Diversify, Diversify, Diversify!

Diversification is one of those “hot button” words that we hear so much about in times like these, but it may just happen to be one idea that is worth understanding.

The word diversification is defined by www.investopedia.com as “A risk management technique that mixes a wide variety of investments within a portfolio.” They go on to say “Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others.” Some big words for sure, but the most common phrase used for this term is “don’t put all your eggs in one basket”. John Paul Getty once said that he’d “rather have 100 employees earning him just one dollar then one man earning him one hundred dollars”. I’m guessing he understood the theory of diversification very well, even beyond his personal investment portfolio.

Your Take-Away: There is absolutely no question that we have all seen the incredible volatility that has been taking place in the world economy over the past 12 months, and the last couple of weeks has been no different. It is hard to watch your portfolio go up and down like a yo yo at times, but that is just part of the game if you hold any money in the market at all. The reason you made the choice to invest the money you did then should be no different then it is now, despite what you’ve experienced over the last few months.

Take advantage of this market and really review whether your portfolio is well diversified. Things to look at would include an appropriate balance between income and equity funds, regions like the US, Canada and world, and even asset classes such as resources and financials. Diversification is the one thing that could help to prevent you from huge swings in a market like this, so it’s definitely worth ensuring that your portfolio has taken advantage of this wonderful strategy.

Until next time, have a Terrific Thursday!

Chris

Being Thrifty is Cool Again, or Is It

Many of us think of our “thrifty friends” as cheap or self pleasing. Maybe they are the smart ones though.

I know that I used to have a very negative view of those people I would call thrifty, but I’m starting to think they knew something I didn’t. Of course it is possible to go to far to one extreme and make thriftiness a characteristic that hinders relationships, but I don’t think that is the case for everyone. If you look up the word “Thrift”, the Canadian Oxford dictionary defines it as “prudent financial management.” I can’t help but think that I would have no problem with my friends using that definition to characterize me.

An article was recently wrtten in the Financial Post and stated that many of us are “just two paycheques away from bankruptcy”. If that’s the case, what’s wrong with being thrifty if for many the alternative is bankruptcy in the case of an unexpected illness, injury or loss of job?

Your Take-Away: I know for myself that learning to be more thrify is something I will take very seriously. After all, I don’t believe that means never having any fun, staying locked up with the lights off to save energy, or even giving up on creating memories for the purpose of saving for the future. Instead, I take that as a challenge to simply save first, and spend second without using credit to do so. After all, almost every one of us could afford to put a small percentage of our income aside, if we really wanted too and if we created the right habit.

So, my suggestion is to seriously take a look at where you are, where you want to be, and how your spending habits match your goals. More often then not, you will probably find that your spending habits say something entirely different then your “assumed spendind habits”. Maybe now is the time for you to consider answering the question “What does thrift mean to me?”

Until next time, have a Magnificent Monday.

Chris & Elisseos 

Bank of Canada Leaves Rate Unchanged - Now What?

This is somewhat old news by now, but it could provide some interesting changes.

As you already know, the Bank of Canada (BoC) shocked many Canadians yesterday by leaving the overnight lending rate unchanged at 3%. This was especially surprising because most, if not all, Analysts were expecting a 0.25% rate cut with fairly strong confidence. To top it off, they also made it clear that there is currently no need for “further monetary stimulus” which says they don’t really feel it is necessary to continue the downward trend of cutting rates moving forward.

Your Take-Away: With the BoC focusing on curbing or slowing down inflation rather then stimulating the economy, there is a very good chance that we will start to see fixed mortgage rates begin to climb over the course of the next six months. If you currently have a mortgage in place, it would be a great time to revaluate your terms in regards to staying with or changing too a fixed or variable rate mortgage. On the other hand, if you are looking to buy your first home or structure a new mortgage, a simple pre-approval could save you literally thousands of dollars over the next five years.

With the recent volatility we have seen, now is a great time to talk to your Mortgage Advisor…it could save you some very real money!

Until next time, have a Wonderful Wednesday!

 Chris & Elisseos

SAFEBRIDGE Ladies Night Out a HUGE Success!

On Friday night, Elisseos and I had the chance to host our first Annual “SAFEBRIDGE Ladies Night Out”.

We had almost 40 of our clients and Referral Partners show up to enjoy a Cosmo at the Cineplex Theatre at Bay and Bloor before being whisked off to watch a private screening of “Sex and The City: The Movie”. From there, we invited our guests to join us for another Cosmo and some finger foods at the amazing Six Steps Restaurant near King and Church in Toronto. From what we heard, considering we did not stay to watch the movie so we could give the ladies the chance to just “be girls”, the movie was amazing and there were many tears and lots of laughter.

Your Take-Away: This is kind of an odd section for this post, but it definitely gives us a chance to explain why we would do something like this event. We believe wholeheartedly that the experience that our clients and Partners have with us personally is one of the key reasons they choose to work with our firm. We are confident in our skills and abilities, but we want to ensure that those who choose to work with us do so because they like too and because they know they are appreciated. Hence, our belief that “experience” is essential for the long term relationship we hope to have with each and ever person who crosses our paths.

So, thank you to each of the women who joined us on Friday night, and rest assured that we will be doing this again next year based on the fantastic feedback we’ve received. Hopefully Hollywood will follow up Sex and the City with a sequel, but I’m guessing that’s a bit of a long shot.

Until next time, have a Magnificent Monday!

Chris & Elisseos

The Truth about MER’s

I’m not going to write a post to simply try and justify the benefits of MER’s, however I do want to try and expose why they exist and why they can make sense.

The term “MER” stands for Management Expense Ratio and is the fee that many Fund Managers and Companies will take from the fund return of those who invest with them. After all, their objective is generally to make you more money then you could make on your own and for that, they deserve to be paid. This is no different then any of us collecting  a pay cheque for what we do day in and day out.

There is no question that MER’s are a cost to you as an Investor, but I do believe that they can be worth it depending on the fund and Manager of choice. For example, if you are diligent in searching the market for strong funds that have consistently outperformed their benchmark and which have almost removed the need to constantly watch your portfolio on a daily basis, wouldn’t you agree that it can make sense to pay someone else to do the work for you? The flip side however is that you may end up in a fund that rarely if ever out performs the benchmark in which case you would be far better off to simply put your money in Exchange Traded Funds.

Your Take-Away: If you choose to create and manage your own stock portfolio and are consistently making wise decisions that result in postive returns above and beyond the bench mark, then good on you. There is absolutely nothing wrong with managing your own money assuming you have the time and expertise to do so, and I would never suggest anything different. For the majority of people however, this is not the case which makes choosing a strong Manager and fund or series of funds of the utmost importance.

When you are looking at funds that you could purchase, consider the following as a starting point:

  1. What is the total MER compared to its peer group?
  2. Is there a performance fee in addition to the MER?
  3. Is the expense component fixed or variable from year to year?
  4. Who is the Fund Manager and what is his track record over a decade or more?

Although this is not an exhaustive list of questions to ask, it is definitely a great place to start. CI Investments was the first Mutual Fund Company in Canada to fix their MER and many are now following suit. That is definitely a positive for those of us who don’t want to have to worry about our MER going up every year.

Until next time, have a Terrific Thursday!

Chris