I Can’t Believe I’m About to Say This
Happy Halloween, !
In times like this its important to review your financial plan. Your plan should do a great job of outlining what you need to reach your goals. A great financial plan will look at your cash flow, assets, liabilities, tax situation, and all your goals for the future.
Leading up to the pandemic we had a great stretch of almost uniform market behaviour. It was pretty easy to make a profit; just don’t over think it and purchase an ETF or mutual fund that covers a broad category and (almost) forget about it.
In today’s market, we’re seeing a shift back to a more discerning approach. Markets are changing almost daily and we’ve seen a drop in the S&P 500 by -9.41% over the last three months. It’s more important right now than it has been in a very long time to make sure that your portfolio is being actively managed and has the flexibility to protect you during times like this.
Many times you will hear advisors say “stay the course” or other catch phrases like this. It is true that down markets are temporary and that missing the rebound can be detrimental to your portfolio. It is also true that having your portfolio get beat up in 2022 and more troubled times ahead can also be detrimental to your portfolio.
In past downturns there weren’t a lot of options that would keep you earning money, while also protect you on the downside. Of course our private portfolios have done exceptionally well in times like this, but right now we’re seeing other options as well.
I never thought I’d say this, but what about GICs?
Ok, hear me out. The Bank of Canada held rates this week and although its possible to see more increases, we’re likely at or near the peak. In many of my non-private portfolios, we have been removing the traditional fixed income (like what I discussed last week) and we’ve been adding something like the Purpose HISA (currently at 5.29%) in its place. I also currently have access to several non-bank GICs, which are paying out 5.75% for one year and 5.20% for 5 years. To lock in at this might be a great option depending on your exact circumstances.
When think about your actual financial goals, you should know what rate of return you need to reach this goal. If your plan is based on a moderate risk level, you should be aiming for about a 5% return. We often try and chase returns, but if your plan is done correctly, and you’ve been honest with what you want/need to have a great retirement (or reach any other goals), then maybe it’s a good opportunity to get some “moderate” returns with minimal risk (there are some liquidity risk with GICs).
GICs are definitely not for everyone and really haven’t been a good solution for quite some time. If you have your fixed income positions in traditional funds and bonds, we should probably have a conversation to see if there are better options (there likely are).
I hope that you have a wonderful Halloween with lots of little goblins at your door!
Have a great weekend,
Trevor
PS Check out the new Wealth Building video (here) or on our Facebook page!
PSS We currently have room for a couple new clients this quarter and have found that forwarding this newsletter has been a great introduction to our team.
