(613) 324-0158 info@balance-financial.ca


3 May

In these turbulent times, markets can be unpredictable. They react to political, economic and monetary events with a hyper-sensitivity rarely seen. So often, it’s investors who lose out, suffering inconsistent returns at best, and repeated losses at worst.

So how does the modern investor ensure better investment results? There was a time when the old adage The greater the risk, the greater the return actually held true. Today, it simply doesn’t deliver. Over the past four years, in partnership with over a dozen investment fund companies, I have been analysing the performance of thousands of investment funds and the reasons for their performance. I have determined that there are a few critical factors that impact much of the results an investment fund will deliver, and I’m excited to share these factors with you today. Armed with this information, it is my hope that you can build investment portfolios that absorb the shocks and deliver the results you need.

  1.  Consistency of returns.Many funds offer years of extraordinary double-digit returns. When the markets were more stable, these funds did very well, but with today’s volatility, these funds, over the long-term, often under-perform funds with more modest, yet steady returns. The key is consistency, not magnitude.
  2. Capital preservation.In tandem with consistency is the preservation of the invested capital. When an investment’s return falls below zero, it must make-up the loss before it adds any gain. Consider the following table, showing the gain needed to offset a drop:
  3. Pension-style asset allocation.Over the decade that ended December 31, 2016, the Canada Pension Plan averaged 6.7% return and the Ontario Teachers’ Pension Plan averaged 7.3%. The average Canadian fund investor saw a return of only 3.31%. There are a few factors at play for this disparity; one of the keys is the way pensions allocate their assets: less Canadian equities and fixed income, more global equities and fixed income, more infrastructure, more real estate, and alternative investments, such as currencies, derivatives and hedge funds. Repeat.
  4. Managed Portfolio/Asset Allocation funds.Mutual funds and segregated funds are collections of individual stocks, bonds, and other investments. Portfolio funds are actively managed groupings of other mutual funds or segregated funds. Often, these portfolios have a set asset allocation (mix of equity versus fixed income) that is matched to an investor risk profile. These funds are managed by a team of experts that can react and be proactive with greater speed and agility.
  5. Values-based investments.This is the reason I founded Balance Investments. While most people would agree that environmental sustainability and social justice are worthy causes, investors should understand, also, that values-based funds often deliver greater financial sustainability, too. Click here to see recent results. Why? These funds own securities from companies that are less vulnerable to shutdowns, boycotts, lawsuits, heavy fines, and consumer backlash, while being increasingly attractive given changing consumer values.
  6. Low investment fees.While the Management Expense Ratio (MER) of an investment fund is not paid directly by the investor, it does erode the investment return of the fund all the same. The lower the fees, the higher the net return to the investor, and even though fees are necessary and reflect, at times, a qualitative benefit (e.g. active management), fee containment should still be part of an overall investment strategy.
  7. It’s all well and good to create wealth – as long as it’s available when we need it for retirement or our kids’ education. A serious illness, a disability or a premature death can thoroughly undermine any investment plan. Protecting wealth through risk management should be part of any solid financial plan.

I should probably add an eighth factor: will power!

Your financial advisor can set this all up for you and not charge you a dime to do it.

Quadrus Investment Services Ltd. and design are trademarks of Quadrus Investment Services Ltd. Used with permission.
Make your investment decisions wisely. Important information about mutual funds is found in the Fund Facts document. Please read this carefully before investing. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Unit values and investment returns will fluctuate.
Mortgage referrals and insurance products, including segregated funds, are offered through Balance Financial and Investment Representative Scott Boassaly offers mutual funds through Quadrus Investment Services Ltd.