Secure your portfolio

Secure your portfolio, secure your future

Financial Post August 01, 2009

The client: A retired high-tech worker in his mid-50s. He was a mid-income earner and is married with one grown child.

The portfolio: The client is an aggressive investor. His portfolio is 80% high risk and 20% medium-high risk. The bulk of assets are in international global technology and telecommunications funds, all in non-registered plans.

The problem: “This is a guy who lived through the tech meltdown of 2000,” says certified financial planner and CGA Ron Harvey, with Independent Planning Group in Ottawa. “He thought it couldn’t happen again.” Problem is, his portfolio is overweighted in an extremely volatile sector. “The client’s argument is ‘that’s the future, we’re not going to go back to not needing technology,’ which I agree with, but these are very risky investments and not all will survive,” says Mr. Harvey. “This was proven this year, and long before that.”

The fix: The first step was asking what the client expected his portfolio to do. Like most of Mr. Harvey’s clients, he wanted to maintain his lifestyle for the rest of his life. “I asked ‘why so aggressive?’ and he said, ‘Well, I’m not a young guy.’ I pointed out that he was younger than me.” Once the client realized that his portfolio would actually need to last another 35 or 40 years, he backed down from his high-risk convictions. “You don’t need to double your money every year,” Mr. Harvey says. “If you want to take that risk, buy a lottery ticket.”

He rearranged the client’s portfolio to reflect a more prudent investment style (35% fixed income, 65% equities). “I put the focus on basic, boring types of investments,” he says. The new portfolio carries only a 20% high-risk portion, which is a much more comfortable level. “The TSX averaged out 8% since 1950. If you choose a portfolio with an average growth rate between 6.5% and 7% — with inflation at 3% — you’ll never run out of money.”

The outcome: Mr. Harvey prefers to leave the specifics to fund managers. He has a large pool of trusted fund managers he returns to again and again. “I only work with people I trust,” he says, and for this client he chose three different managers to handle different portions of the portfolio, based on their expertise. “For example, I know a woman who has been managing money on a conservative basis since the ’70s. Why wouldn’t I have her manage my Canadian equity fund?” And, with a less risky portfolio, the client doesn’t need to worry about what his money is up to.



35% fixed income, 65% equities – Equities (risk balance):

25% low-medium (balanced funds)

50% medium (Canadian equity, some balanced)

25% medium-high (international equity) – Equity breakdown:

20% financial services

20% resources

15% consumer products

10% technology

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