- I invest first and foremost for total return over my lifetime as opposed to tax-advantages in the short term. In other words, I let my overall investment strategy set my course. Once I set my strategy, I do aim for tax benefits, but it never drives my decisions. I see too many clients investing for short term tax advantages, to the detriment of their long-term wealth building. For example, many of my Canadian clients have upwards of 90-100% of their equities in the Canadian market, due to the tax benefits of Canadian dividends. Yet they are missing out on significant gains (and diversification) by ignoring the U.S. and global markets.
- The portion of my assets that are in equities are ALWAYS 100% invested in the market. See the chart on this page for an explanation why.
- I never have more than 5% of my investible assets in any one stock or bond.
- I normally buy equal amounts of all holdings except for my "speculative" stocks, which are very small amounts.
- My speculative stocks, if any, make up less than 2% of my liquid assets. I currently hold some shares in a private, alternative energy company.
- My bonds are high-grade provincial, municipal, and corporate bonds. I never chase yield, in that the reason I hold bonds is for safety and preservation of capital. I have never had a bond holding default.
- I keep my fees low. I use a discount broker and simply pay $9.99/trade. For managed accounts, I try to keep my clients' cost well under 1% of total assets under management, and closer to 0.50% is preferred. In a low interest environment like we have been in for years, you simply cannot afford either direct or hidden fees of 2% or more as you are likely to end up losing money after taxes and inflation.
I'm often asked if I will manage my clients' money. The answer is no, for a number of reasons:
- I believe strongly in the entire financial plan. History shows that the actual selection of individual stocks and bonds is not nearly as important as asset allocation and how the entire plan works together - income, investment, and spending. We won't invest for you directly, but we will figure out your best asset allocation.
- There are many ways to successfully invest and build a portfolio. I am a very strong believer in just one method, which I detail below. I'm not sure I'd be acting in the best interests of all my clients if I only used this one technique (even it has been very successful).
- As my senior citizenship looms, I don't have a yearning for hundreds of panicked phone calls from clients when the market is down. (If you're currently freaking out about the market, read this.)
- I'm not a licensed broker, so while I can give advice, I cannot actually take over the funds and invest them.
That being said, I have a long history of successful investment management and a solid philosophy of what works and what doesn't (backed by empirical evidence). Under the heading of "putting my mouth where my money is", I will share these theories and actual practices with you in the posts below. These are not necessarily recommendations on my part, but it is an overview of the process that I do use for managing my own and my family's investments.