Anthony Layton MBA, CIM

Chairman & CEO, Portfolio Manager

Peter Guay MBA, CFA

Portfolio Manager
  • T514.875.7566 x 224
  • 1.800.875.7566
  • F514.875.9611
  • Place Alexis Nihon
  • 3400 de Maisonneuve Ouest,
    Suite 1501
  • Montreal, Quebec H3Z 3B8

7 steps to maximize your wealth in a world of diminishing returns

Where are the markets headed? Is Trump good or bad for the stock markets? How about China? Will its economy slow down or accelerate -- and what does it mean for the price of oil? Is the dollar going up or down?

My answer to these kinds of questions might surprise you: I have absolutely no idea. And neither do the forecasters who actually make their living coming up with predictions about this stuff.

The research shows their crystal balls are just as foggy as yours and mine. The bottom line? Doris Day said it best...Que sera, sera...the future’s not ours to see.

Before you hit the panic button, this doesn't mean you’re powerless. There are steps you can take to improve the performance of your investment portfolio and maximize your wealth.


Returns are falling

While we can’t predict the future, we still have to work with some assumptions about what returns to expect over the long term, based on history. And we see some big trends we believe will reduce them in the future.

These trends include low inflation, low interest rates and sluggish economic growth. The result is that our research team at PWL Capital expects a balanced portfolio to return 5% a year on average versus a historical return of 8.4%.

So you can see there’s not a lot of room for error. You need to squeeze all the juice you can out of your portfolio. To help you do that, here are seven steps you can take right now to maximize your investment returns.

  1. Understand the difference between risk and danger. Danger is the possibility of losing a devastating portion of your savings. Risk is the possibility the value of your portfolio will diminish temporarily in any given year.
  2. Be patient. Investing is about taking prudent risk and being compensated for it. This takes time. If you jump in and out of the markets chasing returns, chances are you will lose.
  3. Diversify your portfolio to the extreme. Diversification across and within asset classes is an effective way to remove danger from your portfolio. Once danger is removed, you become empowered to take on more risk. You can handle more portfolio fluctuations because you understand your wealth is not endangered.
  4. Capture risk premiums. The research shows you can boost your overall returns by tilting your portfolio toward higher-return securities. You can choose corporate bonds over government bonds. Value over growth stocks. Small cap over large cap stocks.
  5. Minimize your investment costs. As you may know, Canadians pay some of the highest investment management costs in the world. By reducing your fees and commissions, you increase your returns, risk-free. Our studies show this can add up to a full percentage point to your returns.
  6. Minimize your taxes. Just like cutting investment costs, reducing the bite the government takes from your portfolio is another risk-free way to boost your returns. Our research indicates you can save up to half a percentage point by minimizing your taxes.
  7. Rebalance your portfolio. According to our research, you can add four-tenths of a percentage point in return by periodically rebalancing your portfolio back to your target asset weightings.

The gains from these steps all add up. And that’s crucial in a time of diminishing returns. So there’s no time like right now to get started in improving your portfolio management.

By: Anthony Layton | 0 comments

I’m a Professional, Should I Incorporate?

Welcome back to “Do It Together” financial planning. In my last series, I talked about the importance of creating a will. Today we start a new series talking about business incorporation.

I get asked this question frequently from doctors and lawyers about whether they should incorporate their business, and the short answer is yes because there are many advantages of incorporation.


 Tune in to today’s “Do It Together” video to learn more on the “why” and the “how” of incorporating your business. And please let me know if today’s topic generates additional questions or subjects I can cover in the future.

By: Peter Guay | 0 comments

What is an IPS and why you need one

Investment advisors make sales calls every day, pushing investments that often aren’t in their clients’ best interest.

Sometimes they don’t even bother to make a call. They just load up accounts with investments and beg for forgiveness later, if and when things go wrong.

How can you prevent this from happening to you? Three words: Investment policy statement. You can think of an investment policy statement (IPS) as a contract between you and your investment advisor.

By filling it out and signing it, you and your investment advisor agree what will be in your investment portfolio, and what will not be in there.

Most importantly, your IPS establishes how much risk you are willing to take in your portfolio by setting down your target asset allocation.


Setting a target asset allocation

What’s a target asset allocation? Well, you might agree with your advisor, for example, that your portfolio will hold 5% in cash, 40% in bonds and other fixed-income securities, and 55% in stocks, also known as equities.

These basic asset classes would then be broken down further. For example, you could designate 20% of the equity portion be in Canadian stocks, 50% in U.S. stocks and 30% in international stocks.

You could take it another step by saying, for example, you don’t want any new stock issues in your portfolio. Or, you could say you only want ethical or green investments and define what you mean by that.

The important thing is that it’s written down.

How much is your advisor earning?

It’s also crucial for your IPS to clearly state how your investment advisor will be compensated and by how much. It should list all commissions, fees and charges you will be paying to have your investments managed.

Why is an IPS so important?

First and foremost, it keeps you on track in terms of controlling how much risk you are taking in your investment portfolio.

Think about the strong returns we’ve seen in the stock market. As your stocks appreciate, they represent a greater percentage of your portfolio and more risk.

Your investment advisor would see that and rebalance your portfolio in line with your IPS. He or she would increase the percentage of fixed income to re-establish your target asset allocation and agreed risk profile.

Helps you not to panic

On the other hand, say the market is falling sharply and you start to panic. You want to sell stocks. Your investment advisor can use your IPS to persuade you to ride out the storm and even buy stocks to rebalance on the other side.

Finally, an IPS can help protect you from bad or risky investments. Too often in Canada, advisors have conflicts of interest and clients are sold investments that are not in their best interest.

I’m proud to say that at PWL Capital, we sign an IPS with all our clients. We have done so since we started the firm 20 years ago. We think it’s an essential tool when you venture into the investment world.

By: Anthony Layton | 0 comments

Where There’s a Will, There Are Three Basic Documents

In my last “Do It Together” video, I introduced how important it is for young professionals with families to have a will in place to protect their loved ones’ interests – especially your kids. Once you’ve thought through your basic intentions, the next step is to reflect them in three basic documents: your will, your power of attorney, and your mandate (or living will).

That’s it. Then you’re done, and you can get back to living your life to the max. You may enjoy it even more fully, knowing your kids are taken care of, come what may.

Tune in to today’s “Do It Together” video to learn more. And please let me know if today’s topic generates additional questions or subjects I can cover in the future.


By: Peter Guay | 0 comments