The Dow declined Monday from last week’s record high as investors worried that surging coronavirus infections could stall economic growth through the winter months. Although the Dow and S&P were off, the Nasdaq closed at a record high, while the TSX was buoyed by the materials sector, which saw gold climb on renewed hopes for a fiscal stimulus package in the U.S.

All four major N.A. markets closed higher Tuesday, with the S&P and Nasdaq setting record highs, as the health care sector rose on positive vaccine news. The TSX also ended the day in positive territory, with energy stocks turning in a strong performance despite a minor pullback in crude prices.

It was a rough session for N.A. markets Wednesday, with the TSX off nearly 80 points as the materials and tech sector weighed on the index. In the U.S., markets retreated from record highs as negotiations stalled once again between lawmakers looking to pass another fiscal stimulus package.

U.S. markets retreated Thursday morning after fresh data showed new jobless claims jumped sharply last week to 853,000 — substantially more than economists had forecast. The latest jobs data underscores the desperate need for more stimulus, but Republicans seem unwilling to sign off on a substantial spending bill. Also weighing on sentiment was the latest coronavirus data from the U.S., with the death toll climbing to a new single-day record of 3,100. By Thursday’s close, the numbers were mixed: the Dow was down 75 points, the Nasdaq was up 67, and the TSX added 33.

Finally, negotiations on a post-Brexit trade deal between the U.K. and European Union are entering their final hours as both sides reportedly have until Sunday to reach a decision. The ongoing drama has once again dragged down the pound, which weakened nearly 1% against the greenback Thursday.

U.S. Markets Lose Ground; TSX Up Slightly

For the four trading days covered in this report, the Dow lost 219 points to close at 29,999, the S&P 500 dropped 31 points to settle at 3,668, while the tech-heavy Nasdaq declined 59 points to close at 12,405. In Canada, the TSX added 72 points to end at 17,593.

Read more…

source https://richarddri.ca/sp-nasdaq-hit-tuesday-highs-but-u-s-economic-picture-remains-uncertain/

“My business stresses me out.” “I don’t have enough time to get everything finished.” “I hate certain parts of my work.” “I keep missing important family events.”

As a business owner, I have said these things too often to be healthy.

For many years, my business was a major source of stress that affected my health and my relationship with my wife and kids. I worried about HOW I was going to provide the best service to my existing clients. HOW I was going to market to new clients. HOW I was going to run the back office.

Notice that I began planning all tasks and projects with the word HOW. It was always some form of, “HOW I’m going to…?” Does this sound familiar to you?

Last week, I provided ​9 secrets to simplify your personal financial life.​ Today, I will discuss how I simplified my business life and offer suggestions for you to do the same.

I will share two ideas from my mentor, author ​Dan Sullivan​:

1. Everyone has a unique ability (or unique abilities).
2. Asking “How I can complete a task?” is the wrong question. It should be, “Who can complete this task?”

Let’s discuss!

The unique ability concept

Do you remember your favourite subject in school? For me, it was math.

(Surprise, surprise!)

I could study it for hours without checking the clock or stressing out. Math tests were easy and math marks raised my overall average. I don’t know why math came easy for me, but it just did.

Dan would say that math is one of my unique abilities.

Unfortunately, I cannot say that I had a unique ability in many other subjects. I tried the sciences (chemistry, biology, physics), but despite my best effort, my marks were average at best. I tried languages with extremely poor outcomes. I also tried sports, but being uncoordinated made playing competitive hockey or baseball difficult.

So I leaned on my math gift as much as possible.

In university, I chose courses with a math emphasis and eventually earned a bachelor of commerce. After graduating, I landed a job in accounting (more math) and eventually found my way to financial planning (more math). I realized I could use my unique ability to support myself and, eventually, my family.

Then, at the age of 29, I started my own financial planning practice, believing that I would spend my career dealing with money, math and people.

But I was wrong…

I was doing everything:

Meeting clients, marketing, preparing financial plans, compliance work, technology purchases, washing dishes, ordering office supplies and many other tasks that had nothing to do with math, money or people.

The more successful I become, the less time I spent working with my unique ability and the more time I spent on tasks that I didn’t do well and lacked the passion to complete.

Of course, I read ​Michael Gerber’s The E Myth​, which explained how an entrepreneur must work ON their business rather than IN their business. It didn’t help.

It wasn’t until Dan Sullivan explained the concept of unique ability that I realized that when I was in university, that’s where I poured my heart and soul.

However, when I started my business, I began doing tasks outside of my unique ability.

That’s when I started hating my business and doubting my career choice.

In “Who Not How”, Dan Sullivan and co-author Dr. Benjamin Hardy say, “Having a capability is not an obligation to use it.”

Instead of doing everything needed in the office, ​I should only assume jobs that give me an unfair advantage over others​. Jobs within my unique ability.

If I could go back to the early days of my business, I would only prepare financial plans and conduct client meetings. For everything else, I would find others whose unique ability suited them to the tasks.

The Lesson

For all you entrepreneurs, focus your time on your unique ability and fill every position within your organization with people performing work within their unique ability. Imagine how productive and self-managing your company would become with this approach. It would be like me spending all my time working on math problems.

The who not how concept

The unique ability concept stresses that we all possess our own superpowers. If we identify and act deliberately within them, we will develop an unfair advantage over our competitors. The second concept assumes we are already doing that and asks business owners to reframe a fundamental question.

Here’s an example I created to help illustrate this concept. How often do you come up with a new idea, product or plan and ask yourself,

“How can I get this done?”

Of course, since you are already busy working within your unique ability, you write down the idea and promise yourself that you will return to it soon.

If you’re like me, that “soon” becomes “later” and then “never.” My great idea dies a slow and painful death…

Dan and Ben recommend that instead of asking “HOW can I get this done?” switch to “WHO can do this job for me?”

Allow me to give you a real life example.

While reading this blog or any others on my website, you may get the impression that I write, edit, pick the title for search engine optimization, choose the images, play with font sizes and, finally, post it and send it to your inbox, right?

In my early blog writing days, I did everything from top to toe.

Today, I simply write a point-form blog of approximately 1500 words and my team of experts does everything else.

It’s a serious team effort!

My editor cleans it up and produces nice sentences and paragraphs. My marketing agency provides imagery, SEO-appropriate titles, fonts and also pulls snippets for social media posting. My compliance department reviews the material for accuracy and brand appropriateness. Finally, ​Ashley Land​ reads the article one last time and then connects it to an app that releases it at the appropriate time and date.

Researching and writing a 1500-word blog takes me approximately six hours, but that’s all I have to do or worry about. I have delegated everything else to other people who are good at doing what I am not. I don’t know exactly how much time the rest of the work takes, but I guess around six hours or so. Most important, its not done by me but by people working within their own unique abilities.

Notice that I stay in my lane of expertise and search for people WHO can do the task that I cannot do well.

I have trained myself to ask, ​“WHO can do this new task?” r​ather than, ​“HOW can I get this done?”. By asking the right question, I leverage the time and skill of others and produce a more valuable service myself. I don’t feel overworked or stressed, but rather more creative and more useful.

Dan and Ben write,​ “WHO expands your vision for what is possible, because you no longer see yourself as the sole means of achieving the result.”​ They also say, ​“There are countless brilliant and capable WHOs out there waiting and wanting to help you. They need only to hear and understand your vision.”

“By freeing yourself from the Hows,”​ they add, ​“you’ll have a reborn sense of purpose and clarity. You’ll feel like you’ve been given another life to live.”

As a business owner, if you commit to finding the right WHOs, your life will improve greatly. I have applied these two concepts in my business, and I can honestly say they have made a major difference in my life.

If you are overwhelmed at work or your to-do list grows longer each week, it’s time to ​set up an appointment​ ​to discuss your unique ability and your appropriate WHOs.

Please give me a call, and let’s begin improving your professional life and increasing your production.

Never Retire Profile

David Letterman

With over 6,000 shows hosted between 1982 and 2015, David Letterman is the longest-serving late night talk show host on American television. Current late night hosts such as Conan O’Brien, Stephen Colbert, Jimmy Fallon and Jimmy Kimmel cite Letterman as their greatest influence, and The Late Show has been ranked by TV Guide as seventh in its 50 Greatest TV Shows of All Time list. Now hosting his new Netflix series My Next Guest Needs No Introduction, Letterman has sat down with Barack Obama, George Clooney, Malala Yousafzai, Melinda Gates, Robert Downey Jr., and many others. A producer (Worldwide Pants) and car enthusiast (with 10 Ferraris part of his extensive collection), Letterman is also a huge financial donor to his alma mater, Ball State University in Indiana. Of his many honours and awards, he is perhaps most proud of receiving the Mark Twain Prize for American Humor. At 73 years old, Letterman keeps serving up his wit and insights for millions of viewers.

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary ​Wealth Navigator Process​ is designed with you in mind. It’s structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the ​Wealth Navigator Process​ ​or our team, call me any time at 416.355.6370 or email me at​ ​richard.dri@scotiawealth.com​.
—
Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

• Subscribe to our ​Never Retire Newsletter
• Contact us to ​order a complimentary e-book
• Check-out our latest ​Wealth Navigator P​odcast
• Follow me on ​LinkedIn

source https://richarddri.ca/stressed-about-your-business-heres-how-to-simplify-it/

North American stocks ended lower on Monday as investors took profits after strong gains over the past few weeks. The Dow dropped 272 points by Monday’s close, while the TSX lost 191, with the energy sector surrendering more than 6%. Although markets lost some ground Monday, it’s been an historic November, with the Dow up 12%, its best month in over 30 years. It was also an exceptionally strong month for the S&P and Nasdaq, which added 11% and 12%, respectively. Speaking of records, the S&P and Nasdaq closed at record highs on Tuesday, largely over vaccine optimism and strong Chinese factory numbers, raising hopes for global growth. In Canada, the TSX also enjoyed a strong day, gaining more than 100 points, buoyed by the materials and financial sectors.

In loonie news, the Canadian dollar strengthened against the greenback Tuesday as Canadian data showed strong Q3 growth. After a rough second quarter, Canada’s economy grew by 40% in Q3, as businesses and stores reopened after Covid lockdowns. The news was also good for Canadian manufacturing, which expanded for the fifth straight month in November, according to data from IHS Markit.

On Wednesday, U.S. stocks wobbled between gains and losses for much of the day’s trading. While all three major U.S. indexes faltered after the opening bell, improving prospects for a U.S. stimulus package helped the S&P and Dow to register nominal gains by late afternoon.

Turning to U.S. jobs data released Wednesday, private-sector job creation fell off in November with slightly more than 300,000 nonfarm jobs added, short of analysts’ expectations.

In Thursday trading, the Dow and Nasdaq finished slightly higher after initial jobless claims for the previous week declined to 712,000, a hopeful sign for the U.S. labour market. By Thursday’s close, the Nasdaq added 28 points, while the TSX gained 40.

U.S. markets register modest gains; TSX flat

For the four trading days covered in this report, the Dow added 59 points to close at 29,969, the S&P 500 rose 29 points to settle at 3,667, while the tech-heavy Nasdaq climbed 171 points to close at 12,377. In Canada, the TSX was flat, adding a single point to end at 17,398.

Read more…

source https://richarddri.ca/dow-turns-in-historic-november-performance-u-s-jobless-claims-fall/

“I’m too busy.” “I don’t have time.” “I’ve got too much going on.” “I can’t get to it all.” How often have you spoken these words or heard these sentiments from friends? ​I’m guessing pretty often.

Are we doomed to forever see our lives as overwhelming and out of control? No.

There are ways to streamline and simplify some things.

In this blog, I will share how I have simplified my personal financial life, and next week I’ll do the same on the topic of my business.

Let’s get started with personal finance advice from the perspective of a financial advisor!

During my married life, my wife Mary took on the responsibility of all things financial.

She paid the bills, reconciled the bank accounts, applied for all health insurance reimbursements, prepared financial statements for our businesses, took care of our rental properties, and monitored all house maintenance contracts (landscaping, snowplowing, window washing, lawn care, etc.).

And she did all this while taking care of the kids, of me, and of her part-time bookkeeping job.

As I have said before, I had the easy job in our marriage.

When I became a widow, I knew I couldn’t maintain my business life and handle all Mary’s responsibilities as well. I had to find a different way to get things done.

I had to find a way that I could continue to run my business, become a mom and dad for the kids, and get all the house chores done.

Long time readers of this blog will know that I tend to overestimate my time availability and assume too much work. Sure enough, early on, I tried to do everything I would regularly do plus do everything Mary would normally do. As you might expect, it was a disaster. I was miserable, overworked, and kept repeating those sentences above. I knew that my life had to change.

Two of my mentors—​Dan Sullivan​ and ​Benjamin Hardy​—co-wrote a book called ​Who Not How: The Formula to Achieve Bigger Goals Through Accelerating Teamwork,​ which changed my mindset and improved my life.

The authors argue that when we get a new idea, project or chore, instead of asking ourselves, “HOW am I going to get this done?” we ask “WHO should do this?”.

To understand my thinking here, you should know that Dan Sullivan believes that business owners (and others) should spend their time in activities for which they have a passion and special talent.

He calls that our ​unique ability.

So if my unique ability is writing blogs on financial planning, then I should spend as much time as possible on it and delegate other activities to people with other unique abilities.

If I dislike administration or house chores, then I should find a “who” with unique abilities to complete those functions.

The goal is to hire people to take on the tasks that leave you overwhelmed, thus allowing more time to concentrate on your unique abilities where the most value for society is created.

Let me share how I have incorporated this philosophy into my personal life.

1. One bank account at one bank.

How many bank accounts and banks do you deal with? How often do you transfer money from one bank or bank account to another?

Obviously, dealing with multiple banks and bank accounts complicates life, wastes time, and may lead to human errors. Personally, I had several accounts at CIBC, TD and Scotiabank. My salary was deposited into a Scotia account but the bills were paid from a CIBC account and my business expenses were paid from TD and Scotia. This mess required multiple transfers between accounts, and we often incurred interest charges from money being in the wrong place at the wrong time.

This problem was easy to fix. I closed all bank accounts except those at Scotiabank. And at Scotiabank, I only have a chequing account and no others, not even a savings account.

Life is a lot easier today, with only excess cash transferred monthly out of this account to my Scotia Wealth Management account (my brokerage account).

2. One credit card.

As with bank accounts, I had several Visas and Mastercards, some of which I never used but kept just in case. Did I really need all of these credit cards?

The multiple credit cards made my wallet bulky, and each card had a different payment date which was impossible to keep straight.

Again, I cancelled all credit cards except the Scotiabank Visa, and I no longer confuse or miss payment dates.

3. Online banking is a lifesaver.

Having your bank accounts and your brokerage accounts connected and available online is a major time saver.

Today, I can go into my ​Scotiabank online account​ and see all my cash balances, investment accounts, mortgages (on my rental properties), Visa balance, credit score and many other useful tools.

And of course, I complete all my bill payments from just one link.

4. Automate your bills.

Most people have the same bills each month, and writing cheques and using the mail system is time consuming and prone to error.

I have the following recurring bills: property taxes, water and waste, hydro, natural gas (delivered by Enbridge, a long-time holding in our dividend model), telephone and cable, car lease, and life insurance.

I established auto payments for each of these through a pre-authorized chequing plan.

For my nonrecurring expenses, such as groceries, LCBO, hair cuts, clothing, gas, travel, and so on, I use my one and only Visa with one electronic payment.

For any bills that cannot be paid by Visa, I use an e-transfer.

Simple. Easy. Streamlined.

5. Automate tracking.

I hate budgeting and tracking expenses, but I’m a financial planner and know how important these are to my goal of becoming financially independent.

I was not interested in building an Excel spreadsheet and manually tracking every penny.

Fortunately, our team member ​Ashley Land,​ mentioned an app called ​Mint ​(owned by Intuit) that can be connected to your bank and download all expenses and income into a simple to read income statement.

It’s a life and time saver.

Every week, I click a button and all my transactions (incoming and outgoing) are automatically downloaded and organized into a personal statement and compared to a budget that I established at the beginning of the year.

There is some start-up time, setting your budget and ensuring all expenses are allocated to the appropriate accounts. But now, my weekly review takes about 30 minutes and includes paying any non-recurring bills.

The program syncs in real time, and I know exactly how my money is spent—and can easily decrease spending if needed.

6. Simplify groceries and meals.

Food preparation is one of the most time-consuming aspects of life.

Preparing a shopping list, driving to the grocery store, shopping, unloading, deciding what to cook, and finally cooking the meal. It can all take a few hours per day, and for some people, all the planning required is stressful.

My solution is to order meal kits. I love meal kits.

Each week, I review 20-30 meal choices and buy five kits for my daughter and I, which are delivered Sunday afternoons. Each kit has all the ingredients needed for one meal and, with some practice, each meal takes about 30-40 minutes to prepare.

Any other groceries that I need (vegetables, fruits, cereals, toiletries) are ordered online and delivered directly to my house.

This solution will save you​ six to eight hours per week.

What would you do with an extra six to eight hours per week? That’s a full extra work day!

7. Hire a property manager.

I own a few investment properties which constantly require something to be done or fixed.

My time-saving solution was to hire a property manager to handle all the day-to-day issues and only call me to authorize purchases like a new light fixture or appliance.

This has made my income properties even more valuable to me.

8. Personal chores.

I like a clean house, especially a sparkling kitchen and washrooms. But when I tried to do the cleaning myself, the house become cluttered, dusty and dirty.

My solution was to hire a professional cleaning company that provided bonded employees and accepted Visa payments.

The company arrives once every two weeks and cleans the entire house. I still have to declutter and do the laundry, but that’s a fraction of the overall household work and time.

For the grass and snow, I hired a great company responsible for both. All I have to do is enjoy the backyard and hot tub.

Also, because my shirts look worse after I iron them than before, I take them to the cleaners for professional care.

Yes, all of these services cost money but they give me back my time. Which is more valuable than the minimal monthly expense. Especially in the long run.

9. Pesky little expenses and monthly subscriptions.

Everyone has those pesky monthly banking or credit charges that they never get around to stopping.

My solution here is radical but I promise it works.

I called Visa, cancelled my card and asked for a new card. This caused an immediate stop to all pre-authorized credit card charges, like Apple Music, Audible, Globe and Mail, and several industry journals (that I never read).

Not only did I ​save more than $200 per month​ but I got rid of the annoyance. The downside to this approach is that you must also restart all the legitimate charges, which can be time consuming.

But it’s a great strategy to examine all those commitments and make changes.

That’s a quick summary of how I simplified my personal finances. Let me know what methods you have used by reaching out on ​LinkedIn​.

Also, if you need help simplifying your personal finances, please give me a ​call​ or send me an ​email​ ​and we can begin working on giving you back your personal time while controlling your finances.

Never Retire Profile

Madonna Buder

If you enjoy sports, you may have seen Sister Madonna Buder—also known as “The Iron Nun”—in a Nike commercial that aired during the 2016 Summer Olympics. In the ad, the 86-year-old (at the time) is first seen kneeling in church in her professional capacity as Sister before she hits the road, swims across a lake, and then jumps on her bike. Buder is the oldest woman ever, at the age of 82, to finish an Iron Man Triathlon. She only began training at the age of 48 and has completed over 325 triathlons since. Now 90 years old, Buder continues to practice as a member of the non-canonical Sisters for Christian Community, a contemporary religious order that is independent of the authority of the Roman Catholic Church, while pursuing her passion for sport. Once asked about the secret to her success, she replied, “I train religiously.”

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary ​Wealth Navigator Process​ is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the ​Wealth Navigator Process​ ​or our team, call me any time at 416.355.6370 or email me at​ ​richard.dri@scotiawealth.com​.
—
Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

• Subscribe to our ​Never Retire Newsletter
• Contact us to ​order a complimentary e-book
• Check-out our latest ​Wealth Navigator P​odcast
• Follow me on ​LinkedIn

source https://richarddri.ca/9-secrets-to-help-keep-personal-finances-simple-when-life-is-complicated/

DEBT.

A “four letter word” when it comes to wealth generation right? I receive a lot of questions surrounding debt from my clients, and for good reason. Because it’s not always easy to answer.

So let’s discuss!

Is it okay to carry debt? If so, what kind and how much? How do I know when I should try to make my money earn for me or, instead, free me from financial obligations?

I get why this topic comes up so much. Within the constraints of this pandemic, debt management can be a particularly urgent consideration.

But even during normal life, you may be plagued by indecision at times. With a goal of financial independence, what is the most prudent and effective path to get there?

This topic can get muddy because both paying off debt and investing are smart strategies for building your net worth. They both play a role. The question is, really, what kind of role and under what conditions?

But first, a quick word on ​spending.​

You can’t pay down debt or invest for your future if you are living beyond your means. Let me say that one more time.

You cannot pay down debt or invest for your future if you are living beyond your means. Period.

• Do you know how much money is coming into your household every month and how much is leaving?
• Are you experiencing any stress in your standard of living? If so, how do you respond to it?
• When a little extra cash comes your way, do you immediately splurge on a vacation?

Your attitude toward spending and saving is your first priority when entering the pay debt vs. invest debate. Take some time to think about your ongoing spending.

If spending is getting in the way of saving and investing, reset to a level in line with your income by finding cost-effective ways to do the things you enjoy in life.

Okay, let’s look at some considerations and priorities regarding debt.

1. Reduce bad debt immediately.

Not all debt is the same.

Mortgages, student loans, business loans and debt consolidation loans ​can be ​forms of debt that add value to your life by contributing to your future wealth or income.

On the other hand, credit card debt, car loan debt, personal loans, and lines of credit do not add value to your life.

In general, bad debt is a loan that pays for anything that decreases in value and lacks the potential to add to your net worth in the long run.

Paying for that fancy vacation with your line of credit is bad debt.

If you want to think in terms of numbers, bad debt is also high-interest debt. What qualifies as high interest? It depends on who you ask. It might be any debt at a higher interest rate than a mortgage or student loan. Or it might be a particular percentage, like 8% or higher.

There is no debate about credit card debt: pay it off every month (which gets us back to living within your means). Then work your way down.

What’s the next highest interest rate you’re paying? And the next? You might want to tackle moderate-interest debt as well. I would suggest any debt at 5% or higher requires attention.

Money going out of your pocket at those rates eats significantly into the earnings on your investments—or into your ability to invest at all.

2. Consider debt repayment as a guaranteed return.

How you answer the pay down debt vs. invest your money question will partly depend on your view of what debt is.

This is not just a savings or cashflow question—some people with solid savings and decent investments don’t think twice about carrying debt. They can “afford” it. They view it as a natural part of life.

But if you look at debt repayment as a guaranteed return, it can be hard to beat “investing” in it. Even if you invest your money aggressively in stocks or real estate, you can’t be guaranteed a return that matches or exceeds what you’re paying out on even a low-rate credit card of 9% to 13%.

With quite low interest rates, mortgages are less of a priority. Personal loans, however, might need your attention.

They offer a pretty good return on your paying them off.

3. Make sure you have an emergency fund.

How is this item about debt? Because it’s a preventative measure. You could pay off all your debt, have little cash in your savings, and find yourself back in the red in a heartbeat.

Never mind that we’re in the midst of a pandemic, which has put financial stress on many people. What if a tree falls on your roof? Your HVAC system draws its last breath and dies? Your business falters for a reason you cannot foresee? Car accident?

Things happen. Unexpected expenses crop up. Emergencies arrive. And it’s important to be prepared.

Look at the possibilities with open eyes and a rational mind. Assess the risks and set yourself up with the funds you need to weather those storms and prevent the future accumulation of debt.

Now, let’s turn our attention to investing. How should you assess your priorities?

1. Tax-deferred (mostly retirement) investments.

If you can minimize or defer tax while investing, take those options seriously.

Begin by being clear about your goals (do you have children to put through school? Grandchildren?), and then take advantage of existing rules and tax vehicles to make the most of your money.

Obvious options are a ​Registered Retirement Savings Plan ​(RRSP), a ​Registered Educational Savings Plan​ (RESP), and a ​Tax Free Savings Account​ (TFSA). If you own your own corporation, your ​Individual Pension Plan​ (IPP) is tax-deductible to the company. And of course, if you or your spouse have an employer-matching pension option, take full advantage of it.

You’ll see that aside from the RESP, everything else on this list is (or could be) dedicated to funding your retirement. Obviously, you can use a TFSA as you desire. But in my opinion, retirement investing is the priority.

If you can, max out all of your available retirement accounts—and earmark non-retirement investment accounts for your retirement, if possible.

2. Invest in assets with high expected returns.

We can debate what “high” means, but generally speaking, with a longer investment horizon, stocks and real estate generally deliver high returns.

I debated the “​stocks vs. real estate​” question in a recent blog. I see both as excellent investment vehicles.

You know by now that I invest in stocks based on the buy/sell indicators produced by models we have created and back tested over many years, such as the ​Richard Dri Canadian Dividend Model​. Avoiding emotional decisions and instead following a rule-based investment strategy should be the cornerstone of your strategy.

When it comes to real estate, consider the data supplied by MLS listings: In Toronto, the average price of real estate properties has increased by 123% over the past ten years. That’s a tremendous return on investment (before subtracting carrying and ownership costs).

3. Balance and rebalance your portfolio.

I’m not suggesting that you only invest in assets with high expected returns. Your portfolio should contain a balance that works for you—say, an asset allocation of 60% equities and 40% fixed income, with a +/- 5% maximum range of fluctuation.

That means that if equities decline to 43% and bonds increase to 67%, you will sell 7% of the bonds and buy 7% of equities, thus returning to the preselected 60/40 mix.

You will need to carefully consider your portfolio balance, depending on your goals, timeline and personality. I add it to this list because it’s a consideration in the pay debt vs. invest decision. Because if you can invest—and I hope you can—the question of “in what?” becomes central.

So we reach the end, and I have not told you exactly what to do. So I will now!

If you have outstanding debt, I believe you should do both: pay down debt and invest. But to have a more precise strategy, you will need to start with a careful list of priorities.

Do you have an emergency fund? Are you carrying bad debt? Have you maximized tax-deferred retirement investments? And so on.

If you’re not sure how to make that list, ​give me a call.​ I’m happy to customize my recommendations to match your unique circumstances and goals.

Never Retire Profile

Madonna Buder

If you enjoy sports, you may have seen Sister Madonna Buder—also known as “The Iron Nun”—in a Nike commercial that aired during the 2016 Summer Olympics. In the ad, the 86-year-old (at the time) is first seen kneeling in church in her professional capacity as Sister before she hits the road, swims across a lake, and then jumps on her bike. Buder is the oldest woman ever, at the age of 82, to finish an Iron Man Triathlon. She only began training at the age of 48 and has completed over 325 triathlons since. Now 90 years old, Buder continues to practice as a member of the non-canonical Sisters for Christian Community, a contemporary religious order that is independent of the authority of the Roman Catholic Church, while pursuing her passion for sport. Once asked about the secret to her success, she replied, “I train religiously.”

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary ​Wealth Navigator Process​ is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the ​Wealth Navigator Process​ ​or our team, call me any time at 416.355.6370 or email me at​ ​richard.dri@scotiawealth.com​.
—
Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

• Subscribe to our ​Never Retire Newsletter
• Contact us to ​order a complimentary e-book
• Check-out our latest ​Wealth Navigator P​odcast
• Follow me on ​LinkedIn

source https://richarddri.ca/should-you-pay-off-your-debt-or-invest-your-money-its-not-as-simple-as-you-think/

The S&P 500 and Dow hit record closing highs on Monday as news of another promising coronavirus vaccine, this one from Moderna, spurred investors’ hopes for a rapid resolution to the COVID-19 pandemic. In both Canada and the U.S., small- cap, value and cyclical stocks led the way. The TSX ended up more than 208 points, led by energy, financials and real estate.

However, hopes faded a bit Tuesday as the grim reality of surging virus cases and lacklustre retail sales sent U.S. markets lower. The number of newly reported Covid-19 cases in the U.S. jumped on Monday to over 166,000 from a day earlier, while hospitalizations hit another high. Meanwhile, U.S. retail sales rose in October at their slowest pace since the spring – an especially troubling fact given those numbers reflect sales before the latest prolonged spike in cases. By Tuesday’s close, all three major U.S. indexes were in the red, while the TSX registered a small gain of 58 points.

U.S. stocks fell even further Wednesday as coronavirus cases continued to spiral out of control in much of the U.S. Also weighing on markets were Tuesday comments from Fed Chair Jerome Powell, who highlighted the uncertainty of the recovery in light of surging infections. By day’s end, the Dow was down nearly 350 points, the Nasdaq was off almost 100, and the TSX erased Tuesday’s gains, losing 58.

U.S. stocks reversed early losses Thursday to end the session slightly in the green, lifted once again by key tech names. While disappointing jobs data showed that new jobless claims in the U.S. actually increased last week to 742,000, momentum appeared to shift later in the day on renewed hopes for a coronavirus relief bill.

Dow and S&P Flat; TSX Registers Modest Gains

For the four trading days covered in this report, the Dow added just 3 points to close at 29,483, the S&P 500 lost just 3 points to settle at 3,582, while the tech-heavy Nasdaq rose 76 points to close at 11,904. In Canada, the TSX climbed 234 points to end at 16,909.

Read more…

source https://richarddri.ca/vaccine-news-lift-markets-but-coronavirus-fears-still-weigh-heavy/

In this week’s blog, I want to talk about investment strategies for business owners. Specifically, I want to review the benefits of investing in stocks and real estate.

Is one a stronger strategy than the other? Or is a combination of both a better approach?

By now, you know that D​ri Financial Group​ specializes in wealth management for business owners so, what we’re about to review will be a compilation of insights designed for those who either own a business or are an incorporated professional.

Let’s dive in.

Long time readers of this blog know that I believe that financial independence is crucial for living your best life.

In my book ​Live Well, Stay Rich, Never Retire​, I say, “When buried under a mountain of financial concerns and stresses, we cannot be the best person we hope to be.”

Financial independence clears the mind and allows us to focus on becoming a better person: a more attentive parent, a more loving spouse, a more caring friend, or a wiser business owner.

For me, the result of having built a successful business is not to accumulate as much money as possible. It’s to accumulate enough money that I can stop worrying about money and start focusing on who I want to become.

How much money do I need to be financially independent? Based on my research, I consider myself financially independent once my investment income equals my lifestyle expenses.

For example, if my lifestyle requirements are $100,000 per year and I assume my investments will generate 4% of passive income, then I am financially independent when I have saved $2.5M. My historical research indicates that a 4% withdrawal rate on a portfolio of $2.5M will produce the required income for 30+ years.

So when you have attained a portfolio of $2.5M, does that mean you should retire?

NO WAY. The next step is to develop ways for your business to become what Dan Sullivan calls a “self-managing company.”

As the owner, this is when you can focus your time only on the business projects within your unique abilities and delegate everything else to people with unique abilities in other areas.

In this article, I will compare two main investment vehicles—real estate and stocks—that may be used to generate all or some of the passive income required to replace your business income.

Let me restate my investment goal: to accumulate income producing assets that generate a reliable stream of growing income until my passive income can comfortably replace my business income. At that point, I consider myself financially independent.

So to reach that point, let’s consider the following comparisons between ​real estate​ and ​stock ownership​ as tools to achieve financial independence as a business owner.

1) Generating profit from business ownership vs owning a rental property.

Many real estate investors consider stock investing as owning a piece of paper (a stock certificate) compared to owning a real tangible building that you can touch with your hands.

However, real estate investors must understand that stock ownership is actually ownership in an underlying business.

For example, if I own shares in Metro, I am a part owner of the business and my investment increases in value when the business does well, and vice versa. As a shareholder, I am able to vote on major business issues, but the day-to-day running of the company is delegated to the management team that reports to the board of directors.

In both cases, investors own either a rental property or part of a publicly traded business.

This argument is a TIE.

2) Generating passive income.

With a history of increasing dividends annually (or almost annually), and ​my investment models​ help identify which stocks to buy and when a stock should be sold. By following the model’s buy, sell and trim up/down signals, I reduce my time commitment with my stocks.

Remember, the day-to-day management of the business is not my responsibility. But I do monitor the business’s progress each quarter by reviewing quarterly financial statements.

A rental property requires managing day-to-day issues, such as tenant complaints, maintenance, rental issues, bylaws, insurance risks, and more. Unless a real estate investor hires a property manager, the daily management is usually the responsibility of the busy business owner. If we assume that the business owner’s time is very tight, then they may have trouble allocating sufficient time to the property management role.

This argument goes to STOCKS.

3) Generating income and capital.

Many people fail to appreciate that a gain from a stock or a rental property comes from two separate components: the income portion and capital gains portion.

For example, when you invest in a rental property, you receive rental income (after expenses) plus a potential property increase (generally, price increases equal to the rate of inflation). When you invest in a dividend stock, you receive dividend income plus a potential stock appreciation (generally, increases by the same rate as the dividend increase).

Both investment vehicles offer both parts of the total gain, but from my experience, a real estate investor has more influence over rental increases than over dividend increases. Rental increases may be connected to building improvements or improving the tenant profile, and both may be influenced by the owner. In contrast, dividend increases are voted on and approved by the board of directors of the company and, generally, the board takes its cues from the CFO, not the investors.

This argument goes to REAL ESTATE.

4) Tax advantages.

When stocks or rental real estate change in value, the gain/loss is deferred until the investment is sold and, once sold, it generally qualifies as a capital gain/loss (some exceptions apply). So the tax treatment on the capital gain/loss is the same for both investment vehicles.

Real estate investors will claim that net rental income may be offset by depreciation (​capital cost allowance​ (CCA) for tax purposes), thereby generating a lower taxable income after claiming the CCA. But a stock investor will state that dividend income is favourably treated in the tax act because of the ​dividend tax credit​ (which offsets the investor’s tax by the tax paid at the corporate level on the same income).

When you sell the property, you may be required to recapture your previously claimed CCA as income. The recapture happens when the sale proceeds exceed the undepreciated capital cost.

This argument is TIE (with perhaps a slight advantage to stocks because of the dividend tax credit).

5) The ability to use leverage.

Real estate investors often boast about the leverage that is available from rental properties. But leverage exists with both real estate and stocks.

For example, a bank may lend up to 70% of the value of the property (some exceptions exist), with the investor contributing the remaining 30%.

A real estate investor will point out that their investment didn’t make 30% ($300,000/$1M), but rather their cash on cash return was actually 100% ($300,000 invested and $600,000 was returned when the property was sold). I would agree with their statement.

I would advise real estate investors that the same example of leverage also applies to dividend paying stocks.

So, go back to the chart, and change “rental property” to the name of the stock you have selected and change net rental income to net dividend income.

Leverage works for both investment vehicles.

This argument is a TIE.

6) Liquidity.

Stock investors often indicate that most stocks may be sold as needed (including a partial sale), but real estate can take months to sell and cannot be sold in portions: the entire building must be sold or not.

From my experience, the ability to sell quickly is not an investment advantage and causes stock investors to be influenced by their emotions, biases and market sentiment. This often leads to selling at the bottom of cycles or buying at the top of cycles.

I appreciate liquidity in my investment portfolio, so I don’t recommend that the entire portfolio is invested in illiquid investments such as real estate.

This argument goes to STOCKS.

7) Dividend yields compared to rental yields.

If you live in Toronto and are thinking of buying a rental building in the GTA, be prepared to find heavy competition from other potential buyers, causing selling prices to usually exceed the asking price and creating low cash on cash yields.

For example, in the current market, if a real estate investor bought a $1M rental property in the GTA, the net rental income (before interest cost) could be as low as $20,000 to $25,000 per year, hence the yield is approximately 2%-2.5%. Real estate investors may find a higher net rental yield if they search outside the Toronto area. The areas around Hamilton, Kitchener, St. Catharines or Kingston may offer yields closer to 3-5%.

However, the further from home, the more likely the investor will not be able to personally manage the property, and the need for a property manager lowers the yield.

Today, a stock investor has many opportunities to buy companies that yield a +5% dividend. For example, as I write this blog, Enbridge pays a 8.7% dividend, Power Financial pays 6.8%, Bank of Nova Scotia pays 6.4%, Canadian Utilities pays 5.6%, and AT&T pays 7.6% (just to name a few).[1]

In addition, active stock investors with a positive cash flow may capitalize on market drops (such as March 2020) and add to existing positions, thereby increasing the average dividend yield.

This argument goes to STOCKS.

Overall, my analysis shows three ties, two wins for real estate and two wins for stocks.

Obviously, the study does not cover every possible difference between the two, but I suggest investors consider including real estate and dividend stocks to form a diversified investment portfolio.

In my investment plan, I have both rental income and dividend paying stocks. Together, they generate approximately 4% annual income and will eventually replace my salary and become my main source of income.

If you have any questions about dividend stocks or wish to discuss whether you should enter the rental market, please give me a call or email me anytime: ​richard.dri@scotiawealth.com​.

So with all things considered, what investment strategy is your favourite? Stocks or real estate?

[1] Current yields indicated are as of November 19,2020

Never Retire Profile

Judi Dench

Unless you follow British theatre and television—such as the two wildly successful series A Fine Romance and As Time Goes By—you may have first come across Dame Judi Dench when she debuted her role as M, the Head of MI6, in 1995’s GoldenEye. Or it may have been in 1999, when Dench won an Academy Award for her supporting role in Shakespeare in Love. Already 61-years-old when she appeared in the Bond franchise, Dench had by that time become Officer of the Order of the British Empire (OBE) and Dame Commander of the Order of the British Empire (DBE). Since then, she has appeared in dozens more stage and film productions, continued to be a patron of over 180 charities, and even makes it onto “best dressed” lists. Recently, Dench has said, “It drives me absolutely ​spare​ when people say, ‘Are you going to retire? Isn’t it time you put your feet up?’”

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary ​Wealth Navigator Process​ is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the ​Wealth Navigator Process​ ​or our team, call me any time at 416.355.6370 or email me at​ ​richard.dri@scotiawealth.com​.
—
Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

• Subscribe to our ​Never Retire Newsletter
• Contact us to ​order a complimentary e-book
• Check-out our latest ​Wealth Navigator P​odcast
• Follow me on ​LinkedIn

source https://richarddri.ca/stocks-or-real-estate-where-should-i-invest-as-a-business-owner/

After sharp declines last week, U.S. stocks rebounded strongly Monday—the day before what may stand to be one of the important, and contentious, elections in U.S. history. Last week’s nearly 6% slide in the S&P 500 might have prompted some bargain shopping as investors looked for undervalued names. By Monday’s close, the Dow was up more than 400 points, while the S&P added 40, and the TSX climbed 116.

Markets turned in an even stronger performance on Election Day as tens of millions of Americans headed to the polls. The Dow had its best day since July, adding 555 points, while the S&P and Nasdaq each added nearly 2%. In Canada, the TSX rose 242 points, led by the tech and financial sectors.

While investors were hoping for a clear election result, a definitive outcome looks to be days, if not weeks away, as both Biden and Trump await the final tallies in a number of battleground states.

Despite the uncertainty, U.S. stocks had their best day after a presidential election on record, led by a rally in tech shares Wednesday. The S&P 500 gained 74 points, its biggest one-day point gain since June, while the Nasdaq surged nearly 4%, gaining 430 points in its best single-day performance since April. Meanwhile, U.S. government-bond yields fell sharply Wednesday, as the prospects for a massive stimulus waned. The yield on the benchmark 10-year U.S. Treasury note declined 113 basis points to settle at 0.768%.

U.S. stocks surged again on Thursday, on track for their strongest weekly rally since April, as investors took a positive view of a potentially divided Congress. By Thursday’s close, the Dow was up 542 points, while the Nasdaq and TSX each added 300 points.

Finally, in currency news, the loonie hit a near two-month high against the greenback Thursday as the safe-haven dollar declined ahead of a Fed policy meeting to weigh the prospects for more stimulus. The loonie reached its strongest intraday level since early September, hitting 76.6 cents (US).

Read more…

source https://richarddri.ca/markets-register-strong-gains-despite-election-uncertainty/

So, your spouse has a spending problem…don’t worry, you’re not alone!

As a financial advisor, I see this issue arise all the time. It’s incredibly common and is one of the topics that most frequently causes issues in a partnership.

Story-time

I was married for almost 34 years. We didn’t fight often but, when we did, the topics of our biggest fights—in order of tears—were:

1. Money
2. In-laws
3. Kids

Allow me to explain, more or less in reverse order…starting with our KIDS!

Our fights over our kids generally dealt with either a) how they should be disciplined, or b) how much financial assistance we should provide.

I was always the bad cop who enforced strict guidelines regarding curfews, school work or ear piercings. If the kids had something big to ask, they spoke with their mother first. Fortunately, Mary was more reasonable and used her persuasion to soften my stance. So together, we managed to eventually agree on almost everything concerning our kids.

The one ongoing conflict would arise when Mary and I discussed whether the kids should use their own money when going out or when buying clothes, haircuts, and so on, or if we should fund them.

Knowing that I’m a financial advisor, I’m sure you know which side of this issue I took…

I argued that I learned valuable money and life lessons by working part-time and paying for my discretionary expenses and most of my university tuition. Mary argued that the kids had their whole lives to learn how to make a living and we didn’t need to rush the process. She believed that while our kids lived under our roof, it was our responsibility to provide the necessities.

Unfortunately, we never came to agreement on this issue. Maybe if Mary had lived longer and we eventually had grandchildren, we would have had a second chance of getting on the same page. I will never know.

The main arguments regarding in-laws (or as some jokingly say, out-laws) always started when one partner felt that the other’s family was interfering with home life.

At the beginning of our relationship, Mary and I would take our own parent’s position, and this naturally infuriated the other spouse. I’m not sure why we didn’t take our spouse’s position. Maybe we were too young and inexperienced to know the damage this approach can have on a relationship.

After a few years of struggling with this problem, we began hearing that some of our best friends were separating and divorcing. The news shocked us.

We had known many of these couples since high school and believed they had strong relationships. Obviously, we were mistaken. We never understood why our friends divorced, but it forced us to realize that we had to stop siding with our respective parents, regardless of the merits of their advice.

We worked hard on this issue and over time improved dramatically. But it was never completely resolved.

This is my counsel if you have grown children: Don’t give advice unless it’s asked for. And even then, tell your kids to discuss the issue with their spouse first. It’s okay if they take a different path in life from yours.

So now we arrived at the biggest topic that caused the biggest fights: MONEY.

I think Mary would agree with calling myself frugal and her spendthrift. I can laugh about these distinctions now, but for most of our married life, this difference was a constant sore point in our relationship.

Mary would buy things we needed, and I would buy things we could afford.

Here’s an example.

When the kids were young, they were involved in hockey, soccer, swimming, dance and other activities, and we often carpooled with other parents. When the time came for us to purchase a car, Mary correctly stated that we needed a safe and reliable vehicle, big enough to carry our three kids plus their friends and everyone’s equipment. I suggested we take a trip to our friendly Honda dealership and have a look around.

Almost immediately, Mary took a liking to the Honda Pilot (today’s approximate price is $55,000 before tax) and I took a liking to the Honda CRV (today’s approximate price is $35,000).

This was our classic stand off.

Of course, from our individual points of view, we were both correct. The Pilot had seven seats and ample trunk space for all our potential passengers. The CRV had less trunk and seating space but was within our budget.

Over the years, I have studied how people can view the same financial issue (and the same group of facts) and reach different conclusions. Our financial profile is partly shaped by the biases we have formed through our life experience, starting as a child.

In our case, I was born into a very modest family where money was a constant concern.

Mary was born into a family where her father owned multiple auto mechanic shops and money was more freely available. Mary was never spoiled, but she didn’t have to worry about the cost of a new pair of shoes.

I know my upbringing has contributed to my frugal attitude toward money and has motivated me to accumulate a significant investment portfolio to buffer against financial stress.

My childhood also influenced my risk tolerance: during market extremes, I am tempted to sell during a crisis (usually at the bottom) and buy during a bull phase (usually at the top).

My biases cause me to be the following type of investor: lower risk tolerance, overly conservative investment mix, high savings rate, large cash position, aversion to debt, delay of gratification.

Consequently, left to my personal biases, I can be overly conservative with my investments and lifestyle.

This attitude leads me to own investments that are too conservative for my age and to save more money in order to offset the low investment returns.

Mary’s upbringing contributed to an attitude of not being overly concerned about her investment portfolio or her spending pattern. She was more confident in her future and her earning abilities. Her biases may lead to a pattern of not saving and investing enough for retirement and taking a hands-off approach with her investment accounts.

I am not saying that our biases are good or bad. I’m saying that they shape how we view financial issues and that it’s important to understand how we are internally motivated to make decisions.

Back to the Honda example.

If I fail to appreciate my natural tendencies, I may simply postpone the purchase of a new vehicle (because of the budget concerns) and make do with the current situation.

Mary, on the other hand, would purchase the Honda Pilot and worry about the cost down the road. Both solutions could create long-term problems.

Researchers refer to the differences I have described as “Behavioural Finance.” This is the study of how our biases shape our decisions, and how we can learn to minimize them to make better decisions.

So it’s no big surprise that Mary spent more money than I did and that this caused friction in our marriage. Yet the research tells us that the conflict should have been expected and that we should have addressed our behaviour with less emotion, preferably before we were married.

My overall point is that money is often the number one issue affecting spouses, and also that the difference in view stems from their individual biases which are shaped by experience, especially the childhood years.

I now include behavioural finance questions in all new client engagements and with existing files.

I ask couples:

• How was money treated when you were a child?
• Did you work during school years, and what did you do with the money?
• What’s your philosophy about money?

Are spouses doomed to argue and be manipulated by their biases into making harmful decisions? Absolutely not.

The solution is to take the time to uncover your biases around money, understand what they mean and how they impact you, and work on improving your communication and decision-making process.

If you find yourselves arguing over money, we can help. Give us a call.

Never Retire Profile

John Grisham

You’ve either read a John Grisham novel or seen at least one of the film adaptations, likely The Firm, The Client, The Pelican Brief, The Rainmaker, or A Time to Kill. Grisham is one of those people who made an abrupt career change midlife, in his case from practicing lawyer and member of the Mississippi House of Representatives to best-selling author (though he would have been a baseball player if he followed his childhood dream). Like many writers, Grisham’s first book (A Time to Kill) was not a success. It was his second, The Firm, that got noticed and began his streak of having a top-10 selling novel every year for two decades following its release. His most recent novel, A Time for Mercy, is his third story involving the characters from A Time to Kill. Just published this month, Grisham is now on to his next book, while he continues his work with the Innocence Project, a not-for-profit committed to using DNA evidence to free those who have been wrongfully convicted of crimes.

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary ​Wealth Navigator Process​ is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the ​Wealth Navigator Process​ ​or our team, call me any time at 416.355.6370 or email me at​ ​richard.dri@scotiawealth.com​.
—
Beyond helping you manage your finances, we take pride in motivating, educating and helping you expand your financial literacy. We are here to answer any questions you have and to help you feel in control of your financial destiny.

If you are ready to dive deeper into your financial literacy journey, we have a wide range of free tools and educational resources available.

• Subscribe to our ​Never Retire Newsletter
• Contact us to ​order a complimentary e-book
• Check-out our latest ​Wealth Navigator P​odcast
• Follow me on ​LinkedIn

source https://richarddri.ca/please-send-help-my-spouse-is-spending-too-much-money/

What questions do we dislike hearing from our clients?

In this week’s blog, we’re going for something a little lighter…irritating questions!

We get some pretty wild questions as financial advisors. Investing in the stock market can be scary and confusing to some and as a result, some odd questions come up from time to time. We’re not saying that these are ​bad q​uestions but it’s safe to say that if you ask your financial advisor one of these questions, you may see your advisor’s blood pressure rise a little bit…

Enjoy!

Question #1: “Should I take some money off the table and run?”

It might surprise you to hear that this in one of the most hated questions I receive.

It implies that I gamble for a living and that I give gambling advice to clients. And it suggests that all of us are just playing one big game of chance.

Here are a few other questions that get my goat: ​“How should we play this market? Why don’t we sell my money and let the house’s money ride? Why are we having such bad luck?”.

If you have ever played a casino game, you know that the odds are stacked in favour of the house. Hence, the longer you play, the higher the likelihood that you will lose money—and possibly every penny of it.

However, if you invest in (not gamble on) the S&P/TSX Composite Index, the longer you stay in, the lower the chance you will lose money (very close to 0% over 30 years).

I consider myself a long-term investor. I do not play casino games, because odds are I will lose money. I hate losing money. So instead, I invest where the numbers are in my favour, and I invest heavily.

Some investors don’t consider investing as gambling or speculating but still wonder if they should sell during market extremes. If you have found yourself in this camp lately, let me clarify the question you are asking—and a few others that often come up.

Question 2: “Can I time the market?”

The short answer: probably not.

Timing the market involves two important decisions:

1. When to sell.
2. When to buy back.

Personally, I find it difficult (if not nearly impossible) to make the sell and buy decision correctly over the long term—without an investment model. For most DIY investors, timing the market will likely fail.

Five years ago, I conducted a study on this timing question, and my research showed that the market DOES provide clues when it’s about to change directions. Based on that data, I built a model called the Smart Fixed Income​.

In simple terms, the model flashes a buy when the market trend is positive and a sell when the trend changes downward.

The research shows very promising performance numbers over the long term. However, the model is not perfect and occasionally the signals are wrong, or we buy too early or sell too late.

In short, if you use a successfully back-tested model, you may garner a benefit over the long term by timing the market. However, if you follow your gut—or, worse, the media—the chances of profiting from market timing are very low to zero.

Question 3: “Can I sell-off my investments to buy stuff?”

During appreciating markets, it’s common to feel motivated to sell some of your holding and use the proceeds to purchase stuff that you want (not necessarily need).

Perhaps the urge is to buy a new car, a bigger house, some fancy designer accessories, or something else…

When clients call to discuss buying stuff, I often refer them to the book ​The Millionaire Next Door​ by Dr. Thomas Stanley. The author explains that some people look rich because they drive around in expensive cars but, in reality, may have very little in the way of assets.

He calls this group “income statement rich.” I​ bet you know a few people like this…

Stanley suggests that investors work on becoming “balance sheet rich.” That is, owning assets that appreciate over time, like stocks, real estate, art, and so on. This type of wealth doesn’t display itself in the way you dress or the car you drive but ultimately results in more wealth, long-term.

In short, don’t let income statement riches dictate your purchases. Concentrate on the balance sheet.

Question 4: “Do I have enough money?”

This question is usually asked by a person who has saved and invested for many decades and feels that they may have enough money to satisfy their lifelong cashflow needs.

I answer this question by projecting the minimum growth rate that is required to generate the desired cashflow.

For example:

If I run different stress tests on the client’s investment portfolio and arrive at a required return of 2% or less, I suggest the client reduce their risk by increasing their allocation of guaranteed investments like GICs.

This investor has “enough” and doesn’t need to assume risk in order to obtain higher returns. They can make ends meet by earning the interest rates payable on guaranteed investments like GICs.

If you have reached your investment goal, stop playing ​the game​ (sorry, I couldn’t resist just one misplaced gambling reference). What I mean is, you can stop investing as you have been. Focus on guaranteed investments and avoid everything else.

Question 5: “Has my risk profile decreased/increased?”

This is a common question for investors. I even asked this question to myself this year!

During market corrections such as in March 2020, I asked myself if I would be better off reducing my risk level. And when the markets began improving (April to August 2020), I wondered if I should increase my risk profile and take advantage of the upside.

Does this line of questioning sound familiar? If it does, keep reading.

Changing the asset allocation of a portfolio during market extremes is usually not a good a plan. But there are three questions I ask before changing a client’s asset allocation:

a) Has your risk tolerance changed?

At the beginning of all investment and financial planning engagements, we ask questions to help determine the client’s investment risk tolerance. Basically, we try to estimate the maximum amount of risk (i.e. stocks) the client will tolerate, which basically means that any additional risk beyond this level would tempt the client to sell during a correction.

For example, assume in a bear market the maximum stock drawdown is -35% and during this period, bonds increase by 5%. Also assume, to start, an asset allocation of 80% stocks and 20% bonds. Different allocations of stocks and bonds vary the impact of the downturn.

Have a look at this:

*Maximum drawdown = (-35%*stock percentage) + (5%*bond percentage)

Can you accept the loss at an 80/20 allocation and continue to believe that the market will recover (as it has done in the past)? Or would you be motivated to sell and protect whatever you can?

If you chose the latter, I suggest your asset allocation is too aggressive and the risk profile should be lowered.

Now, look at an asset allocation of 50% stocks and 50% bonds and maintain the other assumptions. Here, the maximum drawdown is reduced to -15%.

Can you mentally withstand a drawdown of approximately 15% without losing sleep or selling?

In short, the ideal is to keep adjusting the asset allocation until arriving at a percentage of bonds and stocks that allows you to maintain your position during the worst market corrections.

If stress testing is performed at the beginning of the engagement, investors generally don’t question their asset allocation during market extremes. However, if they didn’t consider worst-case scenarios when selecting an asset allocation, then investors may have assumed an overly aggressive portfolio and an asset allocation adjustment would be necessary.

b) Has your risk capacity changed?

During a financial planning review, we evaluate all sources of income, including “potential” sources such as inheritances, employer pension plans, or divorce settlements.

For example, assume a client expects a sizable inheritance within 10 years. We include the inheritance in their retirement projections in year 10, and we emphasize equities over bonds because the inheritance covers 70%+ of their cashflow requirements in retirement.

Then, assume that in year three, the investor learns they will no longer be receiving the inheritance because of family issues. Now, they must rely on their own investment portfolio to cover 100% of their retirement cashflow needs. They can no longer accept large swings in their portfolio because they may need to sell some of it, even during market downturns.

This is a good example of a life event that reduces an investor’s capacity to accept market volatility, hence requiring an asset allocation adjustment.

c) Has your risk willingness changed?

Generally, the younger the investor, the greater their willingness to accept volatility/risk. Younger investors have longer time frames to recover from market corrections, so they are more willing to accept market downturns.

However, I know many young clients who have a very low risk toleration (I call them scaredy cat investors). I also know of older investors who are very willing to accept market risk regardless of their age (I call them honey badger investors—have you seen these fearless creatures in action?).

Again, when the client’s willingness to accept risk is discussed in advance, I generally find that they don’t question their asset allocation during market extremes.

So, before changing your asset allocation, ask yourself if any of these have changed since drafting your Investment Policy Statement (IPS)​: risk tolerance, capacity to assume risk, or willingness to accept risk.

More often than not, a client answers no and leaves the asset allocation as outlined in their IPS. If nothing has changed in their investor profile and a proper stress test was performed before investing in the first place, then there is no reason to change the asset allocation (especially during a market correction).

In some cases, the client answers yes to one or more of the questions. Usually, they lower their risk tolerance.

A change in risk tolerance during a market correction is expected with less experienced investors. When we talk about it, I ask if the investor has tested their asset allocation decision during a real market correction. If they have little experience with market corrections, I usually err on the side of caution and recommend a lower equity exposure than otherwise recommended.

In conclusion, consider what you are actually asking when you are tempted to “take money off the table.” Ask yourself why you feel compelled to sell some or all of your equities. And keep asking questions until you arrive at the real reason you want to sell. This process should stop you from selling because of media headlines or emotional anxiety and limit your asset allocation changes to situations when your investor profile changes.

Never Retire Profile

Louise Glück

If you’re not a literary type, you may never have heard of Louise Glück—but the whole world knows who she is now. Glück is this year’s recipient of the Nobel Prize in Literature, selected “for her unmistakable poetic voice that with austere beauty makes individual existence universal.” The 77-year-old American poet and essayist has won dozens of prizes, including a Pulitzer, and was Poet Laureate of the United States from 2003-2004. At the Nobel announcement this year, Glück’s poetic style was described as “candid and uncompromising” as well as “full of humour and biting wit.” While she studied at Sarah Lawrence College and Columbia University in the 1960s, which is also when she began writing, Glück did not earn a degree and supported herself by working as a secretary. Now a professor and writer in residence at Yale University, Glück has no plans to put the pen down. If you feel like dipping into this poet’s body of work, perhaps try her 1992 award-winning collection, ​The Wild Iris.​

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier. Dri Financial Group’s proprietary ​Wealth Navigator Process​ is designed with you in mind. Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the ​Wealth Navigator Process​ ​or our team, call me any time at 416.355.6370 or email me at​ ​richard.dri@scotiawealth.com​.
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source https://richarddri.ca/take-money-off-the-table/