Post on 03-Dec-2014
description
Investing- tame your fears and grow
Gwen Becker, CIM, CFP, FCSIVice-President, Associate Portfolio Manager
Whose Involved in Making Investments Decisions?
Overwhelmed
Women are still pulling double shiftsLife life’s usSo much information existso Industry jargono Why bother in this market?
Everything seems to work out okay in the end
The Factual Conversation
Women influence 70% of consumer spending decisions in this country1
In the next 10 to 20 years, many boomer women will inherit wealth twice – from their parents and their spouse1
82% of Canadian wealth will eventually be managed by women1
70% of women switch advisors after the death of a spouse1
Average age of a widow is 562
According to one Cornell study, 10 trillion dollars in inheritance will pass to baby boomers between now and 2040 – majority of inheritors will be women2
1 Source: TDWIS Newnet Article obtaining an uncommon understanding of your client interview with Dave Pickett: The Rise of High Net Worth Female Investors2 Source: My Money Mindset (www.mymoneymindset.com) by Dr. Deborah Nixon
The Factual ConversationWomen have been raised to be the keepers of the household purse, not the income generators. That legacy lives on for the majority of the population. Budgeting, borrowing and everyday saving is not a primary struggle for women – wise investing is.2
Women want a financial advisement process that accounts for her heart, not her ego. In other words, a process that incorporates her feelings, her perceptions, her life situation and her desires to take care of others.2
Two-thirds of women are single by the time they hit age 65—either because they never married, their spouses pass away, or they divorce.2
Don’t know what you don’t know. Start with what should I know?
1 Source: TDWIS Newnet Article obtaining an uncommon understanding of your client interview with Dave Pickett: The Rise of High Net Worth Female Investors2 Source: My Money Mindset (www.mymoneymindset.com) by Dr. Deborah Nixon
Solutions To ChallengesFINANCIAL PLAN & GOAL SETTINGo Regardless of your situation
TYPES OF ADVISORS & EXECUTIONo Not alone, Not all or nothing
INVESTMENT STRATEGIESo Constructing an “Investment Portfolio”o “Asset Classes”o Cash, “Fixed Income & Equities”
Cash, Bonds & Stocks
CYCLES & SEASONALITY
Written Financial Plan - 30% of Women Have One
Budget (www.mint.com)Cash FlowGoals vs. AbilityNet Worth Statement Projected Net WorthReport Card
"You've got to be very careful if you don't know where you are going because you might not get there." Yogi Bear
Goal vs. Ability
Specific and Obtainable GoalsShort term (less than 1 year)
emergency funds, down payment home, vacation
Mid term (2-5 years)fund child’s post secondary education, care for aging parents, revenue property, pay down debt
Long term (5+ years)buy a winter /summer home, comfortable retirement, philanthropy, estate
Investment Portfolio = Goal
Income• Need For Current
Income• Moderate Focus On
Growth Above Inflation
• Low Tolerance For Risk
• Short/Intermediate Investment Horizon
Balanced • Equal Focus On
Growth and Current Income
• Moderate Tolerance For Risk
• Intermediate Investment Horizon
• Emphasize Time Horizon Over Risk
Growth• Little Need For
Current Income• Focus On Growth For
Capital Appreciation• High Tolerance For
Risk• Intermediate/Long
Investment Horizon
INCREASING RISK, VOLATILITY AND RETURN EXPECTATIONS
Diversification of Asset ClassesParticipating in the gains while managing the down side risk
Constructing an Investment Portfolio
Asset Allocation Decision
Income Balanced Growth
50% Bonds / 50% Stocks 70% Bonds / 30% Stocks 30% Bonds / 70% Stocks
SOURCE: www.ishares.ca | Index Compound Returns shown BEFORE fees all in CAD $ ending December 31st, 2012
Asset Class ReturnsIndex Returns (ending December 31, 2012)
SIMPLE % COMPOUND %1 Mth 3 Mths 6 Mths 1 Yr. 3 Yrs* 5 Yrs* 10 Yrs*
S&P/TSX (TR) Index 1.95 1.72 8.86 7.19 4.79 -0.81 9.22
S&P/TSX Capped Energy Index (CAD$) 0.07 -3.58 7.07 -4.83 -3.25 -3.81 9.65S&P/TSX Small Cap (TR) Index 2.40 -2.00 6.16 -2.23 3.35 -0.46 5.70
S&P 500 Index (CAD$) 0.80 -0.24 5.86 13.00 8.8 1.70 2.30
MSCI EAFE Index (CAD$) 3.26 7.62 12.76 17.65 2.63 -4.93 5.29MSCI World (TR) Index (CAD$) 2.12 3.71 6.81 13.26 5.11 -1.01 2.66
DEX Universe Bond Index -0.13 0.30 1.54 3.60 6.64 6.35 5.97
SOURCE: www.ishares.ca | Index Compound Returns shown BEFORE fees all in CAD $ ending December 31st, 2012
Risk (4-Letter Word) /Return Trade-OffThe Efficient Frontier
Asset Class diversification works over the long run
• Bonds negatively correlated with stocks (“Defense”)
• Pure income portfolios have ~2/3 the risk of stocks
• Pure bond investors benefits from small addition of stock exposure given negative correlation
Asset Class ReturnsJanuary 1, 1950 – June 30, 2011
Despite the financial crisis, long term stock returns continue to lead all asset classes.
• Bonds performed well over the last 61 years. ¾ of the return & only ¼ of the risk vs. Canadian Equities
• Interest Rates peaked in early 1980s
• Inflation rate has been remarkably steady over the postwar period
Chasing Last Years Return - Asset Class Performance
The Problem With Going With The Flow
Herding: Our Tendency Is to Follow the Crowd
Common Mistakes
Unclear investment objectivesPoor asset allocationExtremely concentratedo 15 – 20 stocks to reduce risk
Over diversificationFocusing on returns without riskEmotional or trend investingHot stock tip
Dividend Investing
Styles of Investor (Jargon)
Deep Valueo Seek out companies trading at deep discounts relative to asset valueo Low price to earnings multiple or price to net asset value or price to booko Eg: Research in Motion (RIM)
Valueo Value typically describes a relationship of the price a particular company is trading at relative to the
stream of earnings or cash flow company produces. All else equal – pay lower price for large stream of earnings or cash flow
o Eg: Microsoft (MSFT), McDonalds (MCD), Magna (MG)
Growtho Focus on companies growing earnings stream and assets typically at a high rate. Investment themes.o Often willing to pay higher price for those assets because expect company to grow much more in the
future. o Eg: Facebook (FB), Lululemon (LLL)
Income o Focus on income generating investments – high dividends o Eg: Canadian Oil Sands (COS), Gamehost (GH), REIT’s Boardwalk (BEI.UN)
Cycles & Seasonality
“My ears cannot listen longer than my behind can endure”
-Ambrose Bierce
Business Cycle & Stock Market CycleLeading Indicators
TRAP
RBC & DOL
Global Industry Classification Standard
Challenging Returns in Junior Oil & Gas Space Junior Oil and Gas companies outperform Large Caps over past 25 years
Asset Mix DecisionLong Canada Bonds vs. S&P/TSX Dividends
Short Duration
Price to Earnings Multiples for S&P 500 & TSX Valuations are Compelling
Current Trailing P/E = 15.2 Canada, 14.2 U.S.
Types of Advisors
Investment Advisor
Client prefers:Variety of ProductsSpecializationDeal FlowActive InvolvementTransaction based focus
Reporting:Monthly account statements
Cost:1-3% of equity trade valueSpread on bond yields1% fund trailer fees
Financial Planner
Client prefers:Variety of investment optionsPlanning focusAdvisory relationshipFee based focus
Reporting:Monthly/Quarterly account statements & fund performance
Cost:Average MER 2.56%Declining DSCs 6%-1%1% fund trailer fees
Investment CounsellorClient prefers:
Variety of investment optionsPlanning and portfolio approachService focusFiduciary RelationshipFee based focus
Reporting:Monthly account statements, quarterly portfolio & performance reports, customized benchmarksCost:
1%-1.25% of AUM on a Declining fee scheduleTax deductible
12 Questions to Ask an AdvisorWhat are your qualifications?What experience do you have?How big is your book of business? What services / products do you offer?What is your approach to financial planning?Will you be the only person working with me (other partners lawyers, accountants, etc.)?How will I pay for your services?How much do you typically charge?How many clients do you have?Could anyone besides me benefit from your recommendations (conflicts of interest)Are you regulated by an organization?Can I have it in writing?
Hiring an Advisor
Are you being heard?Has your best interest at heart?Can you have an honest open conversation?Are you being pressured into making a decision?Do you trust this person?Use emotional intelligence and your voice
SummaryFINANCIAL PLAN & GOAL SETTINGo Regardless of your situation
TYPES OF ADVISORS & EXECUTIONo Not alone, Not all or nothing
INVESTMENT STRATEGIESo Constructing an “Investment Portfolio”o “Asset Classes”o Cash, “Fixed Income & Equities”
Cash, Bonds & Stocks
CYCLES & SEASONALITY
Lesson
“We must be careful to get only the knowledge out of a lesson. The cat who sits on a hot stove top will never sit on a hot stove again. But she will never sit on a cold one either.”
- Mark Twain
Questions & Answers
Personal & Private
Here until 2:00 ish
Or…….
Contact Information Email: gbecker@matcofinancial.ca
Call: 403-718-2125
Blog: www.matcofinancialinc.com
Twitter: @Gwenbecker
Website: www.winkcalgary.com
WINK Facebook and LinkedIn Pages
Survey Monkey
Honest Criticism is hard to take,Particularly from a relative, a friend, an acquaintance, or a stranger”
-Franklin P. Jones
Thank You
GuestsDirectorsFamily, Friends & MatcoBLG conference roomDoor Prize donated by Studio GorgeousNext Speaker –Sharon Gray “Evaluating Assets”
Disclaimer
For your information:MATCO FINANCIAL INC. is a privately owned and independent wealth management
office. The material presented is intended to provide information to Matco Financial clients, contacts and affiliates. Readers should not act on this information without first consulting their investment advisor, tax advisor, financial planner or lawyer. This communication does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.Management fees, commissions, and expenses may be associated with investment management services and mutual fund investments. Before investing, please read the applicable information such as the prospectus, which contains detailed investment information and is available from your advisor. Most marketable securities such as mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. All statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and are not guarantees of future performance. Investors should not rely on forward-looking statements. Actual results, actions or events, could differ materially from those set forth in the forward-looking statements.
2011 & 2012 Global Market Returns (USD)
Volatility Index (VIX)
Height of pessimism
Seek lower volatility to enhance returns
LESS VOLATILITY = GREATER WEALTH
Consistent Investment: $1,000,000 Volatile Investment: $1,000,000
Year Rate of Return Ending Value Rate of Return Ending Value1 8% $ 1,080,000 30% $ 1,300,000 2 8% $ 1,166,400 -20% $ 1,040,000 3 8% $ 1,258,712 25% $ 1,300,000 4 8% $ 1,360,489 -20% $ 1,040,000 5 8% $ 1,469,328 25% $ 1,300,000
Arithmetic annual return 8% 8% (Net 40%/5)
Compound annual return 8% 5.39%
Source: CEG Worldwide. Note: This is a hypothetical series of returns to indicate the significance of volatility and does not represent any specific investments at any specific time.
Types of Advisors
IIROCCSCInvestment DealerAgency relationshipKYCDomestic & US Stocks, Bonds, Mutual Funds, IPOs, InsuranceCommission and some Fee based compensation
MFDAIFIC, CFPMutual Fund DealerAgency RelationshipKYCDomestic, International & Specialty Mutual Funds, InsuranceFront end load, DSC & Trailer Fee compensation
Investment Counsel / PMCFA, CIM, CFPPortfolio Management FirmInvestment Policy StatementDomestic, US & International stocks, bonds & Specialty pooled fundsFee based compensation as a % of assets
Investment Advisor Financial Planner Investment Counsellor
Investor vs. Trader (doesn’t work with a Plan) Fundamental (Buy and Hold)o Look at everything from financial statements, industry statistics to
broader economic environment to gain insight on company’s future performance
Technical (Active)o Study historical stock price and market behaviour. Look for recurring
patterns in charts to time purchases and sales of securitiesQuantitativeo Screens and factors based on metrics and ratios drive investment
selections. Agnostic to company specifics oftenTop Down vs. Bottom Upo Focus on macro environment or company specific
Current Asset Mix (tactical)
Underweight Bonds
Overweight Equities (Stocks)
Market Weight (Canadian Equities)
Overweight (Global Equities US in particular)
Market OutlookBond Bull EndsDividend growth over incomeChina – Looking to Regain its SwaggerEurope – Back from the BrinkUS Energy IndependenceLNG – Closer to realityUS Recovery Gains TractionCanada Faces HeadwindsCanadian Housing Feels the ChillValuations Expand