Investing - Taming Your Fears

WINK presentation by Gwen Becker, Matco Financial

  1. Gena Rotstein
    WINK presentation by Gwen Becker, Matco Financial
    Transcript Header:
    Investing - Taming Your Fears
    Transcript Body:
    • 1. Investing- tame your fears and grow Gwen Becker, CIM, CFP, FCSI Vice-President, Associate Portfolio Manager
    • 2. Whose Involved in Making Investments Decisions?
    • 3. OverwhelmedWomen are still pullingdouble shiftsLife life’s usSo much information exists o Industry jargon o Why bother in this market?Everything seems to work outokay in the end
    • 4. The Factual Conversation Women influence 70% of consumer spending decisions in this country1 In the next 10 to 20 years, many boomer women will inherit wealth twice – from their parents and their spouse1 82% of Canadian wealth will eventually be managed by women1 70% of women switch advisors after the death of a spouse1 Average age of a widow is 562 According to one Cornell study, 10 trillion dollars in inheritance will pass to baby boomers between now and 2040 – majority of inheritors will be women21 Source: TDWIS Newnet Article obtaining an uncommon understanding of your client interview with Dave Pickett: The Rise of High Net Worth Female Investors2 Source: My Money Mindset ( by Dr. Deborah Nixon
    • 5. The Factual Conversation Women have been raised to be the keepers of the household purse, not the income generators. That legacy lives on for the majority of the population. Budgeting, borrowing and everyday saving is not a primary struggle for women – wise investing is.2 Women want a financial advisement process that accounts for her heart, not her ego. In other words, a process that incorporates her feelings, her perceptions, her life situation and her desires to take care of others.2 Two-thirds of women are single by the time they hit age 65—either because they never married, their spouses pass away, or they divorce.2 Don’t know what you don’t know. Start with what should I know?1 Source: TDWIS Newnet Article obtaining an uncommon understanding of your client interview with Dave Pickett: The Rise of High Net Worth Female Investors2 Source: My Money Mindset ( by Dr. Deborah Nixon
    • 6. Solutions To Challenges FINANCIAL PLAN & GOAL SETTING o Regardless of your situation TYPES OF ADVISORS & EXECUTION o Not alone, Not all or nothing INVESTMENT STRATEGIES o Constructing an “Investment Portfolio” o “Asset Classes” o Cash, “Fixed Income & Equities”  Cash, Bonds & Stocks CYCLES & SEASONALITY
    • 7. Written Financial Plan -30% of Women Have One Budget ( Cash Flow Goals vs. Ability Net Worth Statement Projected Net Worth Report Card "Youve got to be very careful if you dont know where you are going because you might not get there." Yogi Bear
    • 8. Goal vs. Ability
    • 9. Specific and Obtainable Goals Short term (less than 1 year)emergency funds, down paymenthome, vacation Mid term (2-5 years)fund child’s post secondaryeducation, care for agingparents, revenue property, pay downdebt Long term (5+ years)buy a winter /summerhome, comfortableretirement, philanthropy, estate
    • 10. Investment Portfolio = Goal Income Balanced Growth• Need For Current • Equal Focus On • Little Need For Current Income Growth and Current Income• Moderate Focus On Income • Focus On Growth For Growth Above • Moderate Tolerance Capital Appreciation Inflation For Risk • High Tolerance For Risk• Low Tolerance For Risk • Intermediate • Intermediate/Long• Short/Intermediate Investment Horizon Investment Horizon Investment Horizon • Emphasize Time Horizon Over Risk INCREASING RISK, VOLATILITY AND RETURN EXPECTATIONS
    • 11. Constructing an Investment Portfolio Diversification of Asset Classes Participating in the gains while managing the down side risk
    • 12. Asset Allocation Decision 70% Bonds / 30% Stocks 50% Bonds / 50% Stocks 30% Bonds / 70% Stocks Income Balanced Growth SOURCE: | Index Compound Returns shown BEFORE fees all in CAD $ ending December 31st, 2012
    • 13. Asset Class ReturnsIndex Returns (ending December 31, 2012) SIMPLE % COMPOUND % 1 Mth 3 Mths 6 Mths 1 Yr. 3 Yrs* 5 Yrs* 10 Yrs*S&P/TSX (TR) Index 1.95 1.72 8.86 7.19 4.79 -0.81 9.22S&P/TSX Capped Energy Index (CAD$) 0.07 -3.58 7.07 -4.83 -3.25 -3.81 9.65S&P/TSX Small Cap (TR) Index 2.40 -2.00 6.16 -2.23 3.35 -0.46 5.70S&P 500 Index (CAD$) 0.80 -0.24 5.86 13.00 8.8 1.70 2.30MSCI EAFE Index (CAD$) 3.26 7.62 12.76 17.65 2.63 -4.93 5.29MSCI World (TR) Index (CAD$) 2.12 3.71 6.81 13.26 5.11 -1.01 2.66DEX Universe Bond Index -0.13 0.30 1.54 3.60 6.64 6.35 5.97 SOURCE: | Index Compound Returns shown BEFORE fees all in CAD $ ending December 31st, 2012
    • 14. Risk (4-Letter Word) /Return Trade-Off The Efficient FrontierAsset Class diversificationworks over the long run• Bonds negatively correlated with stocks (“Defense”)• Pure income portfolios have ~2/3 the risk of stocks• Pure bond investors benefits from small addition of stock exposure given negative correlation
    • 15. Asset Class Returns January 1, 1950 – June 30, 2011Despite the financialcrisis, long term stockreturns continue to lead allasset classes.• Bonds performed well over the last 61 years. ¾ of the return & only ¼ of the risk vs. Canadian Equities• Interest Rates peaked in early 1980s• Inflation rate has been remarkably steady over the postwar period
    • 16. Chasing Last Years Return - Asset Class Performance
    • 17. The Problem With Going With The Flow
    • 18. Herding: Our Tendency Is to Follow the Crowd
    • 19. Common MistakesUnclear investment objectivesPoor asset allocationExtremely concentrated o 15 – 20 stocks to reduce riskOver diversificationFocusing on returns without riskEmotional or trend investingHot stock tip
    • 20. Dividend Investing
    • 21. Styles of Investor (Jargon) Deep Value o Seek out companies trading at deep discounts relative to asset value o Low price to earnings multiple or price to net asset value or price to book o Eg: Research in Motion (RIM) Value o Value typically describes a relationship of the price a particular company is trading at relative to the stream of earnings or cash flow company produces. All else equal – pay lower price for large stream of earnings or cash flow o Eg: Microsoft (MSFT), McDonalds (MCD), Magna (MG) Growth o Focus on companies growing earnings stream and assets typically at a high rate. Investment themes. o Often willing to pay higher price for those assets because expect company to grow much more in the future. o Eg: Facebook (FB), Lululemon (LLL) Income o Focus on income generating investments – high dividends o Eg: Canadian Oil Sands (COS), Gamehost (GH), REIT’s Boardwalk (BEI.UN)
    • 22. Cycles & Seasonality “My ears cannot listen longer than my behind can endure” -Ambrose Bierce
    • 23. Business Cycle & Stock Market CycleLeading Indicators TRAP RBC & DOL
    • 24. Global Industry Classification Standard
    • 25. Challenging Returns in Junior Oil & Gas SpaceJunior Oil and Gas companies outperform Large Caps over past 25 years
    • 26. Asset Mix DecisionLong Canada Bonds vs. S&P/TSX Dividends Short Duration
    • 27. Price to Earnings Multiples for S&P 500 & TSXValuations are Compelling Current Trailing P/E = 15.2 Canada, 14.2 U.S.
    • 28. Types of AdvisorsInvestment Advisor Financial Planner Investment Counsellor Client prefers:Client prefers: Client prefers: Variety of investment Variety of Products Variety of investment options options Planning and portfolio Specialization Planning focus approach Deal Flow Advisory relationship Service focus Active Involvement Fee based focus Fiduciary Relationship Transaction based focus Reporting: Fee based focusReporting: Monthly/Quarterly account Reporting:Monthly account statements statements & fund performance Monthly account statements, quarterly portfolio &Cost: Cost: performance reports, customized Average MER 2.56% benchmarks 1-3% of equity trade value Cost: Declining DSCs 6%-1% Spread on bond yields 1%-1.25% of AUM on a 1% fund trailer fees 1% fund trailer fees Declining fee schedule Tax deductible
    • 29. 12 Questions to Ask an Advisor What are your qualifications? What experience do you have? How big is your book of business? What services / products do you offer? What is your approach to financial planning? Will you be the only person working with me (other partners lawyers, accountants, etc.)? How will I pay for your services? How much do you typically charge? How many clients do you have? Could anyone besides me benefit from your recommendations (conflicts of interest) Are you regulated by an organization? Can I have it in writing?
    • 30. Hiring an Advisor Are you being heard? Has your best interest at heart? Can you have an honest open conversation? Are you being pressured into making a decision? Do you trust this person? Use emotional intelligence and your voice
    • 31. Summary FINANCIAL PLAN & GOAL SETTING o Regardless of your situation TYPES OF ADVISORS & EXECUTION o Not alone, Not all or nothing INVESTMENT STRATEGIES o Constructing an “Investment Portfolio” o “Asset Classes” o Cash, “Fixed Income & Equities”  Cash, Bonds & Stocks CYCLES & SEASONALITY
    • 32. Lesson “We must be careful to get only the knowledge out of a lesson. The cat who sits on a hot stove top will never sit on a hot stove again. But she will never sit on a cold one either.” - Mark Twain
    • 33. Questions & AnswersPersonal & PrivateHere until 2:00 ishOr…….
    • 34. Contact Information Email: Call: 403-718-2125 Blog: Twitter: @Gwenbecker Website: WINK Facebook and LinkedIn Pages Survey Monkey Honest Criticism is hard to take, Particularly from a relative, a friend, an acquaintance, or a stranger” -Franklin P. Jones
    • 35. Thank You Guests Directors Family, Friends & Matco BLG conference room Door Prize donated by Studio Gorgeous Next Speaker –Sharon Gray “Evaluating Assets”
    • 36. DisclaimerFor your information:MATCO FINANCIAL INC. is a privately owned and independent wealth management office. The material presented is intended to provide information to Matco Financial clients, contacts and affiliates. Readers should not act on this information without first consulting their investment advisor, tax advisor, financial planner or lawyer. This communication does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. Management fees, commissions, and expenses may be associated with investment management services and mutual fund investments. Before investing, please read the applicable information such as the prospectus, which contains detailed investment information and is available from your advisor. Most marketable securities such as mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. All statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and are not guarantees of future performance. Investors should not rely on forward-looking statements. Actual results, actions or events, could differ materially from those set forth in the forward-looking statements.
    • 37. 2011 & 2012 Global Market Returns (USD)
    • 38. Volatility Index (VIX) Height of pessimism
    • 39. Seek lower volatility to enhance returns LESS VOLATILITY = GREATER WEALTH Consistent Investment: $1,000,000 Volatile Investment: $1,000,000Year Rate of Return Ending Value Rate of Return Ending Value 1 8% $ 1,080,000 30% $ 1,300,000 2 8% $ 1,166,400 -20% $ 1,040,000 3 8% $ 1,258,712 25% $ 1,300,000 4 8% $ 1,360,489 -20% $ 1,040,000 5 8% $ 1,469,328 25% $ 1,300,000Arithmetic annualreturn 8% 8% (Net 40%/5)Compound annualreturn 8% 5.39% Source: CEG Worldwide. Note: This is a hypothetical series of returns to indicate the significance of volatility and does not represent any specific investments at any specific time.
    • 40. Types of AdvisorsInvestment Advisor Financial Planner Investment Counsellor IIROC Investment Counsel / PM MFDA CSC CFA, CIM, CFP IFIC, CFP Investment Dealer Portfolio Management Mutual Fund Dealer Firm Agency relationship Agency Relationship Investment Policy KYC KYC Statement Domestic & US Stocks, Domestic, International & Domestic, US & Bonds, Mutual Funds, Specialty Mutual International stocks, IPOs, Insurance Funds, Insurance bonds & Specialty pooled Commission and some Fee Front end load, DSC & funds based compensation Trailer Fee compensation Fee based compensation as a % of assets
    • 41. Investor vs. Trader (doesn’t work with a Plan) Fundamental (Buy and Hold) o Look at everything from financial statements, industry statistics to broader economic environment to gain insight on company’s future performance Technical (Active) o Study historical stock price and market behaviour. Look for recurring patterns in charts to time purchases and sales of securities Quantitative o Screens and factors based on metrics and ratios drive investment selections. Agnostic to company specifics often Top Down vs. Bottom Up o Focus on macro environment or company specific
    • 42. Current Asset Mix (tactical) Underweight Bonds Overweight Equities (Stocks) Market Weight (Canadian Equities) Overweight (Global Equities US in particular)
    • 43. Market Outlook Bond Bull Ends Dividend growth over income China – Looking to Regain its Swagger Europe – Back from the Brink US Energy Independence LNG – Closer to reality US Recovery Gains Traction Canada Faces Headwinds Canadian Housing Feels the Chill Valuations Expand
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