An Investment Philosophy to Help Make Work Optional
By Doug Ransom, CIM®, CFP®
Today’s investor must prepare for a long retirement. Whether you are retiring in 30 years or have retired 15 years ago, a 3-tier strategy can help you grow your portfolio and sustain retirement income in the long run.
Each year we review your cash flow requirements. Based on this we segregate your portfolio into three tiers: short-term, medium-term and long-term. The goals of this strategy are to:
⚫ Sustain stable and constant cash flow, without selling core long term investments.
⚫ Maximize returns over the long-term while reducing concentration risks and volatility.
⚫ Fund your income needs over your planned retirement.
The short-term tier provides your near-term cash-flow needs. The medium-term tier tops up your short-term tier with cash flow from income and maturing investments. The long-term tier provides growth potential to sustain the portfolio for later years, invested primarily in equities.
To minimize taxes, the strategies for each tier are different for registered, non-registered, and corporate accounts.
Some of our principles of success include:
⚫ Keeping the fees-low. As you can see in Figure 1, reduced fees can make a significant difference
over an investor’s lifetime.
⚫ Overweighting securities with momentum and value factors, two factors that have evidence of better risk-adjusted returns than broad stock market indexes.
⚫ Incorporating investments structured to enhance returns over expected stock market conditions. Canadian Banks issue a variety of products that are structured to achieve this. We feel this approach is likely to provide more consistent returns than attempting to pick outperforming mutual funds or individual stocks.
⚫ Selecting tax-efficient investments for corporate and non-registered accounts.
Based on a 6% annualized return on a $250,000 portfolio, before management expenses.
Benefits of Tax-Efficient Investments
Our tax-efficient strategies are for investors with holding
companies or significant personal non-registered investments.
Our tax-efficient strategies employ tax-managed mutual funds
and other tax-efficient investments. These funds allow investors
to select tax treatment to complement tax and financial planning
objectives such as: tax deferral, income splitting, OAS
maximization, and tax-efficient cash flow generation.
Business Owners and Incorporated Professionals
What would you do with an extra million
dollars?
A holding company is the best place for
most incorporated professionals and
business owners to accumulate assets for
retirement.
The federal budget of 2018 makes having a
tax-efficient portfolio more important than
ever. If you currently have passive income
in your corporation over $50,000, a tax-efficient
portfolio can put you ahead by six
or seven figures in 10-12 years!
Implementing Your Financial Solution
Contact us today at 250.412.3499 or Email
doug.ransom@iagto.ca to request a meeting or learn more
about our advisory process.
References and Further Reading
Vanguard Factor-Based Investing
Momentum and Value Everywhere, Clifford S. Asness, Tobias J. Moskowitz, and Lasse Heje Pedersen
The Journal of Finance VOL. LXVIII, No. Three, June 2013.