Investors are smitten researching and selecting investments, not strategies.

My View:

Learning to recognize portfolio processes that deliver is a prudent exercise.


Well designed investment plans reduce anxieties and improve outcomes.

“Your future depends on many things, but mostly on you.” 
—Frank Tyger (1929–2011), cartoonist, columnist and humourist

Designing the investment plan for the long haul requires much serious thought. Unfortunately, investors shortchange themselves on two fronts. Firstly, they spend far too much time selecting investments. Secondly, and more important, they spend too little time researching and establishing their investment policies and strategies. The ones that the plans should put into effect to reach personal goals.

In my experience, few investors actually have a sensible game plan that is being followed. Too often, this results in a collection of “flavour of the day” investment selections. Designing the appropriate investment plan is essential, particularly the asset mix targets.

Understanding the major investment risk factors brings perspective to the plan. The ability, willingness and need to take risks are your top three.”

Happily, this situation is easy to rectify. A new year is about to make its grand entrance. Let us take a breather to contemplate a few improvements.

Stewarding the finances is truly a long journey. If you were my client, I would start with this question, “What is important about investing to your family in 2018 and beyond?

My observation is that many investors opt for preservation of capital. Others focus on portfolio growth. The rest concentrate on the retirement income stream. Lifestyle needs are also high on the pecking order.

I touch on a handful of key steps in designing your game plan:

1. Retirement prospects
Determine the family’s desired retirement income goal in today’s dollars. Calculate the size of portfolio to reach and sustain the goal. This provides portfolio direction and purpose. Estimate the personal rate of return required to achieve the retirement nest egg ballpark. Then treat that rate of return as the “investment benchmark” for the game plan.

Once the personal rate of return is identified, there is likely no need to incur higher investment risk than necessary. This is especially important to retired investors. Consider all the investment accounts owned as part of the big picture, not in isolation. Revisiting your “asset location” best practices helps fine tune the game plan.

2. Investor profile
Analyze which type of investor profile suits and feels best. The most familiar ones are labeled as preservation, income, balanced, growth and aggressive. In my experience, investor profiles change infrequently.

The majority of investors are comfortable within 40% to 60% allocated to stocks and the remainder to cash and bond selections. For example, a balanced profile typically allocates about 50% to stocks, 40% to bonds and 10% to cash instruments.

3. Asset mix
Asset mix decisions have the greatest impact on portfolio outcomes than any other factor. Studies show that these decisions explain a substantial amount of variations in total portfolio returns. All portfolios ought to contain a variety of diversified asset classes that don’t all move in the same direction.

This implies owning something you don’t particularly like. Once asset mix guidelines are determined, stay invested within the appropriate targets. Some rebalancing strategies assist as markets drift higher or lower.

4. Know the risks
Understanding the major investment risk factors brings perspective to the plan of action. The ability, willingness and need to take risks are your top three. Investment time horizon ought to be at least five to ten years, preferably more. If it’s less, stocks may be too risky, notably during market volatility.

Assess the risks in each account owned. A capital loss incurred in a registered account becomes a real loss because there is no offset against capital gains. Consider whether the risk and reward of stocks ought to be incurred outside registered plans. Perhaps, concentrate fixed income investments inside and equity investments outside.

Be mindful of investment quality versus yield, especially for investors nearing or in retirement. Today’s low return environment makes it extremely tempting to sacrifice quality.

5. Control the variables
Understand the investments owned and those being contemplated. Look for a good fit between the two camps. Plan on some capital losses and skip the emotional attachments to all investments. Know when to fold. Take the medicine and sell the losers as early as you can.

Minimize the number of portfolio taxable events. It defers income taxes and keeps your capital invested longer. Performance has been over-emphasized to exhaustion. A portfolio with focus on consistent returns serves you better in the long run than one which dwells on hot performance.

I recommend capturing the appropriate investment policies and strategies into your written plan of action. It becomes a blueprint for the finances where asset mix is uppermost.

Place investment selection as the very last item on your to do list. Make every effort to design the appropriate game plan. Then follow, monitor and tweak its components throughout your lifetime

Heed the powerful message from Mr. Tyger. Transform your future into value you can depend upon. Anxieties should diminish. Your investing experience should improve in 2018 and beyond

Best wishes for a very Merry Christmas and a happy, healthy and prosperous New Year to all.

About Adrian Mastracci, Discretionary Portfolio Manager, B.E.E., MBA  My expertise in the investment and financial advisory profession began in 1972. I graduated with the Bachelor of Electrical Engineering from General Motors Institute in 1971. I then attended the University of British Columbia, graduating with the MBA in 1972. I have attained the “Discretionary Portfolio Manager” professional designation. I am committed to offering clients the highest standard of personal service by providing prompt, courteous and professional attention. My advice is objective, unbiased and without conflicts of interest. I’m part of a team that delivers comprehensive services and best value in managing client wealth.