Investments 101

Investing is all about making your money grow and work for you. You have worked hard for your money, so you need to get your money working hard for you. But which way is best; what should you invest in? While there is no quick answer to that question, it depends on an array of different things, not the least of which is your risk tolerance. I’m not going to try and sell you a “get rich quick scheme”: they don’t truly exist. What I will give you is honest, independent financial advice based on your risk tolerance and investment objectives.

I offer Guaranteed Investment Certificates, Mutual Funds and Segregated Funds which I find are suitable for most clients. However, I wouldn’t be telling you the truth if I tried to tell you that those were the only things around to invest in. Many folks have done well investing in real estate, their own business or even directly in stocks or bonds. It depends on your objectives, risk tolerance, and time available to manage your own investments.

How Much Will You Need When You Retire?

Likely more than you realize: you need to know your future income requirements, account for inflation, projected rates of return and projected life expectancy, plus build in a reasonable buffer to account for the uncertainties that exist. Let me help you get your plan started!

The primary purpose of many individual investors is building up the required assets for a comfortable retirement. The question of how much you will need depends on your answers to a few more questions. At what age do you want to retire? What kind of income do you want in retirement? How soon are you going to start investing? Unlike our parents’ generation, pensions are less common, and we’re going to have to all build up the assets we need so that we won’t have to be working until we’re 75. You’ll forgive me for being a little pessimistic about planning for retirement; but look around at the business landscape. Businesses are cutting back retirement benefits and governments also have started to cut back and postpone retirement benefits. This trend is unlikely to reverse.

Retirement may seem like a long way off, but trust me; once you’ve seen the math, you’ll realize you need to be thinking about retirement now if you haven’t already. It may be 25-35 years away, but chances are the earlier you start, the better position you’ll be in to retire when you plan to. Planning for retirement doesn’t just involve investments though. If you own a home, your mortgage may be a key factor in your retirement planning. Look through the mortgage section for some tips to eliminate your mortgage as quickly as possible.  Stop flushing money on non-tax deductible debt payments and start investing it for your future.

Economics 101 – Market Forces – Why do investment prices go up and down?

Simple answer:  Supply and Demand. Stocks and market funds prices go up and down like most things based on what the demand for them is and the available supply. In the short term, prices can vary greatly on the perception of the long term value of the company. Positive or Negative news can have a big effect on stock prices in the short term. But in the long run, stocks go up and down based on the profitability of the underlying company. 

We could easily fill a library with books on investing and the stock market. But at the end of the day, the question of who sets stock prices and why do they move up and down comes down to supply and demand. Stock prices go up as more and more people want to buy a particular stock as to own part of the underlying company. The reverse is also true. If people are trying to sell (or short sell) a stock, the price drops as fewer and fewer individuals want to own a part of the company.  As companies give out (unexpected) good reports of earnings, prices usually go up as investors expect the company to be worth more in future. Equally if a company has (unexpected) bad news or poor media coverage, investors believe the company to be worth less and the price investors are willing to pay drops. This is true of individual companies, as well as sectors or even entire countries’ economies.  A market crash happens when a large proportion of investors want to sell at the same time. There just aren’t enough buyers, and prices drop rapidly.  Likewise, prices rise when a large proportion of investors all want to buy at the same time. Prices are pushed higher and higher as the underlying investment is bought up.

Mutual Funds and Segregated Funds prices move up and down as the stocks and bonds in their portfolio moves up and down. Funds, however, generally have less volatility than the underlying stocks and bonds they hold, as the funds provide diversification which helps to temper some of the fluctuations. Some stocks may drop, while other rise on any particular day.

Trying to predict stock prices is both an art and a science. Professional investment managers (like those who manage Mutual or Segregated funds) rely on both statistical and economic data and years of experience and instinct when trying to predict what will happen. They typically have both complex computer system to help them manage their trading as well as a team of analysts searching the market for valuable companies.

What Is Mike’s Role Regarding Investments?

I am committed to helping you build a solid and secure financial plan. Investments are certainly an important part of that plan. It has been my experience that most clients are interested in growing their investments, yet want to have a manageable risk level. I help clients choose investments funds (or guaranteed investments) that suit their investment objectives, risk tolerances and tax status.

Some investors fail to realize that rate of return, while important no doubt, is not the only important factor to consider in your investment plan. For example if you’re saving for retirement, your pure-rate of return is not as important as how much you have to use for retirement when the time arrives. A very profitable investment may not be as good as a less profitable investment if the less profitable investment has superior tax efficiency.

Other important factors to consider include the amount you invest and the timing of those investments. If you don’t put aside enough funds regularly, even if the investments you have perform very strongly you won’t have met your goal. It’s also important to consider the timing of your investment purchase to try and maximize any tax advantages where applicable.

One important point that I like to make with clients is what my role is not. I am not a day-trader, looking to have you buy and sell your investments on a day to day week to week basis. If you are using a mutual fund or a segregated fund we’ve hired people within the fund to do the day trading for you and that is their full time responsibility. They constantly assess the stock, bond and derivative markets to try and make money for the fund and ultimately you. My role as a financial planning is to help you select the right funds for your objectives, given your larger financial plan, taking into account you income, income tax and risk tolerance.

How Do I Choose?

Investment choices always need to be done in the context of a larger financial plan. Investment objectives must also be established. Are you investing for retirement? a college fund? a first home purchase? An inheritance or an expected liability? Are you concerned primarily with Safety, Income or Growth of Capital? Next, you will want to consider how much risk you’re willing to accept. We’d all like to maximums our returns, but most of us also want to be able to sleep at night. Before you invest, I’ll speak with you so I understand your unique situation and objectives so that I can recommend the best choices for you. I’ll also ask you to meet with me annually to review your investment portfolio and ensure it is still meeting your needs. You will receive independent financial advice and I will present to you a variety of options often from competing companies.

Contact me today and I’d be happy to talk to you about your investment objectives, and other aspects of your financial plan.



Advisors affiliated with the PEAK Financial Group mutual fund dealer offer their clients access to more than 3,000 mutual funds and a whole host of managed products.

We do not manufacture and promote in-house funds, PEAK offers Advisors the freedom to recommend mutual funds that perfectly meet their clients’ financial needs and expectations without pressure.

We make available all of the funds approved for sale in Canada and which have been carefully analyzed and approved by our Compliance Department. The funds from all major mutual fund companies in Canada are accessible.