Retirement Investing Basics 101

Fee-only Retirement Income & Wealth Planning, Calgary

In the Spring of 2000 we received a letter from Sun Life Financial informing us that due to the demutualizing of the company we were entitled to 102 shares of the company. We did not understand it at the time so we tucked it away for a little while until Nancy's dad mentioned that he had received the same letter and had cashed in his shares for about $12 each. We quickly dug out our letter and after locating the stock symbol in the financial section of the Calgary Herald realized that the stock was quickly gaining momentum. Within a short period of time, the shares were trading in the $20 and 30$ range. We eventually sold those shares for $38 and used the proceeds for a down payment on our home in NW Calgary, where we still live. This is when our passion for investing took off.

Since then we have been schooled in the fine art of investing and paid our tuition dues a few times over. We have had many successes and failures over the past 20 years and hopefully our mistakes and triumphs along the way provide us the expertise to help clients today successfully navigate the seemingly complicated world of retirement income & wealth planning. 

We arrived in Calgary in the Spring of 98' broker than a 2 wheeled tricycle and quickly went to work to establish ourselves and rebuild our financial lives and to start fresh and enjoy the Alberta Advantage. 

What's unique about our story is that we didn't come from money. We earned our success from hard work, perseverance, education and by taking risks. One thing we know for sure is that you cannot save your way to financial success. Another thing you need to understand is that you need to define what financial success is for you. 

We have lost a few bucks on Nortel, mining and energy stocks, high flying dividend payors that ran out of money. We have also made a few bucks on some great companies like Parkland Fuel Corp., Keltic Energy, Pure Industrial REIT, and from owning real estate. 

After selling our Sunlife shares we bought our house for $196,000, which also generated $1000/month in rental income. We paid down the mortgage and with the new equity in the house, we bought a few more rental properties. 

Through all of the ups and downs we have learned the basics about investing and would like to share some of them with you and hopefully, our experiences, can help guide and inspire you to greater financial victories.

1. Patience is required when investing. In fact, I would say that it's the number one ingredient for success in investing. Many people panic and pull out their money at the wrong time and solidify losses forever. You can't uproot a freshly planted tree every year and replant it someplace else because it isn't growing fast enough. This is what a lot of people do and never see the fruit of their efforts. 

2. There's a difference between short term and long term investing and both require a different strategy. Short term investing in the stock market isn't investing - it's speculating. There's nothing wrong with speculating, but understand that it is the highest form of risk there is. We have spent some time in our past speculating and 'you win some and you lose some', but at the end of the day, the house always wins and you are not the house. Speculating is something you can do once you have lots of money and you can speculate with money you can afford to lose, but it will not negatively impact your financial security.

Long-term investing strategies require looking at the bigger picture and looking for the companies and sectors that have the highest growth potential over the next 5-10 years. Technology is not going away. Whenever there is a setback on the markets there's a sell-off in technology stocks like Apple, Facebook, Amazon, and Google. These companies have grown so much over the past few years that they now represent a huge part of all indexes and when they drop they pull the whole index down with them.

3. Asset allocation is crucial. Over the past 12 years, it's the global and US markets that have led the way with the highest gains, yet most Canaians have a large percentage of their money in Canadian companies. We have only been exposed to the Canadian markets on a very small percentage over the past 5 years. We have had an overweight to the US and global funds. We now think Canada may represent a potential opportunity because it has lost so much recently. That doesn't mean we are quick to rush back in. 

We have added some new funds that will have a little more Canadian content. We will be reducing our percentage of US funds and increasing our exposure to international companies and emerging markets, like India. Although we work with 15 financial institutions, the main companies that we work with are Manulife, Sunlife, Nicola Wealth, and IA, and they all share this general big picture outlook. We use these platforms for different reasons based upon your individual risk tolerance and unique needs for retirement income and wealth planning. 

Nicola Wealth: is a private portfolio manager in Vancouver. They have more than 12 different asset classes that they invest in with a focus on income generation and capital preservation. They do not capture all of the upsides of public markets, but on the flip side, they do not participate too much in negative markets. During the recent crash where the markets wee down by 35%, their core portfolio was only down 7.9%. With a focus on reduced volatility, they aim for consistent returns in the range of 6% annually. 
We acces this portfolio through a relationship with WealthBar. Website

Empire: This company is one of the oldest in Canada and they focus on investments that provide guaranteed income through cashable annuities. What they do is unique and no one does it like them. Those of you who want a pension style retirement with a guaranteed monthly income that will never go down. Website

Sunlife: Great institutional investment options with growth and income products. Really stable returns and international opportunities like emerging markets. Sunlife also offers a cashable annuity style investment that can provide guaranteed lifetime income. Website

Manulife: Access to more account types, including RESPs, and a bigger focus on growth investing. They tend to have an overall lower fee structure for their investment products. Website

IA - Which stands for Industrial Alliance. We like their global dividend fund and the American fund the best. Website

Note: We are compensated the same from all of these companies and do not push one over another. It really comes down to the best fit for the client. We are compensated by the total value of the investments under our management. This means that we have an aligned interest to see your accounts grow because that's how our income also grows.

4. Perspective is everything. If you watch too much news and investment shows you will have a constantly changing perspective that is influenced by too many different people. Always keep in mind the source of the information you are listening to and realize that there is often a hidden agenda behind what people are saying. We mainly take our cues from the chief investment officers at Sunlife,
Sadiq Adatia, and from Manulife's Philip Petursson. Both of whom, we have spent time with when they were here in Calgary. These guys are regulars on BNN and travel extensively and are responsible for Billions of dollars of client money. They have an aligned interest with us in seeing our client's investment money grow safely. 

Our Approach: First thing, UNDERSTANDING YOUR OBJECTIVE - growth, income or preservation; 
which are the 3 main investment objectives of most people. Secondly, is UNDERSTANDING YOUR TIMELINE - how long before you need to use the money for it's intended objective. Thirdly, RISK TOLERANCE - this will determine what kind of investments to include in your portfolio and asset allocation.

5. There's no such thing as a good or bad investment. It really comes down to the right or wrong investment based upon your objective - suitability is what matters most. You can't expect a 10% return on an investment where preservation was your main objective - that's unrealistic. The same can be said of a growth investment. If you are only averaging 2-3% per year than the makeup of the investment needs to be readjusted because you should be getting 6-10% per year on average, or more, in a growth investment with a long-term horizon. 

Consistent returns are better than dramatic high and low returns. This is especially true during retirement when you need to start taking income from your portfolio. If your portfolio is down significantly because of the performance of the markets and you need to take out an amount of money to cover lifestyle expenses, you will end up with less money in order to regain the losses you encountered. For example, if you have a $500,000 portfolio and it drops by 10% to $450,000 than you will need an 11.11% return to get back to $500,000. What if you needed to take out $50,000 when your portfolio is down and now you only have $400,000 left. You will then need a 25% return to get back to $500,000.

Before retirement volatility is your friend, but after retirement volatility is your worst enemy.

I know this may seem elementary to some of you, however, the key to learning is repetition and by repeating this we want to assure you that we have your back when it comes to investing.

Also, we want you to know that we invest our money along with yours. We have our RRSPs, TFSAs and nonregistered accounts at Sun Life and Nicola the same as many of you. We own the exact same funds as most of our clients. We also own some real estate here in Calgary and some in Arizona. We have a few speculative stocks that we have carried along for more than a decade.



6. There are great investment opportunities all around. Invest in things that interest you. If you like real estate, then learn more about it and how you can start to invest. Start with a  small investment and add more and you learn more. We like real estate and when we were visiting Scottsdale, AZ a few years back we started looking around at condos. We called a realtor, Dave Fernandez, and he took us out to view a few places. We placed an offer on a cute little 2 bedroom condo that was under renovation, where the owner had lost interest. We got the place for a bargain price when the Canadian dollar was near par and we have since seen the place double in value. We were in the right place at the right time and took a calculated risk that has paid off in a big way for us.

7. Don't invest in what you don't understand. There's been a lot of buzz around cannabis stocks over the past 2 years and many people have made and lost a lot of money. These stocks are highly speculative and without expert advice, it's only a gamble. 

8. Look beyond your borders. Asset allocation is all about being broadly invested in different industries, sectors, cities, and countries. Emerging markets, such as India is fast becoming a major trend in investing. The best way to be involved is through a fund created by Sunlife Global Investments.

We specialize in advanced retirement income & wealth planning strategies for those over 55. If you are not certain that your current adviser or institution can offer you the expert strategies you will need to ensure you do not outlive your savings and that you pay the least amount of tax then we invite you to consider working with us. The first step in our process is to book a meeting so that we can get to know you better and gain an understanding of your situation and to see which our strategies would work for you. You can select a time in our calendar below. It will lead you to complete a basic questionnaire and book a time for the appointment. During our time together, we can determine the next steps. We look forward to speaking with you soon.

Click here to learn more about our fee-only planning services for those 55+.

Advanced Retirement Income & Wealth Planning 

Willis & Nancy Langford

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