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Insurance & Investments

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Downside Protection Applications

Investment Views, Investments

Asset Allocation

The conventional method to reduce risk in a balanced portfolio involves decreasing the portfolio’s riskier asset class, which for most investors is likely the equity allocation. For example, shifting from 55% equities and 45% bonds to 30% equities and 70% bonds. The following graphic illustrates this as the move to the “lower risk benchmark portfolio”.

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Yield Verboten

Investment Views, Investments

Global bond yields have been on a multi-decade decline; therefore, it should be no surprise that today’s yields are at or close to historically low levels. Chart #1 shows the extent of this decline for the 10 year Government of Canada (“GoC”) and U.S. Treasury (“UST”) bonds. From December 1990 to June 2016, the GoC yield started the period at 10.3%, averaged 5.1%, and closed at a mere 1.06%. Over the same period, the UST yield started at 8.4%, averaged 4.8%, and closed at a mere 1.5%.

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When do people retire and why?

Investments, Personal Finance

There is no normal retirement date anymore. There is no hard-fast retirement date everyone has to hit. The answer to the question; "when will you retire?" is becoming a very individual decision, and one you need to plan for and periodically stress test to make sure it's still going to work for you. Here's what we do know. 

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Evaluating Downside Protection

Investment Views, Investments

Semi-deviation (also called downside deviation) is a variation of the more commonly used metric, standard deviation. Both measures track the historic variability of returns around an investment’s average return, however, semi-deviation only considers those returns that fall below the investment’s average. A lower semi-deviation indicates an investment with lower downside risk.

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Downside Protection Strategies

Investment Views, Investments

My last blog discussed the importance of downside protection, specifically looking at the asymmetry of gains and losses, and poor historical investor behaviour. This blog will investigate some strategies investors can implement to potentially protect their portfolio from significant losses in down markets, while still allowing them to participate in rising markets.

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Importance of Downside Protection

Investment Views, Investments

Markets go up and markets go down. That’s the nature of investing in stocks and bonds, whether directly or indirectly through investment funds. Investors generally like upside volatility (when markets go up), but are much less tolerable towards downside volatility (when markets go down). Implementing downside protection strategies regardless of current market conditions can help reduce volatility when markets do go down, thereby helping to preserve and build wealth over the long-term.

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Registered Retirement Plans with named beneficiaries: Lessons and Considerations

Investments, Personal Finance

In my last post, I shared the issue of naming an adult, independent child as a beneficiary of a registered retirement plan, (either a Registered Retirement Savings Plan or a Registered Retirement Income Fund (income version). (see Registered Retirement Plans with Named Beneficiaries: Unintended Consequences ) You may wish to avoid paying probate and estate costs on your plan. You may want to make the transfer as seamless and efficiently as possible. You may want to leave someone something extra. One issue is that the person receiving the money usually pays no tax. The estate usually pays the tax. The Canada Revenue Agency first looks to the estate to pay any income taxes owing. Only when there are insufficient monies in the estate, does the Canada Revenue Agency assess the beneficiary of the registered retirement plan for any balance owing. That means the beneficiaries in the will shoulder the tax bill. Is that the intention?

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Registered Retirement Plans with named beneficiaries: Unintended Consequences

Investments, Personal Finance

Let’s say you’re single, divorced or widowed. You have saved up some money for retirement. Perhaps you are already retired and are taking out an income from your registered plan. You may not get to spend all of your savings during your lifetime. Where does the balance go?

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Accumulating money - 3 things you need

Investments, Personal Finance

We hear so much from the media that we are not saving enough for retirement. This message is beaten into the minds of middle and upper middle income Canadians. Saving for retirement is tough, considering all the demands you have now. Investment choices are mind boggling. And rates of return rule the roost.

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Life insurance mistakes to avoid

Helpful Tips, Insurance

There is no question that confusion exists when it comes to the topic of life insurance, and where there is confusion, mistakes can happen. So, to help you learn from other’s experiences, here are some common life insurance mistakes to avoid before, during and after you make a life insurance purchase: 

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