Another great question!

There are many different viewpoints on how to invest so let’s cover the basics and some questions you can ask your financial advisor to get you making money.

Not everyone acts the same with loss and although we like to think we are rational in our decisions, the research and evidence suggests that all investors (and some advisors) tend to sometimes act irrationally with errors in judgment caused by greed, emotion, and the fear of loss. Basically, there are two ways that most Canadians invest in the market today: (1) fixed income investing, or (2) guided stock portfolios (Exchange Traded Funds/ETFs + Mutual Funds/MFs). To take advantage of upswings you want to be invested in securities, but to add stability to your investments you also want to hold fixed products too.

Let’s talk about both.

Fixed income investing is primarily a rules-based investment philosophy that takes all emotion out of the equation. You simply follow the rules and get a solid return. Laddering is the most common method used with bonds and today $11 trillion is invested this way in Canada alone. When analyzing the markets from a long-term perspective, the fixed income portfolios win every time through laddered techniques. They are certainly not as glamorous as picking stock, however because of their stability and security, almost all large corporate and government pension funds are done through this method. Fixed income products consist mostly of different types of bonds and buying them is much like buying real estate. You can’t turn around and sell them immediately after the purchase for a profit, as you can with stocks. It is a guaranteed product that over time will have a higher value than your purchase price, typically without the loss of your initial investment. Most people who invest in real estate and want a tangible asset, choose to diversify their investments in institutional bonds because of the similarities.

Guided stock portfolios are the method of choice for most Canadians when investing for the future. Gone are the days of finding a good stockbroker. Today more than ever, we have a massive expertise gap in stock picking with most financial planners now pushing clients into MFs and managed accounts. Managed products and advisor services now have embedded fee-based structures that are designed to protect the advisor and the brokerage firm, with the goal of limiting potential damages to their client’s portfolios. Large firms will showcase their sophistication in wealth management, financial and estate planning, trusts, business planning, and business successions. These firms will also have proprietary programs that follow specific methodologies for picking and choosing different stocks such as managed programs with varying annual fees.

Your financial objective should always be to focus on how to secure your capital with adequate growth in the most tax-
efficient manner. Here are some key points to discuss with your advisor to limit losses and secure your future.

  1. What products do they have for the protection of lifestyle? (example: annuities, segregated funds)
  2. Does your advisor understand your vision of retirement and your personal risk tolerance?
  3. What is the accumulation strategy recommended versus just focusing on money management and managed
    portfolios? (example: you want to create multiple streams of income from employee pensions, government
    pensions, RRSP, TFSA, real estate investments, laddered strip-bond portfolios, and/or side incomes/part-time
  4. What products can they offer to generate a consistent, stable return regardless of the day-to-day market
    activity? (example: hedged products, SMA products with guaranteed base returns, REITs, bond portfolios)
  5. Have they fully outlined their fee structure, embedded costs and management or trailer fees? (example: MER
    fees on MFs, front-load fees, back-end-load fees. You will also want to check the tax-loss harvesting time
    periods on MFs, and check the lock in time periods used to cover load fees on MFs or managed products).


Of course, if any of my readers have questions about saving for the future or need specific advice about how to retire
debt free and wealthy, you can always email me your questions through the contact page on my website, here: Contact


Good Luck & Best Wishes,

ATML - Christine Ibbotson