September 2024
Scott Lewis, MBA, CIM®
Investing is a crucial aspect of financial planning that evolves with the changing stages of life.
Investing is a crucial aspect of financial planning that evolves with the changing stages of life. Whether you're just starting out in your career, raising a family, or preparing for retirement, having a tailored investment strategy can help you achieve your financial goals effectively. In this article, we'll explore recommended investment strategies for Canadians at various stages of their lives.
Early Career: The objective should be to build a solid financial foundation and capitalize on long-term growth opportunities.
Have an Emergency Fund: Before diving into investments, ensure you have a few months' worth of living expenses in something safe and liquid such as a high-interest savings account.
Focus on Growth: Given the long investment horizon, consider allocating a significant portion to growth-oriented assets like stocks or equity mutual funds. While these come with higher risk, they historically offer higher returns over the long run.
Utilize Tax-Advantaged Accounts: As cashflow allows, maximize contributions to Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) for tax-deferred or tax-free growth.
Diversify Wisely: Spread investments across different sectors and geographic regions to reduce risk.
Mid-Career and Family years: Balance growth with stability while planning for future expenses like children's education and buying a home.
Maintain a Balanced Portfolio: Begin to shift towards a balanced portfolio with a mix of growth assets (stocks), income-generating assets (such as bonds) and cash and continue growing your savings.
Plan for Major Expenses: Allocate funds towards saving for a home in a First Home Savings Account (FHSA) and education savings plans (RESPs) for children if you have them.
Maintain diversification: Diversify your investment portfolio across different asset classes and geographic regions and depending on personal circumstances, investing in non-correlated assets such as alternatives or real estate can provide both rental income and potential capital appreciation.
Review Insurance Needs: Ensure adequate life and disability insurance coverage to protect against unforeseen events.
Pre-Retirement: As you near retirement, your investment strategy should become more conservative as protecting your nest egg becomes increasingly important. However, don't become too conservative too quickly, as you may still need growth to fund a potentially long retirement.
Focus on Income and Preservation of capital: Gradually shift a portion of your investments towards income-generating assets such as bonds, cash/GICs. This helps stabilize your portfolio and ensures a steady stream of income during retirement.
Retirement Planning: Evaluate retirement readiness by estimating retirement expenses and all income sources (pension plans, CPP, OAS). Consider consulting a financial advisor to optimize retirement savings to minimize taxes.
Healthcare Costs: Plan for potential healthcare expenses in retirement by understanding government healthcare benefits and considering supplementary health insurance coverage. Most of us we will no longer be covered by employer plans.
Retirement: Maintain financial stability, generate income, preserve wealth for future generations and tax planning.
Focus on Income and Preservation: Emphasize income-producing investments and lower-risk assets to cover living expenses.
Manage Withdrawals: Develop a withdrawal strategy from retirement accounts to minimize taxes and sustain income throughout retirement.
Estate Planning and Legacy: Review estate plans and Wills regularly and consider strategies to minimize estate taxes and ensure a smooth transfer of assets to beneficiaries.
At all stages, it is important to diversify your investments, focus on the long term, adjust as necessary and seek professional advice to create a personalized investment plan.
By adopting these tailored investment strategies at each stage of life, Canadians can build wealth, manage risks effectively, and achieve financial security. Planning early and staying disciplined are key to maximizing investment returns and realizing long-term financial goals.
Author:
Scott Lewis, MBA, CIM is a Portfolio Manager and Wealth Advisor at Louisbourg Investments. Comments or questions may be submitted to Scott at scott.lewis@louisbourg.net.
This writing is for general information purposes only and is not intended to provide legal, accounting, tax or personalized financial advice. If you are not sure how to proceed with a request for further information, seek help from a professional. Any opinions expressed are my own and may not necessarily reflect those of Louisbourg Investments.
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