Wealth Management Questions with Bill Richardson Part 7

Three Questions for Bill Richardson Part 7

Question 1: I am approaching retirement and am wondering if I should be making changes to my portfolio to reflect my change in circumstances?

It is always a great idea to do a complete analysis of your portfolio when you experience a major life change.  Planning is a three-step process.  1.  Where are you now?  2.  Where do you want to be at a specific point in the future? 3.  How do you plan to get there?

When your circumstances change, like moving from working to retirement, you will experience many changes.  From an investment point-of-view, we call this change transitioning from accumulation to distribution.  That is, you move from a regular income to needing to take income from your investments, depending on what type of pension income you have to support your lifestyle.

When you retire, you have more time to spend on personal things, like travel or golfing so you need to plan out your activities, what they will cost, whether you need to switch some of your investments from growth to income and most importantly, do you have enough savings to support you retirement lifestyle.

I’d suggest you book an appointment with your advisor, or give me a call, and we can analyze your sources of retirement income and discuss your options for trying to meet your retirement goals.


Question 2: I am 85 years old and get a lot of advice from my children and grandchildren about managing my investments.  They tell me that I should convert from investing in stocks to 100% guaranteed investments. Are they right?

Sounds like you have your investments under control and are confident in the way you are managing your money.  The key thing that you need to focus on is “can you withstand a short-term decline in markets and your portfolio”. 

There are many ways to look at your situation.  Do you have enough income to support your retirement activities if your portfolio had a short-term decline of 20 to 30%?  Many people forget that even solid investments like the Canadian banks experience declines of this magnitude from time to time. 

I had a client in your exact situation who called one day with a shopping list of stocks he wanted to buy.  I questioned him on his strategy, and he told me “I have enough money and income to live the life I want to live.  This is extra money that I have earmarked for my grandchildren who are still in their teens and early 20s.  They should be investing for long-term growth so I am investing this money in great companies.

Establishing “buckets” like this is a great way to invest your money.  Determine what you will need money for in the future, how much and when and structure a portfolio that will help you achieve this goal.


Question 3: The Canadian Dollar has been rising lately.  This is negatively affecting my investment returns.  What can I do about this?

You are absolutely correct.  The Canadian Dollar has been very strong since the stock market bottomed in late March but over the last year, it is down one or two percent against the US Dollar.

The Canadian Dollar is a unique counterbalance in portfolios.  When markets rise, the Canadian Dollar often rises as it is considered to be a riskier investment than the US Dollar and when things are good, people are willing to take on more risk.  When markets decline, like the one we experienced in March, there is a “flight to safety” and investors sell the Canadian Dollar and buy US Dollars.  A falling Canadian Dollar is good for most Canadian investor portfolios so losses in stock values are offset by currency gains.

If you are skilled enough to trade swings in currency, that can help your performance when you are right and hurt performance when you are wrong.  For individual investors, it isn’t all that simple to manage currency.  You can sell your individual stocks and buy a hedged ETF, for example but good stocks often outperform ETFs or you can invest in a fund that manages currency but most do not.  We hedge currency moves in both the Willoughby and Northgate funds that I manage so that might be an alternative for you. 

Over time, the value of the dollar remains fairly stable.  Over ten years, the Canadian Dollar has declined by -2% against the US Dollar and as US stocks, in general, are better than Canadian stocks, you are better to focus your attention on investing in the right stocks instead of focusing on currency.


Until next time, enjoy your day!