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Financial Planning Advice.


Some of the best reads in the weekend papers are the ‘case-study’, Financial Planning articles from Andrew Allentuck and Dianne Maley. Garry Marr too.

Despite the individual-specific circumstances, over time the advice from Financial Planning experts such as Adrian Mastracci, Derek Moran or Warren MacKenzie is remarkably similar in that their advice repeats the same themes.

Have a plan. Get advice from a fee-only Financial Planner. (Both Adrian and Derek are Registered Financial Planners RFPs). Planning documents include a budget, an investment plan, an estate plan and an insurance plan, a tax plan and a retirement plan. Together, they form a comprehensive financial plan.

Pay down debt … especially before transitioning in to retirement.

Live below your means. Reduce your spending.

Maximize your RRSP contribution.

Find the appropriate allocation of investment assets to stocks, bonds and real estate. Diversify. Too many Individual investors have concentrated portfolios. (Always a surprise when markets don’t go as planned … or hoped). Many other investors are over-diversified. They have mutual funds that overlap and duplicate each other.

Get your risk tolerance right. Adrian has said that there are basically two types of investors – comfort investors and performance investors. (Many comfort investors ‘think’ they are performance investors. We all are, until markets don’t go as planned … or hoped). In my experience, 7 of every 10 Individual Investors are ‘comfort’ investors. Comfort investors should allocate somewhere around a 60% to stocks and 40% bonds … plus or minus 10%.

These last two steps are critical and too many Individual investors (or their advisors) get them wrong.

Replace high-cost mutual funds with Exchange Traded Funds or Index Funds.

Shift Non-RRSP assets to dividend income earning assets to earn tax-advantaged dividend income.

Simplify. This can make life easier (so you can spend you time ‘living’). And it will ease estate planning. (So there is no mess left for someone else to manage should something unforeseen happen).

Have Insurance. Accidents happen.

These simple guidelines all make intuitive sense. Individual Investors who engage will be better off.

Here are some previously talked about planning tools.

Next time?

Objective Advice.

Doug Cronk CFA is Manager, Investments for a Canadian Pension Plan

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