What is a Balanced Portfolio?

What is a Balanced Portfolio?

WhA balanced portfolio requires weighing an investor’s objectives, time horizon, risk tolerance and investment knowledge. Once these factors are take into account, a financial advisor should consider the following variables: asset mix, asset allocation style, investment management style, georgraphic bias and marketing capitalization.

The following variables a financial advisor should consider:

1. Asset Mix

Asset mix refers to the combination of equity, fixed income, cash and other assets to create diversification. Equity classes can be further broken down to include specific sectors, such as real estate, financial institutions and consumer staples. Fixed income classes may include federal, provincial or municipal bonds, high-yield corporate bonds and debentures. Cash typically refers to t-bills, banker’s acceptances and commercial paper. Generally, a balance portfolio has 60% in equities, and 40% in fixed income.

2. Asset Allocation Style 

Refers to several methods. The three most common are strategic asset allocation, tactical asset allocation and a concentrated or focused asset allocation.

Strategic asset allocation focuses on a balance between risk and return mapped along what is called an “efficient frontier” (a curve that plots the maximum reward for a given amount of risk). The benefit of this approach is it minimizes an emotional response to market volatility. The disadvantage is that it may be too disciplined or rigid in the short term to take advantage of marketing fluctuatations. An example of strategic asset allocation is always being at 50% equities, 50% fixed income, no matter the market conditions.

Tactical asset allocation may start with an optimized asset allocation, but will allow a manager to increase or decrease exposure to equities and/or fixed income within a prescribed range. This style can take advantage of short-term marketing anomalies, such as buying opportunities when a stock, commododity or resource drops in price and is likley to rebound within an acceptable timeframe. But a tactical manager may act too early or too late to maximize a return due to an over- or under-allocation.

Finally, a concentrated or focused asset allocation may focus on a specific sector, region or company size (usually referred to as “marketing capitalization”). Some would suggest this is a highly speculative approach that doesn’t allow for proper diversification. However, it may be appropriate if a client is diversified in other personal or corporate investments that provide exposure to other asset classes. In this case, this approach can be very targeted given certain marketing cycles, conditions or client requirements.

3. Investment Style 

Investment style can be based on different preferences including value, growth, or GARP (growth at a reasonable price). A value-based approached is used by investment managers who seek a margin of safety by investing in what they deem to be undervalued stocks. Alternatively, growth investment managers seek momentum in a particular company, industry, or sector. This momentum can be driven by events such as the launch of new products, an increase in housing starts, or a decrease in interest rates that may fuel growth in the mortgage and lending sector. A neutral position may include 50% of expoosure to value and 50% exposure to growth. GARP investors seek companies that are showing consistent earnings growth above broad market levels (a fundamental of growth investing) while avoiding companies that have very high valuations (a key tenet of value investing)..

4. Geographic Consideration 

Provides an opportunity for an investor to diversify assets across different locations. Although many Canadians are drawn to investing in Canada which is not always paying the best dividends, the local market represents only 3% of the world equity market. As a result, most balanced investment portfolios will blend holdings across Canadian, U.S. and global equities and fixed income to capture the greatest diversification.

5. Market Capitalization 

Preference refers to choises made based on the size of the companies held in an investment porfolio. The most common holdings in most porfolios are large blue-chip companies that arae often considered less risky as they have been in business for a long time, are covered by many analysts, are frequiently in the news and are familiar to advisors and investors. However, a market capitalization approach may also provide exposure to micro-cap companies that are not well-known, or small and medium-sized companies that may be well-known only in a particular region or industry. The balanced investor may seek exposoure to each of these to gain diversification.

Just as the definition of work-life balanced will vary by person, a balanced approached to investing may vary by investor. For example, some may choose a 50/50 or a 60/40 asset blend of income and growth, while others may prefer a strategic approach instead of a tacitical one.


What is an RRSP Loan?

What is an RRSP Loan?

It might sound rather funny to borrow money to save money, but that’s the general idea behind an RRSP loan.

When the RRSP deadline approaches, some Canadians will take out an RRSP loan to make a large contribution before the deadline, which will hopefully result in big tax savings in the short term.

Most Canadians use RRSP loans to catch up on contributions they wanted to make, but never stick to their monthly contribution plan.

How does an RRSP loan work? 

You borrow a lump sum of money and have to make principal and interest repayments regularly over a period of time. The only thing that makes it an RRSP loan is that the lump sum goes directly into your RRSP account.

RRSP loans repayment schedule could be from 1 to 10 years. They often include a defferal on when the first payment has to be made, too. For example, if you take out an RRSP loan in February you might have the option of not making the first payment until three months later. Why would you do that? Because it might give you enough time to file your taxes, claim the RRSP contribution, and generate a tax refund. That refund could be used to reduce the loan balance and, depending on the loan provider, give you the option of an lower monthly payment than originally planned.

What are the benefits of an RRSP loan? 

The benefits of an RRSP loan leads people to getting an RRSP loan every single year. Also, you should be aware that there is a cost to borrowing money which offsets some of the potential gains from investing.

Usually, interest rates on RRSP loans are low. If you feel tempted to take out an RRSP loan every year because you feel that’s what keeps your overall contributions higher, just remember that if you’re making an automatic loan payment or making an automatic contribution, there’s not much difference, except one comes with interest chargers.

Here are a few situations where an rRSP loan looks more attractive:

1. You’re in a high tax bracket

The higher the tax bracket, the bigger your refund. That’s a powerful motivator. Just make sure to put your refund to good use and not for conspicuous consumption.

2. It would use most of your cashflow 

All of this legacy building plan assumes that you already have life insurance in place. If you don’t, the time may be right for planning ahead and to obtain a life insurance policy. Remember, not only will your tax-free funds be used to help take care of your funeral cost, outstanding debt, taxes payable, etc., but you will also make a difference in a cause or charity of your choice while allowing your name to live on for many years to come.

3. You’re only using a short loan

You should be able to pay off the loan quickly. As a result, it will minimize the interest you’ll have to pay.

Some people might start a plan where they would commit to a monthly contributions, but stop because of other financial commitments. Committing to a one year RRSP loan is more likely to result in hitting your goals for fear of missing a loan payment. On the other hand, if you are able to make the RRSP loan payments, you probably can set up a regular RRSP contributions that wil save you money on interest payable.


RRSP vs. TFSA

RRSP vs. TFSA

Whether you’re in your 20s or 40s, being a new parent is one of the most exciting and frightening events that can happen in one’s lifetime. In one fell swoop, you are suddenly completely responsible for another human being. Term life insurance can replace the income needed to cover bills, but it can also pay for hopes and dreams. You want to make sure your new bundle of joy will always be cared for, even if you aren’t around to do so. Like most types of insurance, you hope to never need it, but your loved ones will be thankful you planned for the unexpected.

Not to scare anyone, but $233,610 is the estimated amount needed to raise a child to the age of 18. Whether you are single or a couple, are a one-income or dual income household, this is a lot of money and it doesn’t include the cost of college. If you were to die prematurely, you need to have a back-up plan for your children. Term life insurance is that back-up plan and it can fit in most budget.

1. Term life insurance is affordable financial protection and it can be set up to provide enough money to:

  • Allow your child to grow up in the home they know
  • Pay for day care, school, and everyday needs
  • Cover college tuition and their future dreams

2. Term Life Insurance is Easily Customized

The magic of term life insurance is that it can last as long as you need it to. You can purchase a policy to last only until your child reaches adulthood, or you could choose a longer term for additional protection. Most term policies are also convertible. Lifestyle needs change and you may decide you would like to have more than just a term policy. Having a conversion option means that if you decide you want permanent life insurance, you can convert regardless of your health as long as you convert before the deadline on your policy.

Life insurance is very customizable for your individual situation. While you have various term and permanent products available, you also have policy add-ons that can supplement a life insurance policy with more coverage. These add-ons are known as riders. Riders vary by insurance company and by policy, as do their workings and costs.

3. All Parents Need Life Insurance

If you’re a single parent, it is essential to have life insurance to protect your child. Some life insurance is better than none at all, and term life insurance is very affordable, especially if you’re young and healthy. If you are a couple, both parents should have life insurance. Even stay-at-home parents should consider life insurance. Stay-at-home parents may not provide income, but they save the family money by being a chef, teacher, daycare provider, housekeeper, and transporter. Not to mention all the boo-boos they heal every day.


7 Simple Ways to Be Smarter About Your Money

7 Simple Ways to Be Smarter About Your Money

Whether you’re in your 20s or 40s, being a new parent is one of the most exciting and frightening events that can happen in one’s lifetime. In one fell swoop, you are suddenly completely responsible for another human being. Term life insurance can replace the income needed to cover bills, but it can also pay for hopes and dreams. You want to make sure your new bundle of joy will always be cared for, even if you aren’t around to do so. Like most types of insurance, you hope to never need it, but your loved ones will be thankful you planned for the unexpected.

Not to scare anyone, but $233,610 is the estimated amount needed to raise a child to the age of 18. Whether you are single or a couple, are a one-income or dual income household, this is a lot of money and it doesn’t include the cost of college. If you were to die prematurely, you need to have a back-up plan for your children. Term life insurance is that back-up plan and it can fit in most budget.

1. Term life insurance is affordable financial protection and it can be set up to provide enough money to:

  • Allow your child to grow up in the home they know
  • Pay for day care, school, and everyday needs
  • Cover college tuition and their future dreams

2. Term Life Insurance is Easily Customized

The magic of term life insurance is that it can last as long as you need it to. You can purchase a policy to last only until your child reaches adulthood, or you could choose a longer term for additional protection. Most term policies are also convertible. Lifestyle needs change and you may decide you would like to have more than just a term policy. Having a conversion option means that if you decide you want permanent life insurance, you can convert regardless of your health as long as you convert before the deadline on your policy.

Life insurance is very customizable for your individual situation. While you have various term and permanent products available, you also have policy add-ons that can supplement a life insurance policy with more coverage. These add-ons are known as riders. Riders vary by insurance company and by policy, as do their workings and costs.

3. All Parents Need Life Insurance

If you’re a single parent, it is essential to have life insurance to protect your child. Some life insurance is better than none at all, and term life insurance is very affordable, especially if you’re young and healthy. If you are a couple, both parents should have life insurance. Even stay-at-home parents should consider life insurance. Stay-at-home parents may not provide income, but they save the family money by being a chef, teacher, daycare provider, housekeeper, and transporter. Not to mention all the boo-boos they heal every day.


Ontario’s Minimum Wage Increase & Other Legal Changes

Ontario’s Minimum Wage Increase & Other Legal Changes

Whether you’re in your 20s or 40s, being a new parent is one of the most exciting and frightening events that can happen in one’s lifetime. In one fell swoop, you are suddenly completely responsible for another human being. Term life insurance can replace the income needed to cover bills, but it can also pay for hopes and dreams. You want to make sure your new bundle of joy will always be cared for, even if you aren’t around to do so. Like most types of insurance, you hope to never need it, but your loved ones will be thankful you planned for the unexpected.

Not to scare anyone, but $233,610 is the estimated amount needed to raise a child to the age of 18. Whether you are single or a couple, are a one-income or dual income household, this is a lot of money and it doesn’t include the cost of college. If you were to die prematurely, you need to have a back-up plan for your children. Term life insurance is that back-up plan and it can fit in most budget.

1. Term life insurance is affordable financial protection and it can be set up to provide enough money to:

  • Allow your child to grow up in the home they know
  • Pay for day care, school, and everyday needs
  • Cover college tuition and their future dreams

2. Term Life Insurance is Easily Customized

The magic of term life insurance is that it can last as long as you need it to. You can purchase a policy to last only until your child reaches adulthood, or you could choose a longer term for additional protection. Most term policies are also convertible. Lifestyle needs change and you may decide you would like to have more than just a term policy. Having a conversion option means that if you decide you want permanent life insurance, you can convert regardless of your health as long as you convert before the deadline on your policy.

Life insurance is very customizable for your individual situation. While you have various term and permanent products available, you also have policy add-ons that can supplement a life insurance policy with more coverage. These add-ons are known as riders. Riders vary by insurance company and by policy, as do their workings and costs.

3. All Parents Need Life Insurance

If you’re a single parent, it is essential to have life insurance to protect your child. Some life insurance is better than none at all, and term life insurance is very affordable, especially if you’re young and healthy. If you are a couple, both parents should have life insurance. Even stay-at-home parents should consider life insurance. Stay-at-home parents may not provide income, but they save the family money by being a chef, teacher, daycare provider, housekeeper, and transporter. Not to mention all the boo-boos they heal every day.


TFSA Contribution Limit For 2018

TFSA Contribution Limit For 2018

Whether you’re in your 20s or 40s, being a new parent is one of the most exciting and frightening events that can happen in one’s lifetime. In one fell swoop, you are suddenly completely responsible for another human being. Term life insurance can replace the income needed to cover bills, but it can also pay for hopes and dreams. You want to make sure your new bundle of joy will always be cared for, even if you aren’t around to do so. Like most types of insurance, you hope to never need it, but your loved ones will be thankful you planned for the unexpected.

Not to scare anyone, but $233,610 is the estimated amount needed to raise a child to the age of 18. Whether you are single or a couple, are a one-income or dual income household, this is a lot of money and it doesn’t include the cost of college. If you were to die prematurely, you need to have a back-up plan for your children. Term life insurance is that back-up plan and it can fit in most budget.

1. Term life insurance is affordable financial protection and it can be set up to provide enough money to:

  • Allow your child to grow up in the home they know
  • Pay for day care, school, and everyday needs
  • Cover college tuition and their future dreams

2. Term Life Insurance is Easily Customized

The magic of term life insurance is that it can last as long as you need it to. You can purchase a policy to last only until your child reaches adulthood, or you could choose a longer term for additional protection. Most term policies are also convertible. Lifestyle needs change and you may decide you would like to have more than just a term policy. Having a conversion option means that if you decide you want permanent life insurance, you can convert regardless of your health as long as you convert before the deadline on your policy.

Life insurance is very customizable for your individual situation. While you have various term and permanent products available, you also have policy add-ons that can supplement a life insurance policy with more coverage. These add-ons are known as riders. Riders vary by insurance company and by policy, as do their workings and costs.

3. All Parents Need Life Insurance

If you’re a single parent, it is essential to have life insurance to protect your child. Some life insurance is better than none at all, and term life insurance is very affordable, especially if you’re young and healthy. If you are a couple, both parents should have life insurance. Even stay-at-home parents should consider life insurance. Stay-at-home parents may not provide income, but they save the family money by being a chef, teacher, daycare provider, housekeeper, and transporter. Not to mention all the boo-boos they heal every day.