Investment Philosophy

Disciplined Investing

We strongly believe that discipline is a primary key to successful investing. Regular investing, like regular exercise, is key to your financial health. Planning to invest and having a plan about how to invest is just as crucial. As your life evolves so too will your investment needs and objectives. Your plan will need to be updated to reflect these changes, as will your investment portfolio. Your portfolio also needs to be continuously monitored to ensure that its composition is not pushed outside of the desired parameters and that its component investments remain the best ones to hold. One of the biggest challenges investors face in sticking to their investment plan is filtering out the noise from the meaningful news in the media. This is a task we embrace daily. We like to summarize our Disciplined Investing approach with the phrase “Plan. Portfolio. Prosperity.”.

Systematic Investment

One of the all-time great investors, Sir John Templeton, liked to say that the best time to invest is when you have the money. We wholeheartedly agree. We would add that the best way to make sure you have the money is to pay yourself first. With our pre-authorized investing system, you can automatically have a preset monthly amount transferred from your bank account to your investment account, TFSA, RESP or RRSP at National Bank Financial.

Optimism With Experience

Mankind has been around for a long time. It has always been particularly adept at two things: shooting itself in the foot and overcoming adversity. We have survived war, famine, pestilence and a near-continuum of political upheaval. Today we live longer, in better health with greater wealth and quality of life than at any time in history. So it seems that whatever can go wrong, will go wrong, but we will overcome it. This suggests that the road ahead will always be bumpy and that, for the most part, one should cope with the bumps as well as one can while staying on the road. If a cynic is an optimist with experience, then call us cynics.

Risk and Risk Management

We also believe that understanding and managing risk is critical to successful investing. After all, return of capital is even more important that return on capital. To manage risk one first needs to recognize what those risks are. There are five principal investment risks:

1. Permanently losing capital. This can largely be dealt with by doing one’s homework to be confident that a given investment is sustainable. An even more effective tool is diversification. We believe that by limiting individual corporate exposure to about 5% of a portfolio, potential permanent loss of capital is greatly reduced.

2. Market volatility. Prices go up, prices go down. This is true for all stocks, bonds, commodities, real estate and any other marketable investment. Time smooths out the bumps. Aside from only investing in things that do not change in price, market volatility is unavoidable. The best way to de-risk exposure to market volatility is to have an investment time horizon for investments exposed to market volatility that is long enough to let time smooth out the bumps.

3. Income taxes. Taxes erode your rate of return. They are unavoidable but they can be reduced and they can be deferred. By taking advantage of various features of the Income Tax Act such as RRSPs, TFSAs, and the favourable tax treatment of dividends and capital gains, among other things, the erosive effects of taxation can be reduced. A secondary risk in this category is tax policy risk. Governments come and go and governments change tax laws. One needs to be prepared to adapt to those changes and not be too reliant on any one feature of tax law so as to minimize the potential to suffer from adverse income tax changes.

4. Inflation. It is insidious. It eats away at the purchasing power of your savings and investments. At 3% inflation the cost of living about doubles in 24 years. This means that over the course of your retirement, your cost of living will likely double.

5. Distraction. In a busy world it is easy to forget to pay regular attention to one’s investments. In our media saturated universe it is just as easy to get caught up with “flavour of the day” investment themes and end up deviating from the path your investments need to be on. The need for news media to sensationalize transitory events makes it far too easy to focus too much on the wrong risks. The world is awash in information but there is less knowledge and even less wisdom out there. Information is comprised of facts or opinions on any number of subjects. Knowledge represents the compilation and contextualization of facts. Wisdom is the productive application of knowledge.

One of the most important roles we perform as your wealth advisor is that of risk manager. Managing the risks of loss of capital, volatility and taxation are inherent and ingrained in our disciplined investing philosophy. We can’t control the rate of inflation, but we do remain cognisant of it at all times and always factor the need to overcome it into our thinking. Perhaps the most important risk management function we perform is dealing with distractions. You lead a busy life and may not have the time or inclination to pay attention to your investments every day. Even if you did, you might not have the expertise to pay the right attention at the right time. We work full time at managing investments. We put a lot of effort into being knowledgeable by sorting through the facts and opinions and filtering out the hype and the noise. We work very hard at being wise when it comes to managing your investments.

Business Philosophy

“Give people something worth paying for and treat them with common courtesy and you can have the lion’s share of any market you want . . . because you will be alone” - Tom Peters, co-author of In Search of Excellence

We are inspired by this thought and do our best to live up to it.

Do What’s Right for Our Clients

We believe that doing what is best for you is the right way to go. This can sometimes mean that we need to do things with little or no immediate reward for us. We accept that this is part and parcel of providing a comprehensive service package.

Grow Business via Referrals from Satisfied Clients

Our business has been built upon referrals from our satisfied clients. We want to keep growing our business. We continue to believe that the best way to do this is to do a good job for our clients.