I have a confession to make. You may not like it. Clients may question why they trust me with their savings. It is the honest truth though.

 

                I have no idea what will truly happen when I recommend an investment for you.

 

                There I said it and it feels good. Now before I get too flippant and scare everyone away, let me preface this a bit. I honestly have no idea if CN Rail or CP Rail will have better performance in the future. I can think both will do perfectly fine for a lot of sound reasons right now, but I also have zero information that is pertinent beyond the next few weeks…maybe next few months if I am lucky. The reality is none of us knows a thing that will happen tomorrow let alone how everyone will react to it.

 

                Here is what I DO know and this is the foundation of how I work with all my clients.

 

1. Financial Planning is much more important than investment management. Consider it as the engine of your car. Sure you can push a car in neutral and it will move but it doesn’t go very far and is a lot of work. Having the engine engaged makes driving a lot easier. Just remember that like a car’s engine, your plan needs regular tune-ups.
2. Costs matter but they shouldn’t be the main decider. Good advice is worth it. Good advice is helping you stick to your plan even when it seems everything is working against you. We talk about “Alpha” in our industry as the measure of performance compared to the market. Well an Advisor adds Alpha by keeping emotions in check and letting time in the market do its job for your savings.
3. Taxes matter, maybe even more than costs. In Canada we have a number of different options for investing in tax-deferred or no-tax plans. Too often we use simple logic and put the bonds into RSP/TFSA and the dividends into yearly taxable accounts and leave it to ferment over time. You should also consider the impact of growth of your tax-deferred accounts over many years when making your calculations. Your plan should consider not only the short-term taxes but also exposure to longer-term taxes as well.

 

                You will notice not once did I mention “picking the best investments”. Why? Because I believe that is a fool’s game. The industry is filled with great analysts who do exceptional work and know companies and industries inside and out. They are brilliant and are important part of the process but they could be exactly right on their estimates for a company’s annual earnings and still be totally wrong on the outcome for that company’s stock.

 

                The key part that they; really everyone, miss is the human reaction to this information. Alphabet Inc. reports great earnings, better than expected yet the stock goes down. That’s human emotions and it makes ALL THE DIFFERENCE in how the market moves. It is also the one part we obsess over because it is the one part we cannot control and we crave control over our environment (Editor: veering too deep into Psychology there, Sam)

 

                What we often miss is that we don’t think about the parts we CAN control. You can choose to spend more or save more. You can choose to trade in and out and in and out or just stick with your asset allocation strategy. You can choose to worry about your taxes each year or you can plan for many years. Each of these decisions are entirely up to you and will have a huge impact on your success. That is the one thing I DO KNOW and it may be the most important thing of all.

 

 

 

                If you want to chat about building a plan for you and your family, contact me today.

 

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