Investment Management

1. “You” is where we start.

Much research has demonstrated that the actual returns achieved by a client are consistently less than that of the actual mutual fund, ETF or security they have invested in. This is primarily a function of an investor’s poor mistiming of entering and exiting markets. An investor’s greatest risk may be their own behaviour.

Therefore, we educate our clients to view volatility as potential opportunity, and not risk. The permanent loss of capital is true risk and what we seek to avoid. We also aim to achieve our clients goals and objectives with the least amount of volatility as possible. If we can arrive at our destination in a more comfortable fashion, why wouldn’t we? We identify and utilize investment managers and strategies that have proven records of delivering attractive risk-adjusted results. Your role as a client is to understand volatility is not a permanent loss of capital and that you will experience it over various periods, and our role is to make the path as smooth as possible.

2. The cash wedge.

For a variety of reasons our clients often have short term needs for cash, for example to purchase of a car, house, wedding, etc. Additionally, many of our clients are retired and, particularly in the early stages of a retirement, it is best to avoid drawing income from an asset that may be experiencing a period of downside volatility.

Therefore, we maintain a cash wedge in client portfolios. This varies and may be between 1-3 years of income. The cash wedge is composed of liquid securities with no or very limited volatility.

3. Focus on the fundamentals.

Investors are regularly bombarded with dubious claims of investment success, “tips” from their brother-in- law or a colleague, or firms claiming to have discovered a new and improved way to invest.

Therefore, we ignore the noise and focus on what is the only reliable and repeatable way to invest successfully over the long-term. At the most basic level, when we buy a security, we are simply paying for its future earnings or cash flow.

We focus on being owners of companies with:

  • Predictable free cash flow
  • Sustainable and growing earnings
  • Reasonable and responsible levels of debt
  • Leaders in their industry with an enduring competitive advantage
  • History of rewarding investors with dividends

Similarly, we hire fund managers who are aligned with this approach to security selection. Also, price is a critical component of investing. What an investor pays will either create a margin of safety and increased upside or if they overpay the potential for greater loss. Patient investors don’t overpay. Lastly, we won’t speculate on the latest marijuana or junior exploratory resource stock.

4. Focus on Tax Efficiency.

Our single biggest expense in life will be taxes. We all have to pay them, however we are not required to leave a tip!

Therefore, to the extent possible, we will work to limit both your current and future tax liabilities. We employ various strategies and solutions to do this. We will integrate our efforts with your other professional advisors (tax and legal advisors) for optimal results.

We will not allow the “tax tail to wag the investment dog”, but nonetheless there are many opportunities available to reduce your personal, corporate and estate taxes.

5. On-going review and monitoring.

Among many reasons, circumstances change, life events happen, investment managers retire, or sometimes need to be fired. Investing is a journey and not a destination.

Therefore, we don’t put our feet up and put the auto-pilot function on. Rather, we are engaged in regular monitoring, assessing, and reviewing our solutions to ensure they are delivering as expected.

6. Cost management.

We are always cognizant of the costs of investing, (including fees, MERs and taxes, the latter is often forgotten by many advisors). We are also mindful of, as Warren Buffet has said, “price is what you pay, value is what you get”. This is applicable to any purchase, but particularly when we invest in securities. To use another instructive quote, “the bitterness of poor quality remains long after the sweetness of low price is forgotten”, Benjamin Franklin.

Therefore, we will work to keep costs and fees as low as possible, however it is the end result we are most concerned worth.  We will utilize mutual funds, ETFs, individual securities and alternative strategies in our portfolios, and will seek to achieve the lowest overall cost, however our priority will remain on the end result.  We hope this provides an understanding of how we view cost and value.  We are always fully transparent and will explain all costs of advice and investing to you.

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