Prime Earning Years

You’re working all the time. Successful in your career or growing your business – these are great, prime earning years. The kids are growing up. Time to think about what life will be like in 15-20 years. Whether you’re looking to set a little aside to help the kids with their post-secondary education or planning for retirement, it’s important to plan for the lifestyle you hope to live. Many of my clients in their prime earning years like growth as well as the security of dividends. “Conservative growth” are the words often used to describe their objectives.

Do You Have The Right Investment Advisor?

Now, it’s more important than ever to have your money working for you. Ask yourself: Are the investments being recommended to you specifically tailored to your needs or are they just general recommendations being made to everyone in your risk category? How closely are your investments being watched? Is your Investment Advisor active and keeping up with the latest trends or are you being told to buy and hold and eventually you will make money?

The number one quality of an exceptional Investment Advisor is that they think about you, the client, first. They are not worried about how they will get paid, but instead are concerned about how their client’s goals and objectives will be met. Don’t just be swayed by the letters behind an Investment Advisor’s name or how big their business may be. Although education and size of business are important, they are not as important as finding the right person that you can trust, who will watch out for your best interests ahead of everything else.

You want to work with an Investment Advisor that follows and understands the markets. You don’t want someone that passes off the responsibility of your account to someone else (e.g., a mutual fund or third party manager). Your Investment Advisor should understand what is happening on Bay and Wall Street, and be able to explain why the market is behaving as it is. It is paramount that you deal with an Investment Advisor that provides exceptional service. They should be front and centre especially in volatile times, when investors need and want direction, as well as a plan to weather these markets and get them back to profitability.


Dealing With Investing Challenges

Volatility in the stock markets is something many investors have wrestled with over recent years and it’s likely to continue. Is it possible to grow your portfolio in these conditions? Are there opportunities to invest? The days of the “buy and hold strategy” are gone. Here are simple steps you can take to ensure your money is protected while maximizing growth:

  • Look to leaders – Identify current economic trends where the “smart money” is being invested. In times of distress, look to large companies – leaders in their industry. These companies tend to outperform in good times and help cushion a portfolio against losses when times are tough.
  • Get paid to wait – Companies that pay dividends tend to outperform over the long run. Those that continue to increase the amount of dividends will provide some growth while you wait for the stocks share price to rise.
  • Shop for bargains – Smart investors look for investments that are “cheap” by historical standards and trading at low multiples. Many investors look to the P/E ratio (price of the stock versus earnings) as a measuring stick to find good valued growth investments.
  • Reduce the cost of investing – Depending on the size of a portfolio, consider having your own specifically tailored mutual fund created out of individual securities in a fee-based scenario. Fee-based accounts can cost less than managed products, such as mutual funds, and their annual fees may be tax deductible. This keeps more money in your hands and can cushion a portfolio in difficult times.

Investing in quality companies that pay consistent dividends and are inexpensive is the best way to protect your money today and grow it over time, regardless of the current investment environment.

Maximizing Your Retirement Contributions

In your prime earning years, you really want to focus on ensuring you have sufficient money to maintain your lifestyle in retirement. There are many ways to build for the future. The fundamental premise behind making an RRSP contribution is to save for your retirement. By investing money in an RRSP account, you gain the benefit of tax sheltered growth. Over the long term, having your money grow tax-free can put a lot more money in an investor’s pocket than if they had to pay taxes each year along the way.

Spousal RRSP accounts, though often overlooked, can be a huge addition to a person’s tax and retirement strategy. If there is a situation that exists where one spouse earns a lot more than the other, spousal RRSPs can be a great idea to set up. Spousal RRSPs would be set up in the name of the lesser income earning spouse with the higher income earning spouse as the contributor to the plan.

Beyond RRSP contributions, you want to have a solid portfolio mix. People at your stage of life see the retirement finish line just ahead and tend to be more conservative. However, they do have more time than someone who is retired to recoup a loss and should be invested more in the equity markets than an individual that is 70 years of age.


Potential Portfolio Mix

  • Financials 25% 25%
  • Technology 15% 15%
  • Bonds / Preferred Shares (or other fixed income products) 15% 15%
  • Industrials 10% 10%
  • Biotech / Pharmaceuticals 10% 10%
  • Retail 10% 10%
  • Europe 5% 5%
  • Real Estate Trusts 5% 5%
  • Oil 5% 5%