fbpx
All Posts By

webmaster

Effectively Time The Stock Market | Timing The Market

By | Blog | No Comments

Market Timing Systems & Market Trend Signals

I’m often asked questions like: “Should I be timing the stock market? Should I buy on the lows and sell on the highs? Are there key market timing signals that I can study to be a successful investor?”

Obviously, there’s no direct, clear or concise answer, but with an investment philosophy such as ours, we believe that you’re likely better off to stay invested and not worry about any market trend signal.

Now, how are you supposed to time the stock market with some new money that is coming your way?

That being said, should you experience an inheritance or windfall, sell a piece of property or win the lottery, there are several strategies to consider when investing those funds. With these considerations it is important to remain defensive, protect capital and reduce market timing risk as much as possible.

Now, how can you do that?

One of the strategies we’ve used in these situations is legging in, which is when you buy over a pre-fixed period of time.

Full Blog article on Why You Should Know Your Investment Time Horizon:

https://robtetrault.com/why-you-should-know-your-investment-time-horizon-whats-your-investment-horizon/

Generally, if you’re a high networth individual and you have a significant amount of cash, you’ll want to leg in your cash in the market over a longer time horizon.

If you were lined up to receive a $10 billion inheritance, then you would most likely want to take a lot of time to leg that in.

However, if you inherit a few hundred thousand dollars, then you might invest over a shorter period of time.

Let’s look at an example:

A couple is about to receive a $2 million inheritance and they’ve got maybe 300-400K in RRSPs.

This inheritance would represent a solid 5x more assets than they currently have. Our goal is to protect the capital and limit any market timing risk. Utilizing a legging in strategy will allow us to allocate their $2 million inheritance over a period of 6 months to 2 years.

This will help mitigate risk and avoid putting their cash/assets in the market in a very short time window. Avoiding downside risk in the event of a correction or in a draw down is key to protecting your capital without missing the possibility of an upside in the market.

Why does this matter?

Let’s say the market drops 5% or 10%.

This represents a buying opportunity and we would be legging in.

If the market drops 5%, we leg in a portion of the assets and if the market drops 10%, then we leg in a further piece.

If there’s a period with a crash or a bear market and the market drops 20%, 25% or 30%, you would’ve been buying all the way down so it’s not necessarily market timing.

Our legging in strategy helps to mitigate any market timing risk.

Full Blog article on How To Prepare A Sound Retirement & Estate Planning Strategy:

https://robtetrault.com/why-you-should-know-your-investment-time-horizon-whats-your-investment-horizon/

If you’re simply investing your annual RRSP proceeds or your TFSA proceeds and you want to put that money to work, we would suggest not worrying about stock market timing as it’s impossible to predict if the market is going to be up a year from today or tomorrow.

Trend Trading

Trend trading is a strategy that attempts to time a security’s momentum in a particular direction by identifying market trends.

Here are some common indicators used to determine a market’s trend pattern:

Traders will analyze technical indicators, look at multiples to see whether stocks are trading at a historically higher price than they normally would be and they focus on market cycles for insight on market trend signals. There are a lot of moving parts here and it’s a not a strategy for everyone.

I’m sure your parents probably told you to do this, but in case you don’t know, it’s possible to reduce market timing risk by buying once a month for 12 months.

It’s a common strategy that I feel many people have heard of and know about, and yet we often don’t see it being leveraged.

An example of how this may work: If you know you’re going to be making 50K in annual contributions and annual savings, then you could try to spread that out.

Once again, take a look at legging in a portion of the 50k. If there is no dramatic market correction, you will be fully invested at the end of the 12 months and have benefited from buying on some dips in the market.

Full Blog article on How Much Money Do I Need To Retire Comfortably:

https://robtetrault.com/how-much-money-do-i-need-to-retire-comfortably/

Free Consultation

Tetrault Wealth Advisory Group is a 2019 Wealth Professional Awards Finalist for the Digital Innovator Of The Year

By | Media and events | No Comments

Wealth Professional announced today that it has selected Tetrault Wealth Advisory Group as a Finalist for Digital Innovator Of The Year in the 5th annual Wealth Professional Awards, the premier and prestigious awards event for the wealth management industry in Canada and top representation of outstanding service, performance, innovation and principle in the business.

When judging this category, the following criteria will be considered:

  • Overall use of digital platforms and wealth technology solutions in the last 12-18 months, demonstrating positive outcomes
  • Clear narrative demonstrating the needs identification process for implementation of the technology
  • Alignment of the use of the technology with the organization’s broader goals
  • Innovation in the types of technology used
  • Efficiencies and cost-savings gained from use of technology
  • Evidence of return on investment and impact on staff engagement and performance

Winners in all 25 categories will be selected by a panel of industry experts and announced on May 30, 2019 during a stellar black-tie awards gala at The Liberty Grand Toronto hosted by ET Canada’s Cheryl Hickey.

“The finalists demonstrate the resilience and sheer management smarts it takes to build a thriving business in the wealth sector today. Success stories like theirs are the lifeblood of financial advisory and services in Canada,” said Jessica Duce, project director of the Wealth Professional Awards. “We are privileged to welcome them at the gala in May for a night of recognition and celebration.” 

The annual gala welcomes over 600 top wealth professionals and organizations. Those who wish to attend the event are urged to reserve seats as soon as possible.

 

About Wealth Professional Canada:

Wealth Professional Canada (WPC) is the leading business magazine for the wealth management and financial advisory sector for in-depth industry issues, market trends, business analysis and intelligence. WPC is complemented by daily news website www.wealthprofessional.ca featuring breaking news, an industry forum and exclusive multimedia content, as well as sister publication Life Health Professional (LHP). WPC and LHP are published by independent media company Key Media International.

Why You Should Know Your Investment Time Horizon | What’s Your Investment Horizon?

By | Blog | No Comments

What is your Investment Horizon?

Let’s talk about your time horizon investment risk profile.

In meeting with individuals to discuss their investment planning horizon, I’ve noticed that there is a common misunderstanding of the concept.

As an investment horizon is a frequent section on investment questionnaires and forms, I want to break it down for you guys.

Anytime you open an investment account or a bank account, you’ll be asked the question:

Do you have a short-term or long-term investment horizon?

While your answer could be 4 years, 5 years, 10 years or more, the actual concept of investment time horizon is very important for the purposes of drawing out your assets and determining what your exposure to equities should and could be.

Therefore, the first step to determine your risk tolerance is assessing your ability to stomach movement in the market. Are you losing sleep at night? Are you stressing over a market correction?

Full Blog article on How Much Money Do I Need To Retire Comfortably?

https://robtetrault.com/how-much-money-do-i-need-to-retire-comfortably/

Another important factor is deciding whether you need your money in 6 months, 1 year, 2 years, 10 years or only at retirement. This, will have a significant impact on your investment strategy.

Let’s look at the following example.

A young couple just got married, they’ve put aside their first $50,000 and are saving for the future. The couple own their home, have a little bit of liquidity either through a credit line or a tax-free savings account and the rest of their assets are in their RRSP.

The couple are 25-30 years old and thus, have a very long investment horizon and are likely not going to touch that RRSP money till they’re 65 or 70.

The couple will likely go through many economic cycles: the highs and the lows.

If they do and if they are able to stomach the volatility through their mental fortitude or their intestinal fortitude, the time horizon question becomes less relevant for them because of their long-term investment horizon.

Contrary to that, there’s another young couple who puts their first 50K aside as a down payment for a house.

Now, if this young couple is set on the idea of buying their house shortly, then that couple should not be invested in equities and stocks.

Why?

Because who knows what will happen in the stock market in the short term. If we see a 20% correction in the market, that couple might no longer be able to use that 50K for a down payment. Consequently, the time horizon question becomes more relevant for them, as they most probably will use that money in the short term.

Accordingly, individuals either have a short, a medium or a long term investment horizon.

RESPs (Registered Education Savings Plan) and how it applies with the topic of investment time horizon

Let’s pretend you have a couple kids at home. They’re 3, 4, 5 and/or 6 years old. When it comes to their RESPs, think of your investment horizon for this specific investment account (RESP) as these kids grow and before they turn 18.

If you have a 5 year old, he/she will start using his RESP at 18 years old so that gives you a 13 year investment horizon. Therefore, you could own equities in that portfolio and over time, you could consider reducing the equity ratio in the portfolio as those cycles can generally be anywhere from 3 to 7 years.

The closer you get to the lower end of those years, the more you want to move towards some fixed income and some more defensive strategies.

The key factor you need to know with your investment time horizon is obviously your retirement date.

I often hear this misconception: ‘’When I retire at 65, all my assets need to be in cash.’’

I don’t believe this is right, I believe it’s a misnomer.

Full Blog article on How To Prepare A Sound Retirement & Estate Planning Strategy:

https://robtetrault.com/how-to-prepare-a-sound-retirement-estate-planning-strategy/

What usually happens and what I’ve seen with my own eyes with my clients is entirely different.

One would retire, then start drawing a little bit on their income.

Perhaps you have a pension, you have some other dollars coming in and maybe you have some real estate income coming in.

Regardless, you have some income coming in and some income needs to be derived from equities, dividends, dividend paying preferred shares, etc. It may also make sense to include some fixed income in there as well.

Over time, you should reduce your allocation of longer-term investments as you near the end of your investment time horizon. The team and I would welcome the opportunity to discuss what is best for your specific situation.

Retirement Payout Calculator Link:

https://www.canaccordgenuity.com/wealth-management-canada/calculators/retirement-planner/

Free Consultation

Note Investing | What’s A PPN And Do Principal Protected Notes belong in your portfolio?

By | Blog | No Comments

What is a PPN?

A Principal Protected Note is a form of a structured note and it’s a bond type instrument that’s issued by the banks.

They’re very similar to bonds. They actually classify as bonds under the fixed income section in a lot of investment policy statements that we see.

What Are Alternatives To Bonds And GICs?

The old alternatives to fixed income are bonds and GICs.

Here’s a video on What Are Alternative Asset Classes:

https://www.youtube.com/watch?v=E7MdSu-q8_k

Note investing

Hypothetically, if you own a bond & you join a GIC, you’re sure to get a coupon for X many periods of years. There’s a guarantee, there’s an underlying guarantee on that coupon, which is the value of the bank that’s issuing these GICs.

In this case, when we look at PPNs, the guarantee is very similar. It’s a bank guaranteed instrument, but the payout is not, the payout is significantly different.

Instead of getting a five-year bond that pays 3%, a client will own a five-year bond or five-year PPN that will pay 100% of the performance of an underlying index.

These have become quite popular. They make a lot of sense for anyone who is risk averse and who wants to participate in the market. They also make a lot of sense for institutions. If you are heading up an institution, a conservative portfolio, you need to have nothing but fixed income and yet you want the returns that the equity markets can generate.

There’s an easy way to approach note investing, get the exposure to that through a bond-like instrument fully guaranteed and then you get to participate in the upside of the market. Usually they have anywhere from a three to eight-year maturity on these PPNs.

These principal protected notes, they would have done remarkably well in the last decade or so. Some of them matured at 10% plus annually. PPNs definitely have a place in some Canadian’s portfolios.

Principal Protected Notes

If you’re risk averse, if you want the growth and yet you want the liquidity that a bond-like instrument like a PPN can give you, then it’s certainly something to consider.

Here’s a video on Liquidity Management & Planning: What Is Your Liquidity Ratio?:

https://www.youtube.com/watch?v=OKK17Jzpa68&t=5s

I believe it’s a fantastic investment instrument. It makes a ton of sense for a lot of people.

It’s something fairly new and it likely makes sense for anyone who is defensive and anyone who wants more of the exposure with less of the market risk.

Free Consultation

Liquidity Management & Planning: What Is Your Liquidity Ratio?

By | Blog | No Comments

What is the importance of liquidity planning in my investment portfolio?

Let’s talk about how you calculate your liquidity ratio.

Liquidity management is a concept, a lot of people don’t understand. The definition of investment liquidity means the availability of converting or having an asset class that is convertible to cash or to cash like instruments that you can spend and use in your day to day life.

Think of an investor, an individual who’s got all his assets in one single investment. It’s a high rise in a remote city somewhere in Canada and it’s a really tough area to sell.

That would be a very illiquid asset.

The only way he can get his cash, is he needs to sell that entire asset to one specific buyer. The other end of that spectrum would be actual cash sitting in a bank account. That is a fully liquid portfolio. In between that, you have all sorts of different portfolios or net worth statements.

What are your liquidity needs?

Let’s chat about individuals who don’t have enough in liquid assets.

It could either be that all your assets are in an RRSP, a registered account or a locked in retirement account. Essentially, an account that you’re not able to pull the money out means the funds in that specific account are not liquid.

Let’s go through a scenario where all of your assets are in an RRSP, you have no tax-free savings account, you maybe have some registered education savings plan money and then all of your other net worth is in either homes, cottages, real estate and other illiquid assets.

You’d be a very illiquid investor and that could be a concern for you.

Full Blog article on the Top 3 Ways To Buy Real Estate Investment Property In Your Investment Portfolio:

https://robtetrault.com/top-three-ways-to-buy-real-estate-investment-property-in-your-investment-portfolio/

When we sit down to do our investment planning with clients and chat about investment liquidity, we want to make sure that you have some of your assets in an account that is liquid.

A tax-free savings account (TFSA) is an example of a liquid account.

Having a non-registered account holding assets that are liquid is another alternative to liquidity management.

The Importance Of Liquidity Management & Liquidity Ratio

What kind of assets are liquid and can be included in my investment portfolio?

Stocks are extremely liquid for the most part and with bonds, there’s historically been a little less liquidity.

Preferred shares and debentures are not as liquid as the former mentioned above.

You should definitely consider having a portion that is liquid. The most liquid stocks are the most highly traded stocks.

Think of your Canadian and US large cap companies. These are highly traded.

There’s a ton of volume every day on the market for these large cap companies. Essentially, that means they get traded a ton which leads to their respective stocks being highly liquid.

Sometimes you get to a situation where you have a stock, a preferred share, a debenture or a penny stock that has no bid and that has very little liquidity. You could not even sell your share if you wanted to. That’s the opposite of liquidity.

Generally, as a company gets more mature, as it appreciates over time and as it has a stronger balance sheet, it commonly graduates from one exchange to another.

If all goes well, eventually it gets on the TSX and then it starts to be trading volume. Once there’s trading volume, that means there’s liquidity and we’ll generally see what’s called a liquidity bump on the value of the stock.

We believe in building very custom and tailored investment portfolios with a balanced calculated liquidity ratio. We want to be assured the client has their liquidity needs looked after.

I think it’s extremely important and I believe people should have exceptional liquidity management not only in their accounts but also in their net worth, on their balance sheet and in their personal net worth statement.

At the end of the day, when you’re looking at that and you’ve got a bit of everything and if you’re not sure of your current liquidity ratio, obviously you want to consult your tax professional or your portfolio manager.

It’s a really important concept and if you get caught on the wrong side of liquidity, you can really get crushed and devastated through having to sell an asset at a depreciated value.

You want to be able to control when you sell your assets.

Full Blog article on How Much Do I Need To Retire Comfortably:

https://robtetrault.com/how-much-money-do-i-need-to-retire-comfortably/

Free Consultation

Can I take money out of a LIRA?

By | Blog | No Comments

Today we’re answering the age-old question, can I take money out of my LIRA or my LIF?

First off, what do these acronyms mean?

A LIRA is a Locked-in Retirement Account and a LIF is a Life Income Fund.

Think of a LIRA the same idea as a RRSP (Registered Retirement Savings Plan) but it has additional restrictions under the applicable pension legislation.

Full Blog article on How Much Money Do I Need To Retire Comfortably: 

https://robtetrault.com/how-much-money-do-i-need-to-retire-comfortably/

These two types of accounts are generated after you retire from work or you left your employer, they will generally offer your pension in a lump sum of dollars.

You would then transfer that money out and it will become a LIRA and remain tax sheltered.

Hypothetically, let’s say you’re a 35-year-old and you just left employment after 10 years, and you had accumulated pension of $50,000.

As those are pension dollars, they would need to be transferred to a LIRA and remain untouched until retirement. Eventually you will get to a point where you want to unlock those funds and access them for retirement income, thus leading your LIRA to get converted to a LIF.

Now once you have your funds in a Life Income Fund, it functions similar to a RRIF (Registered Retirement Income Fund) that has a minimal annual payment.

However this type of account also has a maximum amount that can be withdrawn annually.

After all, the government wants your pension money to last for your lifetime.

Essentially the income stream provides you with “Pension Withdrawals” to supplement your lifestyle needs. Every pension legislation is slightly different in what they allow or don’t allow in accessing the funds, so this varies by province and if the pension is a federal LIRA.

Metal Deposit Boxes RetirementNow there are a few exceptions for when you can take money out.

One such exception which applies on some pensions is the “Financial Hardship Unlocking” privilege.

If you’re able to prove to the government that you’re undergoing a rather tough patch in your life, you will be able to unlock your LIF for that reason (subject to specific qualifications).

Another exception to the rules is the “Small Balance Unlocking”.

Hypothetically again, let’s say there’s a small amount in your LIRA or LIF and If it meets the specified calculation, then you can move it out of there (LIRA Unlocking) and into an RRSP account.

One of the last exceptions is as a non-resident, you’re no longer living in Canada and you’ve been away for more than two years.

You can then apply for “Unlocking a LIRA in Canada”, to get that money unlocked or move to an equivalent account out of country and you can generally get it unlocked that way.

One fantastic exception is a one-time only exception, “50% Unlocking”, where you can transfer up to half of your locked-in dollars to what’s called the Prescribed RRIF (P-RRIF).

This P-RRIF allows you to access the unlocked 50% of your pension, with no maximum restrictions on withdrawals.

The other half would remain in a LIF, under the normal restrictions.

You of course could start drawing it down and access as much as you want. It gives you a ton of additional flexibility in your retirement income. Now just be aware that the more you take out, the more income that is taxable.

At the Tetrault Wealth Advisory Group, we have a dedicated Wealth & Estate Planning Specialist, who works with you to determine the best way to draw down your retirement funds and control the amount of taxes you pay.

Full Blog article on How To Prepare A Sound Retirement & Estate Planning Strategy:

https://robtetrault.com/how-to-prepare-a-sound-retirement-estate-planning-strategy/

We will work with you to navigate the world of LIRAs, LIFS and the various potential pension legislations they may fall under, and ensure we recommend the best strategies for your needs!

Retirement Payout Calculator Link:

https://www.canaccordgenuity.com/wealth-management-canada/calculators/retirement-planner/

Free Consultation

How Much Money Do I Need To Retire Comfortably?

By | Blog | No Comments

It’s a question that we get asked daily.

I remember growing up, people used to say, you need $1,000,000. Reach this amount and you have enough to retire.

Well, the reality is things have changed; and as you may know, there’s a lot of different types of pensions that exist.

⭐ Full Blog article on What’s an IPP (Individual Pension Plan):

https://robtetrault.com/whats-an-ipp-individual-pension-plan-and-who-is-it-for/

Some retirees require additional money for extensive travelling, snow birding to the USA/Mexico or just to spend funds on kids or grandchildren.

Another important factor is that people are living a lot longer than in the past.

With such a variety of factors that impact a person’s need, we strongly believe at the Tetrault Wealth Advisory Group, there is no “one size fits all” approach.

Let’s analyze a simple retirement math strategy for you folks with some basic assumptions.

Let’s start with the individual who has no pension, who’s been living their life as an adult and earning a $100,000 per year.

This said person is living on $100,000 per year and now decides to retire.

One very general concept we can use is the assumption that this person will require 70% of their pre-retirement income. Now they need to get about $70,000 per year in retirement.

If we use  what I refer to as the “Back of the napkin math” and take an assumed 5% annual withdrawal rate, this would mean they require $1.4 million accumulated by the time they’re 65 in order to retire.

Of course, your portfolio will hopefully generate additional dividends, income and growth as well.

If you have a good portfolio manager you can draw down at that rate.

If you are fortunate enough to have a “defined benefit pension”, you will likely have a large portion of your cash flow needing looked after, however there may be additional funds still required.

Let’s do some quick math. (*Financial Calculators)

For someone who’s getting $40,000 a year in future pension income, you’re simply contrasting the number you need at retirement with the pension and you’re funding the difference, with your registered or your non-registered assets.

In this case, an additional savings of $600,000 to fund the $30,000 difference at the same 5% withdrawal rate.

One of the major keys to a successful retirement is “Retirement Financial Planning”, and the earlier you can start the better.

Those scenarios are certainly a way to simplify something that is not always simple. Everyone has different needs, different lifestyles and different goals.

You may ask, “How much money do you need to retire at age 55?”

or

Perhaps you want to fund additional expenses, leave a legacy, or even charitable giving.

Retired Couple Holding Hands - Retirement Planning

We want to ensure all your unique goals and objectives get built into your financial plan, because there is no cookie cutter answer to how much you need.

If you do have legacy needs, want to leave a specified amount to your beneficiaries or charity, where will this money come from and will you have the additional capital needed to accomplish this?

Let’s look at another scenario we come across often.

You have a husband, wife, who have been living their entire life on two significant salaries. This hypothesis assumes they are each making $250,000 for a $500,000 pretax income.

Occasionally, we get this high-income earning couple saying, “Oh we can live off $50,000 in retirement…”, but previously they were living on a $500,000/year lifestyle.

That is a drastic change!

We take a long, hard look at their budget and though this step is far from exciting, it’s important to know the income would be enough for their expenses.

Other factors can arise:

  • Is the mortgage paid off?
  • Do they own multiple properties?
  • Are there any other major expense changes in retirement?

It’s crucial to look at your true cashflow needs because what is retirement actually?

It’s where you are drawing a cashflow from your pot of assets to replace your salary/income you previously had while working.

Now you’re going to be drawing down an income from the pot of assets that you’ve accumulated that needs to be done in the most tax efficient way possible. This needs to be done in a way where you want to enjoy and spend money, but also gives you the peace of mind that you will not outlive your financial resources.

At the end of the day, retirement planning is truly a cashflow projection.

⭐ Full Blog article on How To Prepare A Sound Retirement & Estate Planning Strategy:

https://robtetrault.com/how-to-prepare-a-sound-retirement-estate-planning-strategy/

Retired Couple Walking On Beach

If you’re not sure where to start, you can start using a 5% number based on the cash you’ll need at retirement and multiply this figure by 20.

Example:

If you need $100,000 to live at retirement, you can multiply that by 20 = $2,000,000.  That’s using a 5% rate, no taxes factored in.

Of course, this is not an all-inclusive example.

At the Tetrault Wealth Advisory Group, we have a dedicated Wealth & Estate Planning Specialist, who will work with you to address all these concerns and work with you to plan for your retirement income that meets your unique goals in the most tax efficient manner.

Retirement Payout Calculator Link:

https://www.canaccordgenuity.com/wealth-management-canada/calculators/retirement-planner/

Free Consultation

Transcript: Valeant BNN prediction video

By | Transcripts | No Comments

Transcript

Rob: I’ve stayed away from Valeant for a while. A lot of volatility lately, a lot of ups a lot of downs and this whole Walgreens Deal, honestly, the market doesn’t like the fact that Mr Pearson’s out.

Speaker 2: How risky is this company financially?

Rob: It’s too risky for me. There are too any unknowns and I want answers before myself and my clients are going to get into the stock.