If you find that the world of personal finance, investing and money in general is confusing then you are far from alone. In fact, according to a poll that was conducted by Scotiabank earlier this year, over 81% of Canadians feel that the financial world is more confusing and complex than it did just five years ago. In the last few years, I suspect that a lot of this confusion has been brought on by new products and speculative investments including NFTs and Cryptocurrencies, amongst other things. But with that being said, in my opinion this isn’t a new trend but rather a continuation of what has been going on for decades and that I think presents the biggest challenge that advisors face today. One of the biggest factors in whether or not a client will be successful in achieving their goals is having a well conceived financial plan that not only considers what needs to be done from a financial perspective (saving, investing etc.) but also how that works within your personality and behavioral pattern. Quite frankly, I can design the best financial plan in the world for you but if it doesn’t fit in line with the type of person you are, or if I haven’t done a good job of illustrating the meaningful impact it can have on your life then it doesn’t matter. As venture capitalist John Doerr says “Ideas are easy. Execution is everything.”
The question is, how do we do that? How do we connect the complex and nebulus world that is your money to the meaningful impacts it can have in your life? For me, the most meaningful word in that question is connect. We need to connect individual parts of your portfolio of investments directly to the goals you have for your life.
One of the ways we do that is through our GPS model for portfolio construction. To break this down, G stands for growth, P stands for Pay cheque and S is for safety. Each of these buckets corresponds to a portion of your portfolio that is directly tied to a goal that you have. Some of those goals are likely more long term related (10+ years), others more mid-term (3-10 years) and of course there are always short term goals as well(0-3 years). The types of investments that are suitable in each of the three buckets will depend on a number of factors which include what your actual goal is, what rate of return you need to be successful in that goal and of course where is your comfort level for volatility. But the main point of all of this is to connect a specific strategy(monthly savings/withdrawals, investment type etc.) to a specific goal which is the impact point in your life. If we are successful at connecting the purpose behind the strategy of your investment then you will be much more likely to remain committed to your plan which of course means that you are much more likely to be successful in achieving your goals.
The benefits go further beyond that as well as many people are experiencing this year as we are experiencing more challenging times in stock and bond markets. It’s fairly commonly known the tone of the biggest contributors to stress in a person’s life is their personal finances. But that stress often comes from the fear that is created by the unknown. The fear of not knowing whether you are on track to achieve your goals, or whether or not you are doing what you need to do to be successful. Once again, it comes back to creating a meaningful connection between your goals and the purpose behind your money and the strategy being used to achieve your goals. Utilizing a strategy like our GPS model described above can serve to remind you that despite the challenges that everyone has had in the investment markets, the money that you are relying on for the next 3 years is allocated in your “pay cheque” bucket and is safe. For that goal you have 5 or so years from now, it may be slightly down in value, but you have 5 years for that to recover and it is likely to do so. Likewise for your long term needs, you have that much more time.
I do not believe that the world of personal finance and investment is going to become any less complex in the near future. But that doesn’t mean that you need to feel lost and paralyzed by it. Drawing a direct connection behind the purpose and strategy behind your money and the impactful results it will have in your life is a good starting point. In time and with new technology including AR and VR, I believe we will be able to make that connection even more impactful in the future.
- Grant White, CIM®,CFP®
Grant White is a Portfolio Manager/Investment Advisor at Endeavour Wealth Management with iA Private Wealth Inc, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families. This information has been prepared by Grant White who is a Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth.
The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces in which they are registered.
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