Wealth Accumulation & Preservation
Financial planning can be used through various stages of your life. It helps you to understand the dynamic nature of your financial risks, presented and developed in a plan that evolves over time to meet your changing needs. Two distinct phases of a financial plan are wealth accumulation and wealth preservation.
The accumulation phase involves making decisions that lead to a consistent saving and investing plan. During this phase, purchasing power preservation is critical as inflation has the effect of eroding wealth. The accumulation phase generally exhibits a rocky ride, given the high exposure to riskier investments, but such exposure provides the best opportunity for earning risk premiums. Throughout this phase, volatility is your friend if you practice dollar-cost-averaging into your accounts. This means adding consistent dollars to your accounts on a regular basis so that you purchase more investments at different prices as they fluctuate in line with trends on the capital markets. In practical terms, this means that if you pay the same amount all the time, you will buy fewer units at high prices and more at lower prices.
During the wealth accumulation phase, maximizing contributions in registered investment accounts mitigates tax exposure in various ways. This would include Tax-Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSPs), and Registered Educational Savings Plans (RESPs). Income splitting through spousal RRSPs is another method to reduce taxable income of the higher earning spouse by transferring that income to the lower income earning spouse.
Wealth preservation strategies aim to maintain wealth with a specific focus on planning for retirement. Individuals should focus on eliminating any outstanding debts and transition growth assets to less risky ones. An important consideration is to ensure your investment strategy does not become too conservative to reach retirement goals. Critical health insurance could be incorporated into your financial plan to offset any health care cost.
This means that financial planning is a flexible and powerful tool to help you make informed decisions. It is worth noting that your financial planning results will only be as good as the information you provide. Once your financial plan is in place, your Investment Counsellor works with you to monitor and update it to reflect any life changes such as: starting a family, switching careers, sale of property, and receiving inheritance.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Real Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.