Does Your Portfolio Have a Healthy Heart?
Canadians are taking increasing control of their financial futures, especially when it comes to retirement planning. Gone are the days when employees could rely entirely on corporations or government to provide for their retirement income. And with today’s longer life expectancies, it becomes even more critical to plan for the future, simply because there’s going to be so much of it!
In the 1920’s, when Canada established a retirement age of 65, life expectancy was only 61. Not many people were expected to survive and collect pensions. Now however, life expectancy is 78, which means the average Canadian will depend on benefits and investment income for over 10 years.*
These new realities point to the importance of having a healthy heart at the centre of your portfolio – something that will grow with you, providing for the long years ahead. Many investors are now favouring a well-managed mutual fund—one that focuses on Canadian equities.
That’s because equities (or stocks) have consistently outperformed the other two asset classes – bonds and money market investments – over the last 50 years. And, by choosing a wellmanaged fund, whether all-equity or part-equity—as in an asset allocation fund, investors can spread their risk over a number of securities that are continually monitored by a professional mutual fund investment manager.
In the past, many investors were content to hold “low-risk” investments such as GICs and Canada Savings Bonds. The returns, however, were not always enough to keep pace with inflation and pay the taxes. As a result, investors weren’t gaining very much at all, which meant the heart of their portfolio wasn’t as healthy as it could be.
Today, investors are looking to, both equity and asset allocation mutual funds, to put them in a more favourable position. These funds have the potential to outpace inflation and still have enough left over to achieve long-term goals.
There are a number of different Canadian equity mutual funds from which to choose: large, mid, and small capital funds, disciplined funds that mirror stock market indices (such as the TSE 300 Index) to name a few. Regardless of which type you favour, the most telling indicator of a fund’s ultimate success is its ‘marriage.’ A good fund will have a strong mutual fund company paired up with a top mutual fund manager.
This combination is critical because a large fund company as the ability to conduct and gather research from around the globe, putting valuable information into the hands of its managers. And that’s when solid investment returns can be made over the long term.
That’s because a talented manager digs deep, analyzing the data for clues that other managers may miss. Then, they go well beyond the data to make informed decisions for the investors who hold units in the fund. In the end, as we begin to take increasing charge of our own destinies, it behooves us to consider the benefits of a well-managed Canadian equity mutual fund. That’s because, along with a solid asset allocation fund, it can provide a key component to the healthy heart we’ll all need in our investment portfolios to carry us into the long and rewarding years ahead.
If you’d like more information on this, or any other investment strategy, please feel free to call me.
This article was prepared by Fidelity Investments for Ryan Webster, who is an Investment Executive with ScotiaMcleod
*Source: Boom Bust & Echo, David K. Foot, Macfarlane Walter & Ross, Toronto, 1996.
Read a fund’s prospectus and consult your investment professional before investing. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated. Investors will pay management fees and expenses, may pay commissions or trailing commissions, and may experience a gain or loss.