Measuring your tolerance for volatility and risk

People are often told not to invest in equity markets unless they have a long-term time horizon. While for some people one to two years might seem like a long time, most investment professionals feel a long term time horizon would be seven years or greater.

Here is some perspective as to what the markets have done over the past two decades in Canada. Between Jan. 1, 1999, and Dec. 31, 2018, the S&P/TSX Composite Index returned a total of 260.50 per cent. This represents an annualized compound rate of return of 6.62 per cent. Most decades the compound rate of return for equities has been declining.

The actual annual percentage returns (losses) of the S&P/TSX Composite Index were as follows:

  • 1999 (29.7)
  • 2000 (6.2)
  • 2001 (-13.9)
  • 2002 (-14.0)
  • 2003 (24.3)
  • 2004 (12.5)
  • 2005 (21.9)
  • 2006 (14.5
  • 2007 (7.2)
  • 2008 (-35.0)
  • 2009 (30.7)
  • 2010 (14.4)
  • 2011 (-11.1)
  • 2012 (4.0)
  • 2013 (9.6)
  • 2014 (7.4)
  • 2015 (-11.1)
  • 2016 (17.5)
  • 2017 (6.03)
  • 2018 (-11.64)

To summarize, we noted that in the past 20 years there have been six years where the S&P/TSX Composite Index posted declines. For the same time period, the S&P/TSX Composite Index posted 14 years in which there were positive returns. We also noted the extremes of a loss of 35.0 per cent in 2008 immediately followed by a gain of 30.7 per cent in 2009. The above information reinforces something we already know — the stock market does not move in a straight line.

An important component to investing is having an Investment Policy Statement (IPS). One component to an IPS is establishing your investment objectives and risk tolerance for each account and outlining the type of portfolio you want.

The above annualized 6.62% rate of return over the last 20 years assumes a 100 per cent Canadian Equity portfolio mirroring the index. Of course, many investors may have fixed income and investments outside of Canada. With interest rates being at low levels, many investors would have opted to decrease fixed income and increase the equity component to achieve greater long term returns.

We encourage most investors wishing to overweight equities to focus on well selected medium risk securities. The higher annual growth you desire, the greater degree of risk you will have to assume. Normally this means increasing the equity portion of the portfolio. The types of equities you purchase are almost as important as the asset mix you choose. Increasing risk in your portfolio does not always equate to higher returns. When you add speculation and high risk into the portfolio, then you also add the possibility of severe corrections if the markets move in a negative direction. High-risk and speculative portfolios run the possibility of experiencing an extreme negative year (i.e. 2008 and 2015).

How does a negative year in the markets impact the investor’s portfolio? The table below shows how the first year investment returns effects the average annual returns required to reach respective targets of six, eight, and 10 per cent.

Potential reward for risk-tolerant investors


Annual First Year                  
Growth   Actual Time horizon to meet your annual growth target *    
Target Returns          1          2          3          4          5          6          7          8          9
  15%    (2.3)      1.8      3.2      3.9      4.3      4.6      4.8      4.9      5.0
6% 5%      7.0      6.5      6.3      6.3      6.2      6.2      6.1      6.1      6.1
-5%    18.3    12.0      9.9      8.9      8.3      8.0      7.7      7.5      7.3
  -15%    32.2    18.4    14.1    12.0    10.8    10.0      9.4      9.0      8.6
  15%      1.4      4.7      5.8      6.3      6.7      6.9      7.0      7.2      7.2
8% 5%    11.9      9.5      9.0      8.8      8.6      8.5      8.4      8.4      8.3
-5%    22.8    15.2    12.7    11.5    10.8    10.3    10.0      9.7      9.6
  -15%    37.2    21.7    17.0    14.7    13.3    12.4    11.8    11.3    10.9
  15%      5.2      7.5      8.4      8.8      9.0      9.2      9.3      9.4      9.5
10% 5%    15.2    12.6    11.7    11.3    11.0    10.9    10.7    10.6    10.6
-5%    27.4    18.4    15.5    14.1    13.3    12.7    12.3    12.0    11.8
  -15%    42.4    25.1    19.9    17.3    15.8    14.8    14.1    13.6    13.2
* Required average annual return to reach stated annual growth target (with different outcomes)

An investor who began investing in early 2001 or 2002 may have a significantly different outcome then an investor who began investing in early 2003 or 2009. When we have new clients that have a lump sum to invest from selling a home or receiving an inheritance, we communicate the importance of reducing market risk. Several simple strategies exist to reduce this risk.

To illustrate, we will use a made up example of John Smith, 50, who plans to retire in five years. John has been managing his own investments and has determined that he requires annual growth of six per cent each year to reach his retirement goals.

A positive outcome after year one would be growth of six per cent or greater. Assuming markets are good, let’s say John’s portfolio returns 15 per cent in the first year. If we look at the table we see that John can now reach his objective by returning only 3.9 per cent for the remaining four years. John should consider shifting his portfolio to be more conservative based on the lower annual growth requirement to reach his goal and rebalance his portfolio.

The attached table is very effective in illustrating the impact of negative outcomes. Instead of earning 15 per cent in the first year, what if John’s portfolio declined 15 per cent? In order for John to get back on track he would have to earn 12 per cent each year for the next four years. Although this is achievable, it is significantly more difficult to achieve than six per cent annually.

The key point to take away is that portfolios should be structured with the appropriate amount of risk.

As your return expectations increase, so does your exposure to the stock market. Although the stock market is biased in the long run to increase, there will likely be both positive years and negative years over your time horizon.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director, wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250-389-2138.


Online access and paperless options becoming more mainstream

Computers, phones and tablets have all become mainstream in today’s modern households. The thirst for current knowledge in a busy mobile world has never been greater. More than ten years ago, businesses began introducing new online options for clients to get financial information. Although some were slow to adopt this technology change, most clients today desire to have online access to both their bank and investment accounts.

The term online access has caused some confusion, especially when financial firms have both online access through a website (the web) and login access through an application (the app) for a tablet and smart phone. What you can access and do on both of these online platforms are different. We recommend that clients create an account and get comfortable with both to obtain all available information on their accounts. I think the hesitation early on was due to peoples’ comfort level in regard to technology and security issues.

There are many benefits to setting up online access. One of the main reasons people like online access is the ability to set up “paperless” options. With most financial firms, this is done through the website version. Going paperless is an optional choice, or an added benefit, that clients have once they have online access on the web. Let us look at some of the benefits of online access and paperless delivery.


I mentioned that some people may be hesitant to go online for security reasons. Financial firms have spent enormous capital to ensure appropriate security is available for their clients. Some people could easily argue that with mail delivery being a manual process that the arrival of your mail at your home is not 100 per cent guaranteed. When you receive other people’s mail you may wonder if anyone has received yours. Many people feel that it is more secure to go paperless and not have your financial information sent by regular mail.


Clients have the ability to select and customize what documents they wish to receive by paper delivery or by paperless delivery. The three broad categories are statements (monthly statements), confirmation slips (sent after each trade) and tax documents. Clients must elect paperless or paper delivery on each account. For example, a client could elect paperless delivery on the TFSA and RRSP account but wish to have paper delivery on the taxable or cash account. It is normally less confusing for clients if they either go all paperless delivery or all paper delivery.


Another benefit of online access and paperless delivery is that you would be able to access your statements sooner. With paperless delivery you would receive a notification by email that your financial information is available online and you could immediately log in and view this information. With paper delivery, the statements would have to be printed by your financial firm and mailed to you. When Canada Post was going on strike, many clients converted to paperless documents to ensure they continued to get their financial information in a timely manner.

Tax documents

Many clients today like the idea of logging onto a secure website and printing off their tax documents. We also recommend that clients create “My Account” with CRA and print the slips automatically sent to them as a completeness check. Once you have set-up “My Account” with the CRA you can take advantage of their sign-in partner service. This allows you to sign into “My Account” with the CRA using the same sign-in information you use for your online access at your financial institution. This is one less password you will have to remember. If you have online access, you would be able to compile all tax slips provided you have paperless delivery and online accounts set up by March 31. If you have paperless tax documents, the latest your accountant should receive your tax documents is April 1st every year. Even if you are travelling you can access your documents and send these through to your accountant — remember to use secure email.


Paperless documents also has the added benefit of being good for the environment. Financial firms reduce printing costs, mailing/delivery costs and do their part for the environment by reducing the amount of paper they use. Clients viewing the information online can do so in a secure manner. They do not have to print the statements and worry about storing the financial information securely or shredding old documents. When clients select paperless delivery, they can go online and go back several years to look up financial information whenever they need to. It is easy to find and stays secure in the meantime.

Power of Attorney (POA) — monitor parents

In many situations, we are dealing with two or more generations in a family. When our clients are aging, we will typically have a discussion with them about steps they can do today in the event they become unable to make financial decisions. If they have reliable and responsible children, we will often suggest a family meeting where one of their adult children is introduced to us. We have a discussion about financial information for aging clients or clients suffering from dementia or Alzheimer’s disease. We like to have this conversation while our aging clients still have capacity and the ability to set up a financial power of attorney. Financial information can be confusing and create anxiety in some cases. Establishing a power of attorney, to monitor your situation can reduce this significantly. What works really well is to set up the account delivery as paperless and provide full online access to the power of attorney.

Power of Attorney (POA) — monitor children

We are often asked if we will help our clients children get started on the right path with investing. When the accounts are set up we can easily add the parent on as a power of attorney. A parent may want to gift money to their children and the POA on the account enables them to keep an eye on the child’s financial progress. Guiding your children on how to deal with money can be as important as guiding them toward a good education and profession. Children naturally do not know the different ways to invest or the different types of investment accounts.

Transfers between accounts

If you have online access set up with your bank and financial firm, it creates an added benefit of viewing both. Online access enables you to transfer funds from a bank account into your investment account. This can be done quickly and efficiently, without the need of writing physical cheques.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250-389-2138.

Protecting client information is critical in a digital world

Today there are many different ways for us to communicate financial information with clients: in-person, over the phone, email and so on. With all of these ways to communicate, it is important for us to continue to keep client information confidential and secure. Social insurance numbers, dates of births, investment account numbers, bank account numbers — it’s all sensitive information that must be protected.

Years ago we would regularly share confidential information by fax with clients. The information would then be printed out and stored in physical files. Clients would have a landline and often owned a fax machine as well. With the introduction of the personal computer and the internet, email became an alternative mode of communication. Most view email as quick and efficient; however, using email to share confidential information does have some risks.

One of the major risks involved in sending confidential information by regular email is having that information getting into the wrong hands or having someone else trying to extract this information. With a regular email, information that you receive, or is sent to you, will be sitting within your email account. Anyone who inappropriately accesses your email account will also have access to all of the information within your account (sent box and inbox). If you have confidential emails saved in your Gmail, Hotmail, Yahoo, or Shaw accounts, it could be at risk.

When we receive an email from a client we must take the extra precaution to ensure the information is legitimate. For example, when clients contact us via email to request funds we always require a phone call as well to confirm that this is a legitimate request coming from our client.

In an effort to help keep information secure and confidential, there are some extra steps that both advisors and clients are starting to take. One example is by using the financial firm’s own server to share confidential information. A simplistic explanation of a secure email is that you are really not even getting the information emailed to you. I know that sounds confusing.

Let us use an example of an adviser who is setting up a telephone meeting with a client who has never used the secured server. Beforehand, the client would like to obtain a copy of their holdings detail report and recommendations for the account. The portfolio manager types a message to the client that looks like a regular email, types “[Secure]” in the subject line, and attaches two PDF documents — the holdings detail report and recommendations.

On the client’s side, they will not initially get the message with the two attachments. What they first receive is an automated message that the portfolio manager has attempted to send the client a secure, encrypted message. Within this automated email message is a link that will direct the client to the firm’s own server.

For clients that have not used the secure service, they must click on the register button. This triggers the client to receive a temporary password to their email account to enable them to register for the secure email service. To register as a first-time user, a client will need to immediately establish a secret password (different from the temporary password), as well as create a challenge question(s) that can be used to verify your identity.

An added safety measure that is available is having your secure account automatically locked if there are multiple failed attempts with an invalid password. In order to recover this password you would need to answer one or more of the challenge questions mentioned above. Other features may also include having the original message deleted automatically after a certain time period.

The process for registration takes less than five minutes. Once the client has the account set up then they will be able to see the message sent by the portfolio manager.

It is important to note the confidential information remains on the firm’s own server and is encrypted. It will look like you are accessing an email within your email account, but the information is actually accessed through the password-protected account on the financial firm’s server.

By viewing information only on this encrypted service, you greatly minimize your exposure to your information being compromised. Using the above phone meeting example, the client can easily print the holdings detail report and recommendations or simply view them online. The information does not sit within the client’s email account.

Of course, clients have the ability to download the information from the encrypted server to their own personal devices and accounts. Once the information has been forwarded from the server, rather than just viewed or printed, then clients could be potentially exposing themselves to other risks.

We understand that having to create an account and enter a password to view your financial information might feel a bit cumbersome. In the end you can have more comfort that your confidential account information is being treated appropriately and ensuring that information does not get into the wrong hands.

Kevin Greenard CPA CA FMA CFP CIM is a Portfolio Manager and Director, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250-389-2138.

Looking at total rate of return rather than yield alone

Yield is essentially the income an investment will pay, such as interest or dividend payments, and is normally expressed as a percentage.

Yield will fluctuate on equity investments based on the current share price. Typically, as the share price goes up, the yield goes down. On the flip side, as the share price goes down, the yield goes up.

The board of directors of a company makes the decision with respect to the dividend(s) the company will declare. This is normally stated as a dollar amount. Using ABC Bank as an example, the share price of the bank is currently at $80 per share. The board of directors would like the annual yield to be approximately four per cent. The board declares a dividend of $0.80 per share for the current quarter. If this dividend was kept the same for the next three quarters, the annual distribution would be $3.20 per share owned. Assuming the share price stays the same, the annual yield would be four per cent ($3.20 / $80).

The board of directors can choose to increase the dividend, and this is often done when the stock price appreciates. If the share price for ABC Bank increased to $100 per share, the yield would drop to 3.2 per cent ($3.20 / $100). The board of directors would have to begin declaring a quarterly dividend of $1 per share to maintain a four per cent annual yield based on shares valued at $100.

It is always nice when your investments will return dividends to you. The dividends are normally only part of the equation when looking at the holdings for your account. The change in the share price is also another important part to every investment. An investment that just pays income, with little hope of capital appreciation, would typically be classified as an “income” investment. An investment that does not pay a dividend, would typically be classified as a “growth” investment. The rate of return on a growth investment, that does not pay a dividend, would be 100 per cent determined by the change in the share price.

Many companies would be considered “balanced,” meaning that they would pay some form of dividend and also have an expectation of share price appreciation. As an example, three companies all make the same level of income in a given year, say six per cent. The first company chooses to pay a six per cent dividend to shareholders. The second company chooses to pay a three per cent dividend to shareholders and retain three per cent. The third company chooses to not pay a dividend and retain the full six per cent. When a company does not pay out some, or all, of its earnings, the share price would normally appreciate in value. Of course, many other factors influence the share price.

In the above example, we would anticipate that the share price for the third company would increase greater than the first company. Total return on an equity investment is the sum of the dividend plus the change in the market value of the shares.

Capital deployment

One of the many important components for us when we are analyzing new companies to add to the model portfolios is deployment of capital. As a portfolio manager, we are always assessing management and how they deploy capital that they are not distributing. If a company distributes all of its earnings, it is not necessarily building up extra capital. Investors will receive the dividends and it is up to the individual investors to ensure those returns are reinvested for continual growth.

Income needs

Retirees often require regular income from their portfolio. If we are sending monthly amounts to clients, this is often referred to as a Systematic Withdrawal Plan. The natural tendency when income is needed is to look at only stocks that pay a high level of dividends. Within our clients’ Investment Policy Statement, we outline the cash-flow needs that they have for the next two to three years. In the majority of cases, we create a one to two year wedge, the portion of the portfolio that is not in any equity (dividend or no dividend) — it is set aside in a cash-equivalent type investment that will not be impacted by changes in the stock market. We refer to this as a wedge. When a wedge is created, it takes the pressure off of a portfolio to create dividends to replenish cash. The focus can then shift to ensure you pick the best risk adjusted total rate of return group of investments. Some of those investments will pay large dividends, some smaller dividends and some no dividends.

Fixating on yield

I have had many conversations with clients about the danger of being fixated on yield. Occasionally, I will have someone ask me about some “high yielding” names that are paying very high dividends. In some cases, we will see that the companies are distributing more than they are actually earning which is not sustainable. In other cases, we see people being caught in the “income trap” and not factoring in the capital cost of the investment. As an example, you purchase 1,000 shares at $10 per share of High Yield Company totalling $10,000. You purchased this company because you read in the paper it is paying a six per cent dividend. If after a year the share price drops to $9.40 then the market value of this company would only be $9,400. The dividend of $600 would be taxable despite you really not making any real return if you were to liquidate at the end of the year. Essentially, a high yield is only part of the equation. An equally important component, if not more important, is the base amount invested in each company.

Universe of investments

If an investor focuses only on higher dividend paying stocks, much of the investment universe would be excluded as an option. Many dividend paying stocks are interest rate sensitive. Many sectors such as technology and certain communication stocks are known to have either no yield or low yields. Adding a mixture of income and growth investments reduces risk in a portfolio and should help smooth out volatility in the long run.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250-389-2138.


It’s tough to get it right on both sides of the equation

During the last quarter of 2018, the TSX/S&P Composite declined 10.11 per cent on a total return basis while the first quarter of 2019 the TSX/S&P Composite posted gains of 13.27 per cent on a total return basis.



When the stock market takes a sharp downward correction, the natural response from investors is to try to anticipate the decline and sell off before this happens.

It sounds easy when you are looking in the rear view mirror. Timing when you are in or out of the markets is in essence basing your investment strategy on a speculative approach rather than a disciplined investing approach that incorporates a long-term vision and goals. Short-term emotional thinking can cloud long-term investment decisions.



The best way to illustrate the challenges of trying to time the stock market is by looking at an investor who is currently fully invested.

Mr. James has $1 million invested in a non-registered account and is currently earning $35,000, or 3.5 per cent, in annual income (primarily dividend income and minimal interest income). In addition to this income, Mr. James’s investments have averaged 4.5 per cent annually in capital gains over time.



The total annual average rate of return is the sum of both of these parts — the income and capital gains. The total average annual rate of return over the last five years has been approximately 8.0 per cent annually.

Mr. James decided that he wanted to be a market timer. By market timer, I mean that he felt he could predict the direction of the stock market and would sell his investments if he anticipated a decline in the markets.

If Mr. James sells off his investments and converts his portfolio to 100 per cent cash, then his income will drop to $16,000 per year, assuming that savings accounts are earning 1.60 per cent.

The downside to savings accounts is that interest income is fully taxable each year in a non-registered account. Mr. James currently has the majority of his investments earning tax-efficient dividend income with some tax deferred growth. As a result of the difference in taxation between interest income and dividend income, the impact on income would be even greater than 1.90 per cent (3.50 to 1.60).

For purposes of this article, we have assumed that both interest income and dividend income are equal. In additional to the differential in the income lost, Mr. James would not have potential for capital gains while out of the market.

Mr. James should also factor in that if all of his investments are sold then he would have to report all the realized gains on his investments and lose the deferral benefits that exist with non-registered equity investments. If you have stock that has increased in value, you do not have to pay tax on the capital gain until it is sold.

If Mr. James has a stock that has declined in value and he realizes a loss then he has to use caution when timing transactions. He must wait at least 30 days before repurchasing a stock sold at a loss or risk violating the superficial loss rules and having the original loss declined.

From an income standpoint, Mr. James will immediately see his dividend/investment income drop $19,000 a year ($35,000 to $16,000). He will also possibly be losing capital growth on his portfolio. The potential tax liability, superficial loss rules and loss of income are the easy components to quantify for Mr. James. It is the change in the capital side or growth that is the tough part to compute in order to determine if Mr. James made the right decision to liquidate.

If the markets increase, Mr. James clearly made a mistake. He will have lost the differential in the income and the capital growth. If the markets remain flat, Mr. James still made a mistake with the differential as his income will drop $16,000 a year.

If the stock market goes down, it’s not necessarily a given that Mr. James will benefit from having liquidated his account.

If Mr. James makes a correct prediction that the stock market declines then for him to benefit he has to also make another correct timing decision to buy back into the market at lower levels to potentially be better off.

If the markets decline and Mr. James does not have the insight to buy back in (before it rises back to the level that Mr. James originally sold at) then he would still be worse off. In essence Mr. James has to make two correct timing decisions: (1) selling before the markets decline, and (2) buying back before they rise.

Mr. James should also factor in the timing in which he feels his predictions for the market will unfold. To illustrate this component we will assume no transaction costs, only the income component (we will exclude capital changes) and no tax impact to the trades for simplification purposes.

The difference between the current income Mr. James is earning of 3.5 per cent and the new income of 1.60 per cent if he converts everything to cash is 1.90 per cent. Depending on how long Mr. James is out of the market impacts how much the stock market would have to decline to make the strategy of going to cash successful.

Let’s assume that Mr. James waits six months, one year, two years and three years before buying back into the stock market. If every year Mr. James is losing 1.90 per cent in income then the longer he waits the greater the stock market has to decline. At the six month point, the markets would have to decline 0.95 per cent (1.90 x .5) or greater, at the one year point the markets would have to decline 1.90 per cent (1.90 x 1) or greater, at the two year point the markets would have to decline 3.80 per cent (1.90 x 2) or greater, and at the three year point the markets would have to decline 5.70 per cent (1.90 x 3) or greater.

Making two correct short-term timing decisions against a stock market that has a long term upward bias is not as easy as it may seem. The markets can rebound incredibly fast — the 13.27 per cent increase in the first quarter of 2019 is only one example. From a psychological standpoint, most people would have the tendency to fear that the markets will decline further after the 10.11 per cent decline in the last quarter of 2018. Most investors would not have had the natural tendency to purchase investments at the beginning of this year. Sticking to a long term disciplined strategy helps deal with the short term quarterly swings of the market.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250-389-2138.



Asset mix should be tied to cash-flow needs and market conditions

The term asset mix refers to the portion of your investments that are held in cash, fixed income, and equities. Asset mix has historically been touted as the most important decision with respect to managing risk adjusted returns. We don’t disagree.

The key question that many people should be asking themselves is the portion of their portfolios that should be in these three categories. Every decade we feel investors have had to shift how they look at asset mix to maintain the best risk adjusted returns. This has largely been the result of declining interest rates.

Rather than rely on older textbook solutions to asset mix we feel clients should focus on cash flow needs and current market conditions. When we meet with clients, one of the first questions we ask them is if they need any cash from their portfolio. Essentially we are asking them the time horizon of a portfolio and whether they are planning to make a significant withdrawal of funds. In more than 90 per cent of times when we ask clients this question, the majority of the investment portfolio is to be invested for the long term (greater than seven years).

We also ask clients whether they have any income requirements from the portfolio, or smaller withdrawal requirements. Many of our retired clients will request that we send them monthly cash flow from their investments. If a client desires $5,000 per month from their portfolio then we would typically put aside 12 to 24 months of cash as a “wedge” earmarked for these smaller withdrawals. This is done to ensure that investments do not have to be sold at the wrong time in the market cycle.

We also ask clients if they will require any significant withdrawals from their portfolio in the next three years. Examples of significant withdrawals will be funds to repair home (i.e. roof), renovations, new vehicle, recreational (i.e. boat, motorhome) and real estate purchases. These amounts are also documented within an Investment Policy Statement and earmarked as part of the “wedge” to ensure the funds can be liquidated and sent when needed regardless of market conditions.

We feel cash flow needs and current market conditions should be the primary determinate for asset mix. To give you an example of older guidance often used with respect to asset mix we have outlined a few observations by decade below.

The 1980s

In the 1980s, interest rates were high and many advocated for retirees to transition portfolios to 100 per cent fixed income. This was during a period when bonds, GICs, CSBs, CPBs, and term deposits actually returned a decent level of interest income to live off. Purchasing annuities was a popular option as yields were significantly higher and translated to higher payouts. Financial plans which make long term assumptions based on 1980s high interest rates were materially over stated when interest rates subsequently declined in future decades.

The 1990s

In the 1990s, the strategy most promoted was to encourage investors to have the fixed income percentage equal to their age. The idea was that as you are aging your portfolio would shift into more conservative investments that paid income to you in retirement. Fixed income still generally had higher income than equities.

The 2000s

In the 2000s, many promoted the strategy of laddering your bonds and fixed income. A bond ladder means you have different bonds with varying maturity dates. This was a way of spreading out interest rate risk. As bonds matured in the ladder, you could use some of the capital if necessary and reinvest the remainder.

The 2010s

Bond laddering started to decline as interest rates started to bottom out. Most economists, and fixed-income bond managers, were recommending to keep the bond duration (term to maturity) shorter. The reason for this is the inverse relationship that bond yields have to the bonds actual price. For example, if interest rates go up, most existing bond prices would decline. The greater the duration of the bond, the greater the decline typically.

To deal with this uncertainty of interest rates, many hybrid type investments were created that had features (resets, call dates). Most of these types of investments lack significant volume and can have material price swings which was not typical of fixed income type investments.

The present and the 2020s

Fast forward to today and what we anticipate in the decade ahead. The following are the top ten bullet points we discuss with our clients:

1) Many chief investment officers and economists feel that central banks simply can’t afford to raise interest rates significantly above current levels. The level of government debt would only spiral out of control further. Interest rates are most likely to stay at low levels for a long time.

2) In Canada, we have raised interest rates five times since the historic lows reached in 2017. If the economy softens, the Bank of Canada is in a position to cut interest rates.

3) The term “fixed income” seems rather archaic when many fixed income rates can shift with many of the new fixed income products. The term step up and floating are just a couple of the terms using in fixed income today.

4) It is ironic that most equities have a higher level of dividend income then the interest yields on fixed income. If investors want high income they can typically achieve this with good quality dividend paying equities.

5) Most bonds pay “interest income,” which is fully taxable in non-registered accounts. Canadian equity investments pay tax efficient dividend income (eligible for the dividend tax credit). All equity investments in a non-registered account can provide deferral of unrealized gains and tax preferred treatment on disposition (only 50 per cent is taxed).

6) Bonds trade outside of an exchange and the price transparency is not as good as equities which trade on an exchange. With most bond purchases, the financial firm you are dealing with is acting as principal, rather than as agent. With a principal transaction, the firm will buy the bond off of the client and put it in their own inventory of bonds to either hold or resale.

7) Fixed income often lacks a high volume of transactions (i.e. preferred shares) and is also susceptible to material price fluctuations. Some fixed income lack liquidity (i.e. longer term GICs and term deposits).

8) Increased scrutiny by regulators of suitability of asset mix on investment portfolios. This creates a natural tendency to possibly be overly conservative unless a full discussion is done with your portfolio manager or wealth adviser. Importance of communicating cash flow needs (both short term income requirements and required significant withdrawals).

9) Conservative investors choosing to have asset mixes heavily weighted in fixed income should have lower return expectations for the next decade ahead. Interest rates will likely stay at low levels for a long time. With even a moderate level of inflation and full taxation on income, after tax returns will not be the same as the past several decades.

10)In order to achieve the best risk adjusted returns, investors will have to invest more heavily in equities than past decades. This means that investors will have to deal with more market volatility and stick to a disciplined plan. Our recommendation for retirees who are opting to increase equity components in their portfolio is to avoid high risk and speculative positions.

It is crucial when working with a portfolio manager or wealth adviser to map out cash flow needs and any significant withdrawals. It is only after that is completed that an appropriate asset mix can be set up and the best decisions can be made on where to draw on those cash flow needs.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250-389-2138.



A spring break refresher on RESPs

Parents and grandparents, who typically set up Registered Education Savings Plans (RESPs), are referred to as the “subscriber.” The children or grandchildren are referred to as the “beneficiary” of the registered plan.

Parents are juggling many different things. Financial planning may not be the highest priority, especially if paying bills is a challenge. With all the different types of accounts, it can be a little confusing on where best to put the little bit of savings that may be available. Do you pay down the mortgage, make an RRSP contribution, open up a TFSA, or save for your child’s education?

The strategy I map out for young parents is to contribute $2,500 each year for the first fourteen years of your child’s life, and $1,000 when your child is 15. Doing the contributions early each year allows a greater amount of time for the value of the RESP to grow. If coming up with $2,500 as a lump sum is difficult, we suggest setting up a pre-authorized contribution (PAC) of $208.33 every month (assuming only one child). Automating this with your bank helps ensure you keep with the plan.

Tuition and textbooks are only part of the cost of education. Being able to have funds set aside for housing, living costs for school and transportation is important to add to the calculation. The RESP can help cover the costs of all of these expenditures.

One misconception is that the proceeds from an RESP can only be used to pay for tuition and textbooks. Withdrawals can be used to pay for all post-secondary education costs. The only reason we ask for a copy of the tuition receipt is to verify that the student is attending a qualifying education program or is enrolled in a specified education program. Most of the criteria focus on the programs having the appropriate number of hours.

Apart from the rising cost of education, the government provides the Canada Education Savings Grant (CESG) for contributions made up until the end of the calendar year in which the child turns 17. The basic CESG provides a grant of 20 per cent, up to a maximum of $500 per child. The lifetime maximum grant is $7,200. The plan noted above has annual contributions of $2,500 for 14 years ($500 CESG each year x 14 = $7,000) and a $1,000 contribution in the 15th year ($200 CESG). This contribution schedule enables the subscriber to claim and obtain the maximum $7,200 per beneficiary.

In addition to these federal grants, the British Columbia Training & Education Savings Grant (BCTESG) is also available. If you have children who were born in 2006 or later, the province will contribute $1,200 as a BCTESG. Below is a table taken from this website.

Grant application period for eligible children

Birth year 1st day of eligibility 1st day to apply Last day to apply
2006 Child’s 6th birthday in 2012 Aug. 15, 2016 Aug. 14, 2019
2007 Child’s 6th birthday in 2013 Aug. 15, 2015 Aug. 14, 2018
2008 Child’s 6th birthday in 2014 Aug.15, 2015 Aug. 14, 2018
2009 Child’s 6th birthday in 2015 Aug.15, 2015 Aug. 14, 2018, or the day before the child turns 9 (whichever is later)
2010 Child’s 6th birthday in 2016 The day the day child turns 6 The day before the child turns 9

The nice part about the BCTESG is that you just have to open an account and apply for this to receive $1,200 — no contribution is necessary. Most banks and credit unions will be able to assist you with the BCTESG; however, most full-service divisions of investment firms do not offer the BCTESG.

Now that we have mapped out the strategy of contributions the next decision is to decide how to invest the money. If you are eligible for the BCTESG, we recommend that you apply and keep these funds in a separate account. Because some firms do not offer the BCTESG, if you have included both BCESG and CESG in a single account, the entire account becomes tainted and you will not be able to be transfer the RESP to most full-service investment firms in the future.

With the BCTESG, we recommend investing this in a mutual fund at a bank or credit union. My opinion about the type of mutual funds when the beneficiaries are young, and the time horizon is greater, is to invest primarily in equity mutual funds.

With the account that is accumulating, the CESG, the funds can be invested in a number of different ways depending on the financial institution you are dealing with. If you open the account up at a bank or credit union then you are likely investing primarily in mutual funds. If you open the account up at a full-service investment firm then you could explore different options outside of mutual funds, especially once the account gets built up.

The priority, initially should be setting the savings discipline and obtaining all available grant money. As the beneficiaries get closer to needing the money, then shifting some or all of the investments into something more conservative to reduce risk generally makes sense.

Time to get educated

The time has come and the beneficiaries are going for higher education. Other than a copy of the qualifying “paid” tuition enrolment receipt (not the T2202A noted below) and a form signed by the subscriber, getting the funds out of an RESP is straight forward. The initial contributions from the subscriber are not taxed and can be paid out either to the subscriber or to the beneficiary — it is the subscriber who dictates how those funds are dispersed.

The CESG and the income earned (dividends, interest, and capital gains) are both taxed in the hands of the beneficiary as education assistance payments (EAP) when taken out. The firm you have the RESP through is referred to as the promoter and must issue a T4A to the beneficiary in the year of withdrawal. In most cases, we try to spread the EAP portion over four years (i.e. or the length of the program). The beneficiary will likely have limited other income while going to school. In the majority of cases, the end result is zero tax being paid on the CESG and the growth within the RESP.

Line 323: Your tuition, education and textbook amounts

The federal government eliminated the education and textbook tax credits in 2017. Students are still able to deduct eligible tuition fees paid for the tax year. A course typically qualifies for a tuition tax credit if it was taken at a post-secondary education institution or for individuals 16 or older who are taking a course to creating skills in an occupation and the institution meets the requirements of the Employment and Social Development Canada (ESDC).

The institution should issue a T2202A (Tuition and Enrolment Certificate) at the end of the year which lists the total paid in the calendar year that is eligible for the student to claim on his or her income tax return. The student must claim the amount paid even if mom and dad paid the tuition.

The student must first try to use the credits on their own tax return. Schedule 11 of the student’s tax return will list the total eligible tuition fees and the total tuition amount claimed by the student.

Line 324: Tuition amount

What if the student has limited or no income to utilize the tuition amount? The student has the ability to either carry the tuition amount forward to future years or transfer up to $5,000 of the tuition amount to your spouse, common law partner, parent, or grandparent. It is a little bit of a funky calculation and at first might seem a little strange.

I will illustrate with a student who has tuition costs of $9,300. During the year, the student earns $13,500 in taxable income. On Schedule 11 that we referred to up above, the student can claim some reductions of this. To keep things simple, we will assume only the basic exemption of $11,809 (2018) is available. The net amount is $1,691 ($13,500 – $11,809) and the student must first use this. The $9,300 total tuition amount is reduced by $1,691 (the amount claimed by the student. The amount remaining of the tuition amount is $7,609 ($9,300 – $1,691).

I know above I mentioned up to $5,000 can be transferred to your spouse, common law partner, parent, or grandparent. The maximum amount that can be transferred is $5,000 less the amount the student is claiming, which in this case is $1,691, equals $3,309. The student will then be able to carry forward, to future years the difference of $4,300 ($9,300 less $1,691 claimed by student and $3,309 transferred in the current year).

When I look at our client’s notices of assessments, I sometimes see unused tuition carry forward credits from previous years. Tuition amounts are non-refundable tax credits. This essentially means that in the past the client did not have any taxes to pay and was not unable to transfer the tuition amounts. Once the tuition amounts are carried forward to another year they are not able to be transferred. Although past carry forward tuition amounts did not provide an immediate tax benefit, they may have a current or future value. If you’re not sure how current tuition costs should be claimed or transferred, we recommend you speak with your accountant.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250.389.2138.

Do you need to make income tax instalment payments?

Twice a year, Canada Revenue Agency sends out instalment reminder letters to those taxpayers who are required to make payments. The February letter outlines the required payments on, or before, March 15 and June 15. The August letter outlines the required payments on, or before, Sept. 15 and Dec. 15.


The February 2019 notice will be based primarily on your 2017 tax return. If you owed more than $3,000 in taxes in 2017, then you will likely be asked by CRA to make instalments on March 15 and June 15t through the February 2019 notice. CRA would not know what your income was for 2018 by the time the February notice are sent. Nor will it know what your income will be for the current year.

The August 2019 notice will enable CRA to adjust the numbers based on your actual 2018 net tax owing. If your net tax owing was less than $3,000 in 2018, you will likely not be asked to make instalment payments on Sept. 15 and Dec. 15.

It is important to note that you have to pay your income tax by instalments for 2019 if both of the following apply:

• Your net tax owing for 2019 will be above $3,000 in British Columbia

• Your net tax owing in either 2018 or 2017 was above $3,000 in British Columbia

The instalment payments are to cover tax that you would otherwise have to pay in a lump sum on April 30 of the following year. Instalments are designed so that taxes are paid throughout the calendar year while you are earning the taxable income.

Infrequent income spike

We often see individuals who have sold a rental property, businesses or investments, which generates a significant capital gain. This is a one-time spike in income, which is not going to necessarily repeat. One of the flaws in the instalment notice is that it is simply an automated process based on the $3,000 thresholds notice above. The year after you have a spike in income, many people are asked to make instalment payments.

You do not have to pay your income tax by instalments for 2019 if you know your net tax owing for 2019 will be $3,000 or less in British Columbia, even if you received an instalment reminder in 2019. It is always best to check with your accountant before skipping instalment payments.

Common areas triggering instalment notices

If you are an employee, and have no other sources of income, you likely do not have to worry about making instalment payments. Your employers has an obligation to withhold appropriate income tax from your earned income. Individuals who work more than one job may also have an insufficient amount of tax withheld, as each employer has based the withholding tax on payroll tables and income from the one job. If you do have two jobs and when both incomes are combined, you are in a higher tax bracket than the payroll table. This will normally result in taxes being owed at the end of the year. You can always request that your employer withholds a higher level of tax on a voluntary basis.

There are situations where taxpayers have income from activities other than employment. In many of these cases, tax is not withheld at source, meaning that you may have to pay tax at the end of the year. This often impacts individuals who have multiple forms of income.

Examples of situations that can result in instalment payments include self-employment income, RRIF payments, Old Age Security payments, Canada Pension Plan benefits, rental income, certain pension income, capital gains and other investment income.

Speaking with a wealth adviser and accountant about instalment payments can often result in some helpful tips on ways to reduce your net tax owing, or even eliminate the need to make the CRA scheduled instalment payments. The easiest way to reduce your net tax owing is by voluntarily withholding tax on certain forms of income on an automated basis. You can withhold tax on your RRIF income by talking to your wealth adviser. Another common strategy is to complete the “Request for Voluntary Federal Income Tax Deduction” form to have tax withheld on Canada Pension Plan and Old Age Security.

Interest and penalties

For some people, making the instalment payments is not a big deal. They simply make the four remittances a year on time. In order to make these instalment payments on time, you have to be organized, have the funds previously set aside and remit them to CRA on or before the required dates.

If taxpayers do not make the required instalments, they may have to pay interest and penalty charges. CRA charges instalment interest on all late or insufficient instalment payments. Instalment interest is charged at the posted prescribed rate (changes every three months) and compounds daily. CRA may also charge penalties if the taxpayer makes payments that are late or less than the requested amounts. Penalties normally apply when your interest charges are more than $1,000.

The worst part about these types of interest and penalty charges are that taxpayers cannot deduct these on their tax return. This is an absolute cost that is permanently lost.

Notice of assessments

One of the services we provide to clients is a review of their tax returns. Fifteen years ago, we used to ask clients to bring in tax returns and notices of assessment, but now we have been able to proactively get this information online, directly from CRA. One of the first documents that we read every year is a client’s notice of assessment. With respect to instalments, we look for three things:

1. Do they have a requirement to make instalment payments?

2. Were any interest or penalties assessed in previous years for not paying required instalments?

3. How can we help the client automate the process?

In some cases, withholding tax on RRIF, CPP and OAS is not enough. Some clients do not wish to voluntarily send CRA any money ahead of time. One of the services we provide for clients with a non-registered account is the ability for us to pay their required instalment amounts directly from their investment account. We have access to the numbers on the CRA website and if a client has provided consent, we can take care of those payments on their behalf. This is particularly valuable for our clients who are busy, travelling or aging.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with the Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonsit. Call 250-389-2138.


Many couples should consider spousal RRSPs

For couples that make approximately the same annual income, a spousal RRSP may not be necessary. The greater the disparity between incomes with couples, the more important it is to consider spousal RRSPs. This is especially true if one person is in an upper tax bracket and your spouse is in a lower tax bracket. If investment dollars are limited, then the recommendation would normally be for the upper tax bracket individual to make an RRSP contribution.

With fewer and fewer income splitting opportunities between spouses, it is important to understand the strategies that remain. Spousal RRSPs are an effective way to split income between spouses during your lifetime. However, it is important that you know the rules.

What is a spousal RRSP?

A spousal RRSP is an account to which you contribute, however your spouse is the annuitant of the account. This means that you receive the tax deduction for the contribution to the account, but your spouse will receive the proceeds from any withdrawals from the spousal RRSP. Once the contribution is made, your spouse becomes the owner of the funds within the account.

The advantages of a spousal RRSP

The biggest advantage of a spousal RRSP is the opportunity to split retirement income between spouses.

Effective retirement planning would result with both spouses having equal income producing assets at retirement. This would allow the family to take advantage of splitting income instead of having it all taxed in one individual’s hands, which is normally at a higher marginal tax rate.

Most people will not have equal assets at retirement, so the spousal RRSP is a method to help ensure that you work towards equal assets at retirement.

Usually, the higher income spouse (and therefore the spouse that is likely to have higher assets at retirement) will contribute to a spousal RRSP for the lower income spouse to allow them to accumulate assets for retirement. When you finally retire, the withdrawals from the spousal account will be taxed in the hands of your spouse, usually at an overall lower tax rate than would be the case if the withdrawal was taxed in your hands.

The advantage to this income splitting strategy is based on the fact that the contributor receives a tax deduction at a higher tax rate than the income will ultimately be taxed at.

Know the rules and be careful of the attribution rules

There are rules in the Income Tax Act called attribution rules that are designed to prevent abuse of spousal RRSPs. The rules state that:

• Withdrawals from a spousal account will be taxed in the hands of the contributor if a contribution has been made to any spousal account in the year of the withdrawal or the previous two years. What this means is that if you made a contribution to any spousal account, you must wait three years before your spouse can withdraw it without it being taxed back to you.

The attribution rules do not apply in the following circumstances:

• If funds are transferred directly for your spouse or common-law partner to a RRIF and only the minimum payments are withdrawn, there is no attribution. However, there is attribution on funds withdrawn in excess of the minimum payment as long as the three years is still in effect. After the three years has passed, there is no further attribution.

• If funds are used to purchase a life annuity or a term certain annuity to age 90, there is no attribution

• If the spouses are living apart due to a breakdown of relationship at the time of payment

• If either spouse becomes a non-resident of Canada at the time of payment

• If the contributing spouse dies in the year of payment

• If the deceased annuitant is considered to have received the amount because of death

One of the most popular questions relating to spousal RRSPs is: “Can my spouse co-mingle their own RRSP with that of their spousal RRSP that I contribute to?”

The answer is yes, however, once you co-mingle the accounts, they are considered a spousal account and therefore subject to the attribution rules discussed above.

We do not recommend co-mingling RRSP accounts. There are reasons to keep the accounts separate, depending upon your circumstances. Having two plans provides you with extra flexibility with respect to withdrawals. For example, if your spouse was not working and wanted to withdraw funds out of their RRSP, they could withdraw them out of their own RRSP and have the income taxed in their hands. If however, the funds had been co-mingled and a spousal contribution had been made within the last three years that income withdrawal would be taxed in the hands of the contributor.

If you are at the age where you have only RRIF accounts and are pulling out the minimum, then co-mingling the accounts at this stage is normally okay.

Other factors and looking at the long term

In some situations, one spouse may be temporarily out of the work force and will have significant income in the future. Individuals that own corporations or other assets should seek professional advice to see how a Spousal RRSP could integrate into a longer-term plan. Stability of marriage, future inheritances, projected retirement dates, and changes in Canadian tax laws are additional factors to consider.


Investment options within your RRSP

The key word in Registered Retirement Savings Plan is savings.

The government allows Canadians to defer up to 18 per cent of the previous years earned income, up to a maximum of $26,230 for the 2018 tax year.

In order to reach the maximum, earned income would have to equal $145,722 or higher. If you are a member of a pension plan, then the maximum is reduced by a pension adjustment.

After filing your annual tax return, you will receive a Notice of Assessment which has your current year RRSP Deduction Limit Statement.

Once your Deduction Limit is known, you may consider contributing early to an RRSP provided cash flow permits. One way to do this is to immediately use any tax refund, if any, to fund the current year RRSP contribution. If you are maximizing every year, then a single lump sum contribution equal to the amount on your RRSP Deduction Limit Statement may avoid the risk of over-contributing.

If cash flow is limited then setting up a Pre-Authorized Contribution (PAC) on a monthly basis may help you maximize contributions. It is important to adjust the PAC amount annually to adjust to your annual RRSP Deduction Limit. Whether you contribute monthly or by lump sum, it is important that you know your limit and do not over-contribute.

Every year you have to decide how to invest the new contribution. In addition to deciding how to invest the current year contribution, you have to continually manage your existing RRSP holdings to get the best long term results.

We have had discussions with clients new to investing that had mistaken an RRSP as a type of investment. RRSP is a type of account but not a type of investment. The Income Tax Act (ITA) outlines that the RRSP is limited to holding qualified investments, such as cash and deposits, listed securities (on designated stock exchanges), investment funds (i.e. mutual funds), and debt obligations (i.e. GICs, Term Deposits, Canada Savings Bonds). There are several other less common types of investments for RRSP accounts but for purposes of this column I will stick with the most common.

Many people rush into a financial institution to deposit funds primarily to get the RRSP Contribution receipt for tax purposes. Although cash is a qualified investment with RRSP, sitting permanently in cash is not a good long term option as returns would be limited.

Before an RRSP contribution is made you should understand the differences between financial professionals and financial institutions. There are significant differences with financial professionals in the scope of both experience and licencing. Some have worked through various market corrections and others are just starting a new career. Some financial professionals are licensed to sell only insurance products, other are licensed through the Mutual Fund Dealers Association (MFDA) and sell mutual funds. Wealth advisers may be licenced with the Investment Industry Regulatory Organization of Canada (IIROC) and have the ability to sell listed securities and mutual funds. You should ensure that the Wealth Advisor you approach has the licensing appropriate to your needs.

With respect to the wide range of financial institutions, you can choose from virtual/online options, insurance companies, traditional banks, credit unions and mortgage investment corporations. You should first determine what type of investment you would like and also what type of services. Even within traditional banks, you have several options including: self-directed, bank branch, and full service. If someone wants to do their own investing and is comfortable with technology then they can consider the online self-directed platforms. These are also referred to as discount brokerage as they have lower fees as you’re primarily doing the work yourself. Options at the bank branch level are typically term deposits/GIC and mutual funds.

Guaranteed Investment Certificates

Some investors purchase GICs, term deposits, and different types of bonds within an RRSP to manage their investment risk level. These types of investments typically pay interest income that is predicable, and volatility is lower. The primary downside to these investments is the relatively low interest rates and return potential. Short-term debt obligations have low real returns after inflation and taxes are factored in. Long-term debt obligations can be surprisingly volatile especially with changes to interest rates. If capital preservation is the primarily objective and time horizon is short, certain types of debt obligations may be suitable.

Mutual Funds

Mutual funds have been around for more than 90 years and have been a very popular type of investment. The concept of a mutual fund is easy to understand in the sense that it is a group of investors who pool their money together and have it managed by a Portfolio Manager. The first stage is picking a fund that matches your investment objectives and risk tolerance. Once the fund is picked, the portfolio manager makes all the decisions and investor does not need to be involved. Another benefit is that investors can choose to contribute a lump sum to the fund or set up automated pre-authorized contributions every month which makes forced savings easy. For inexperienced investors, or those with smaller amounts to invest, a mutual fund allows you access to a professional money manager. You do need some guidance to ensure you pick a mutual fund(s) with the appropriate asset mix and level of diversification. All of the banks offer a selection of mutual funds.

Listed Securities and Wealth Advisers

Investors that have accumulated significant savings have another option available to them. The full-service wealth division of Canada’s largest banks provide a wide range of investment options, typically for clients with investable assets over certain thresholds (i.e. $250,000, $500,000, $1,000,000). As noted above, wealth advisors are registered with IIROC and are able to purchase a wide selection of investments within an RRSP, including the investments noted above, as well as listed securities. One type of popular listed security is common shares that trade on exchanges such as Toronto Stock Exchange, New York Stock Exchange and Nasdaq.

The greater the size of an investment portfolio, the easier it is to obtain diversification with individual holdings. The benefit of transitioning to individual securities is lowering your cost of investing and having more control over the risk level of the account and each security added. It is easier to diversify your portfolio by sector and geographic exposure. Individual blue chip equities typically generate greater income and provide better transparency.

Avoiding significant mistakes is a key component to the success of an RRSP. Common mistakes we see are being too conservative or too aggressive. Keeping the funds in cash or being too conservative will not result in wealth accumulation after inflation and income tax are factored in. Investing in speculative holdings, unnecessary concentration, and making emotional decisions during periods of volatility are also common mistakes.

Kevin Greenard CPA CA FMA CFP CIM is a portfolio manager and director of wealth management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the Times Colonist. Call 250.389.2138.