A Solid Base is the Most Important Step

By Elliott Routly, RBC

There is a seemingly endless flow of investment tips and strategies available from brokers, financial advisors, the internet, and many more sources. With all the opinions and data out there, many of which conflicting, it may seem daunting to sort through it all. To begin, it is imperative to build a base strategy that you’re comfortable with. Once the basics are covered, you can then look to add further sophistication and unique vehicles to your investment strategy. The following are components that every strategy should contain:


1. Have an Investment Policy Statement (IPS) and/or Financial Plan

These documents help provide a clear course now and down the road for your family’s creation of the wealth, and they outline a guide to investing that will help keep your emotions in check.


2. Be Tax Efficient

Take advantage of tax efficient vehicles such as RDSPs, RRSPs, TFSAs, and RESPs as they can provide significant additional after-tax returns. Be sure to make the most of these opportunities by allocating your least tax-efficient investments (interest producing investments) to them before your other holdings.


3. Choose the Asset Allocations that work for you

A large part of portfolio returns and portfolio volatility is determined by the asset allocations that you choose. If your portfolio is too volatile, you’ll be up at night worrying about it, or even worse, you’ll choose to sell at inopportune moments. By being realistic about your risk tolerance, you will make better investment choices, be less stressed, and make better returns on your money.


4. Invest in Consistency and Liquidity

The base investments of your portfolio should be in vehicles that show historic stability and are highly traded. Investing in vehicles that move erratically and cannot be sold easily opens up a great deal of additional risk and stress, usually unnecessarily.


5. Contribute Regularly

Contributing on a regular basis to your portfolio is a great way to build wealth. It can be difficult to stick to your plan by making lump sum contributions, so making smaller monthly commitments can be an easier way to keep your investment contributions on track.


By creating a base from which to work from, you will find day-to-day investment decisions easier to manage, and you will stay closer to the path needed for reaching your long-term objectives.


Elliott Routly, CFA is the lead of Routly Wealth Management, a full-service investment advisory and financial planning group within RBC Dominion Securities. Elliott brings his unique engineering and instutional portfolio manager background and strategies to his advisory clients.