How To Develop An Appropriate Investment Strategy

July 19, 2019

How To Develop An Appropriate Investment Strategy

It is critical for Canadians to take care of their financial health and make wise investments and financial decisions. While working with a financial advisor can provide numerous benefits, you should take an active interest in your investment-related affairs. It’s not about what you select but from where you select it.

How will you allocate your assets to achieve your short-term and long-term financial goals? When it comes to developing an investment strategy, the asset allocation process plays a key role whether you allocate $5,000 or $5 million. This is the most significant part of managing a portfolio. This process helps you decide where to invest a pool of resources and avoid making unwise decisions. This blog post will provide tips on how you can get the right mix:

Define your objectives and risk tolerance

Before you make any final decisions, make sure you determine your goals and risk tolerance which can be influenced by various factors: your social and economic situation, age, and investor personality. For instance, risk tolerance of a 55 year old with three dependents would be totally different from that of a single individual of the same age. Likewise, a person with a defined benefit pension plan would be able to take a different level of risk with their RRSP as compared to someone who only has RRSP as the only retirement savings vehicle.

When determining your risk tolerance, review your ability to replace losses. For example, if you have a high net worth, you might be able to deal with a loss of $50,000 with ease; however, if you’re a retiree with a fixed pension, managing such a loss would be a nightmare.

Take your total portfolio into account

Many Canadians make a mistake at the start by separating their non-registered investments from registered ones. Whether your investments are in RRSP or any other registered account, it should not influence an asset allocation decision. In other words, you need to consider your total investment portfolio so you determine the right proportion of asset types. After completing the asset allocation process, think from a tax perspective which investments to hold inside your RRSP.

Plan for long-term

Once you devise the asset allocation strategy, it’s time to let your investments grow long enough to complete a full market cycle. It’s a mistake to buy what’s trending and then sell as soon as the investment loses value. On the other hand, a long-term, considerate asset allocation strategy will produce higher returns.

If you’re looking for assistance or you’re not sure what type of investment vehicles would best suit your financial situation and your objectives, consult a financial advisor. If you’re in Edmonton, please contact Kewcorp Financial at 780-449-6292 or click here.

Did you know?

A non-registered account is a type of account that is not registered with the CRA.
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Jim Kew

Financial Planner
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Scott Kew

Financial Planner
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