Wealth Management
Wealth management is the practice of putting your savings to work so that it continues to grow over your lifetime and will also benefit your heirs. Wealth management encompasses many different areas of investing like long term investment planning and retirement planning.
If you’re new to investing, a good place to start managing your wealth is to consult your tax preparer or accountant. They may be able to provide you with financial planning services. They may also be able to refer you to somebody who can.
There are three types of professional wealth management services you can use.
1.    A full service stock broker – A good stock broker is one who understands investing and who has the integrity to settle conflicts of interest in the client’s favour. Good stock brokers can provide an effective and economical way to manage your investments. But if you are going to use a full-service broker, take the time to find a broker you can trust.
2.    A discount stock broker – A discount stock broker will simply carry out buy and sell orders for their clients, and charge lower commission rates than full-service brokers. You pay even lower commissions if you trade stocks online, instead of placing orders over the phone.
3.    Portfolio managers – A portfolio manager is someone who fully manages your wealth portfolio and has a fiduciary responsibility to make sound investment decisions on your behalf. Portfolio managers are more stringently regulated than full-service or discount brokers.
retirement savings ideas

Don’t use these retirement savings ideas if you want to retire comfortably

To succeed as an investor, you need to get used to the idea that short-term declines come along unpredictably. These declines are common enough that some investors think about them way too much. Far better to focus on investment quality, along with portfolio balance and diversification. It’s much easier to buy and stick with high-quality investments, than to try to predict the next change in stock-price trends.

Today we’re sharing retirement savings ideas you should avoid if you want to maximize your retirement income.


Relief from High Fees and Low Returns

Clients come to Successful Investor Wealth Management for many reasons, but for this one first of all. The portfolios we have managed for our clients over the past 15 years have returned an uncommonly high average of 9.01% net per annum, compounded—after fees are deducted. And we have a simple fee structure, with no hidden costs.

To find out more about Successful Investor Wealth Management, click here >>


Retirement savings ideas to avoid: Buying too many “stocks that everybody likes.”

Some stocks stay popular for years, if not decades. They can be very profitable during those periods. But if you buy too many, you’ll wind up getting aboard some just as they reach their peak. When these stocks fall out of favour, the drop in your returns can be breathtaking. It can also take years for such stocks to recover.

Retirement savings ideas to avoid: Bonds

Unfortunately, using bonds for retirement may not be the best strategy. Bond prices and interest rates are inversely linked. When interest rates go up, bond prices go down, when interest rates go down, bond prices go up.

Even so, brokers continue to sell bonds to their clients. They know that bonds do tend to reduce the volatility of your portfolio, since they tend to rise when stock prices fall. Of course, bonds also generate more commission fees and income for the broker, compared to stocks, especially if you buy them via bond funds and other investment products.

That’s why we continue to recommend that you invest only a small part of your portfolio—if any—in bonds and fixed-income investments. Instead, you should aim for a diversified portfolio of well-established companies with long histories of dividends, or ETFs that hold these stocks. We recommend a number of stocks and ETFs appropriate for retirement investing in our Canadian Wealth Advisor newsletter.

We recommend this retirement investing strategy because equities are bound to be more profitable than bonds for retirement over long periods. That’s because equity returns are related to business profits, while returns on fixed-return investments are related to business interest costs.

Retirement savings ideas to avoid: RRSP meltdown strategies

The idea of withdrawing funds from an RRSP tax free has obvious appeal. However, we’ve looked at a number of different RRSP meltdown strategies over the years and, for the most part, we have found that they serve the interests of the brokerage industry more than those of investors. Here’s why:

Say you make a $5,000 withdrawal from your RRSP and want to offset your tax payable using the interest from an investment loan. Supposing a 5% annual interest rate on the investment loan, you would have to borrow $100,000 to invest in dividend-paying stocks to generate a large enough interest deduction to offset the withdrawal.

The fees and commissions that the investor generates when he or she invests the money are an obvious benefit to the investor’s broker. The investor, meanwhile, significantly increases his or her leverage. Moreover, many investors attempt the RRSP meltdown when they’re at or near retirement. In other words, at the worst time to take on additional debt.

Retirement savings ideas to avoid: Overindulging in speculative stock market investments

Even the best speculative companies go through wider price fluctuations and expose you to greater risk than well-established stocks. If you hold too many speculative stocks, you run a far greater risk of loss during a market downturn.

Retirement savings ideas to avoid: Disregarding subtle signs of high risk

These include an unusually high dividend yield or an unusually low p/e (the ratio of a stock’s price to its per-share earnings). High yields and low p/e’s are good, but only within limits.

If a stock’s yield is extraordinarily high, it usually means there is some risk that the company will have to cut or even eliminate its dividend. If the p/e is extraordinarily low, it usually means there is some risk that the company’s earnings are about to fall. Or worse, that the company is using “creative” or deceptive accounting to seem more profitable than it is.

Instead of seeking out the highest yields and lowest p/e’s, look at a wide variety of measures, rather than just one or two financial ratios.

What retirement savings ideas, for better or worse, have been the most impactful for you during your investing career? Please share your story with us in the comments.

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