Covid.

What does golf and investing during these market corrections have in common?

A well thought out gameplan.

If we approached golf without any consideration for the inherit risks of the game, well we would just feel the consequences. We’d lose a ball here, bogey there, it would be a miserable experience.  Some of us all can feel that pain. Playing the game more smartly, hitting more fairways, staying out of the bunkers, well of these efforts make for far better results.

Investing needs to be focused, and well thought out. Ensuring you understand the risks of the portfolio you are in, the timelines you have, the goals of each portfolio, and the risk of each investment in your portfolio; is incredibly important. There needs to be a well thought out plan for taxation, capital gains [this is the topic of the day – thanks to the recent budget], and a discussion of the solutions that make the most sense for each investor. Often what works for you, may not be what works for your neighbour or colleague. Like golf, we all have different risk tolerances, capability, and performance needs. You need to play your own game, and your own pace.

Unlike golf – there are some great opportunities that will enhance your experience. Portfolio management, risk management, diversification, and a deep understanding of your needs – will all allow for an exceptionally smooth ride.

Imagine golf is someone could just tap your shoulder right before you started your ill-fated swing and said – “I just wouldn’t take that shot”.

It might make the game a lot more fun.

Consider helping your investing experience by adding a professional wealth management team to help you understand your own gameplan.

My thoughts for the day.

If there is ever a time to start understanding how interest rates work, now might be it! The Bank of Canada has been slashing interest rates consistently since the beginning of the Covid-19 pandemic. Below is a simple explainer of what it means to cut rates and how it could affect you and your money.

What You Need to Know

What Is an Interest Rate?

Simply put, an interest rate is the cost you pay to borrow money. For example, a bank may agree to lend you $10,000 but only if you agree to pay them 9% interest on that $10,000. This is how lenders get paid.

What Is the Federal Fund Rate? And Why Does it Change?

The federal fund rate, also known as the overnight rate, target rate, or nominal rate is one of the most important tools the federal government has.  A central banks ability to change the target rate is used to sway the economy in two major ways:

1. The first is inflation. The government can raise interest rates when inflation is becoming too high as a way to stabilize it. The idea is that the raised rates lessen the flow of credit into the financial system. These raised rates tend to discourage people from borrowing and spending, which in turn can stop the rise of inflation.
2. The second is to stimulate the economy. This is when growth is too low and unemployment is too high. By lowering the rates, the central banks hope to encourage borrowing and start a flow of money into the economy.

How Will Changes Affect You and Your Money?

Rate changes will affect anyone who has any debt. That means mortgages, lines of credit, credit cards…essentially anything you pay interest on! This is important for mortgages; especially when rates go down. If you have a fixed rate mortgage, rates going down may be a good reason to refinance and take advantage of lower interest rate.

What Do Interest Rates Have to Do with Investing?

Lowered rates are meant to encourage people to start investing in risky assets such as stocks and bonds.  This of course is part of the plan to stimulate the economy. By lowering interest rates, securities become more attractive than keeping your money in cash. The fact that the government takes steps such as this in an economic downturn is one of the reasons that securities typically will outperform cash in the long term.

The Bottom Line

The central banks have been using interest rate cuts to try to hedge against the economic impact of the covid-19 pandemic.  Lowered interest rates are designed to provide opportunity to businesses and investors. Be sure to talk to your advisor to find out how you could benefit.

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The concept of investment is no longer alien and almost everyone now has one form of investment or the other tucked away somewhere. Even new babies now have investments. Just as there is no age limit to investing so is there no limit to the extent of time you can hold your investment. You can hold your investments for decades and reap multiple profits on them. It is not all about having a long-term investment portfolio; there is a science to it also. It is important to be strategic in your choice of investment portfolios. Everyone has a risk appetite, and it is important to choose an investment portfolio that conforms with your risk principles. Another key factor to having a healthy long-term investment portfolio is adapting your investment approach to the changing dynamics of the financial market.

Secrets To Creating a Long-term Investment Portfolio 

When it comes to having an investment portfolio, it is important that you make the right decisions. This is what will ensure a healthy investment portfolio. If you are looking to grow your wealth over a 20-to-25-year span, you should try the following tips:

1. Select The Appropriate Asset Allocation: At this stage, you use your current financial situation to determine how you want to spread out your investment portfolio. To successfully do this, you must consider your age, the amount of capital you want to invest, and your risk appetite. Your risk appetite is important because when it comes to investment, you will make losses at one point or the other. So, depending on your risk appetite, you should choose an investment portfolio that is in line with your risk appetite. You should also consider your current expenses as you do not want to invest all your money and be left with nothing to settle your bills.
2. Structuring Your Portfolio: After determining how you want to allocate your investment portfolios, the next thing to do is to determine how much goes into each portfolio. This is where you determine how much goes into bonds, stocks, and cryptocurrencies. You can also go further by further dividing your portfolio allocations. For example, if you have an equity portfolio, you may decide to spread it across different industries to minimize your risks. You can also spread your bond portfolio into short-term bonds and long-term bonds.
3. Monitoring and Reviewing: After successfully structuring your investment portfolios, you need to keep an eye on them to make necessary adjustments where necessary. The fact that they are long-term investments does not mean you can abandon them and check them when you are ready to cash out. You analyze your positions from time to time and rebalance them where necessary. This is made necessary because of the constant price movements in the financial market which will make your initial trading positions change. Your current financial needs may also require you to change your position. If you have extra cash to invest, you may want to pump in more money and if you need cash, you may want to deduct from profits already accrued.
4. Strategic Rebalancing: After reviewing your portfolio and there is a need to rebalance your positions to make your portfolios healthy, you need to go about it in a strategic way.  In other words, while you identify a performing portfolio, you should also determine the portfolio you can use the proceeds of the performing security to buy. These are strategic decisions that must be taken carefully to ensure an all-round healthy investment portfolio over a long period.

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