How much risk is right?

How much risk is right?

Build a portfolio that doesn’t keep you up at night—while achieving your goals

By James Parkyn - PWL Capital - Montreal

After three straight years of double-digit equity gains, it’s easy for investors to feel bullet-proof. Yet history reminds us that market corrections are inevitable.

Times of euphoria are a good time to ask ourselves: How much of a drawdown could I truly tolerate? If you don’t think about this now, you’re more likely when a correction hits to make emotional decisions that undermine your investing success.

3 pillars of risk profiling

At PWL Capital, we determine our clients’ risk profile as an important step of creating their investment plan. The process includes filling out a risk profile questionnaire. We’ve now made it available on our website (try it here).

The questionnaire helps determine three important things about an investor:

1. Their financial ability to take risks

2. Their psychological ability to tolerate losses

3. Their need for risk

Financial ability to take risks

When designing an investment plan, it’s important to assess a client’s financial capacity to handle risk. This breaks down into a few elements.

• Time horizon—The longer you have, the more time there is to recover from inevitable down markets. Time horizon influences the portfolio’s allocation of stocks versus bonds—with the latter acting as a stabilizer or safe bucket. It’s worth noting that retirees can have very long time horizons of over 20 years.

• Value of your human capital—This is the investor’s lifetime capacity to earn income from work, save and build a retirement nest egg. Some have very stable cash flows; others less so. Some investors maintain the value of their human capital past retirement age, continuing to earn employment income.

• Risk capacity—To evaluate risk capacity, we prepare a detailed balance sheet for the client. A personal balance sheet is like getting a blood test at a medical checkup. It gives important insights for understanding an investor’s financial health and capacity to withstand large drawdowns.

Psychological profile to tolerate losses

Using the risk profiling questionnaire, we also assess the client’s emotional comfort with volatility and seeing losses in their portfolio. There’s an old saying: “An investor really learns their true risk tolerance in bear markets.”

Loss tolerance is important for designing a portfolio that the client can comfortably stick with for the long term. If an investor panics and sells in a bear market, they’re at serious risk of reducing long-term returns while they wait on the sidelines. As we often say, timing the market is virtually impossible.

Thinking about loss tolerance is especially important today after the exceptional stock markets of the last three years. It’s useful to keep in mind that markets don’t just go up. Global stocks experienced six bear markets (a 20%+ decline after inflation) in the past 55 years. That works out to 1.1 such declines per decade on average.

If you fear you may panic and sell, then you should reconsider the balance of stocks versus bonds in your portfolio.

During annual review meetings, we show clients our model portfolios and the returns pre-fees over the last 20 years. The worst period was March 2008 to February 2009. A balanced account (60% stocks, 40% bonds) dropped about 20%, while an assertive portfolio (80% stocks, 20% bonds) fell about 27%.

Despite these losses, a balanced account had a 6.73% annualized return over the past 20 years. An investor who held the entire time would have seen their holdings multiply by 3.68 times. An assertive portfolio saw an annualized return of 7.93%, with their holdings increasing by 4.6 times.

Need to take risk

Finally, we evaluate the client’s investment goals and balance sheet. If your assets are limited, you may need to take on more risk to achieve your financial goals. On the other hand, a multimillionaire who lives on $50,000 annually doesn’t need to take on undue risk.

We do financial planning with clients to understand their needs. For accumulators, we estimate the savings they require. For retirees, we aim to find a sustainable withdrawal rate.

We also consider expected returns on investments and inflation. (You can find our latest twice-yearly report on estimated expected returns in podcast #79 and this blog.)

How aging alters perception of risk

New research says we must also take into account aging. Brain systems for learning, reward and risk assessment evolve over a person’s life, says University of North Carolina finance professor Camelia Kuhnen in a recent research paper. “Those changes systematically affect financial behavior.”

Each person is different and some are unaffected. However, Kuhnen says, aging can reduce the brain’s ability to learn from experience. This is especially true in uncertain situations—such as the environment investors face.

“When decisions depend on tracking outcomes over time—such as figuring out which investments are paying off—performance declines,” Kuhnen says.

This doesn’t mean aging degrades financial decision-making. Rather, we must consider that older people may learn differently and respond differently to information.

At the same time, older adults often outperform younger ones in some areas: managing emotions and maintaining discipline during stressful times. They’ve lived through so many bear markets that they learn to tune out the noise. All this goes into helping to prepare a client’s investment plan.

Risk you can live with—and profit from

Past experience with downturns teaches us important lessons. Markets have prospered despite the dot.com crash, 911, the 2008-09 financial crisis and Covid. The key to navigating these periods is to have a long-term investing plan that reflects your risk profile and sticking to it with discipline.

As David Booth of Dimensional Fund Advisors put it: “Since we know risk is unavoidable—and it’s the source of investment returns—you want to find the amount of risk that is right for you.”

Well said, David. A patient long-term approach converts risk into gain.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

The Value of Good Financial Advice

The Value of Good Financial Advice

By James Parkyn - PWL Capital - Montreal

September marked 25 years since a milestone in the world of financial advice. In 2001, the investment firm Vanguard released its “Advisor’s Alpha” study—research that redefined what it means for advisors to add value for investors.

Rather than viewing success as beating the market, the study suggested that advisors should focus on helping investors with portfolio construction, financial and tax planning, and discipline.

Vanguard later quantified that finding to show the impact it could have. The firm found that advisors who use wealth management best practices can add up to 3% or more in net annual returns for their clients. That added value compounds significantly over many years.

The value comes not from trying to predict the next market move, but from guiding investors to make good choices to achieve their financial goals.

Where does the value originate?

Behavioural guidance–up to 2% or more

One of a good advisor’s most significant contributions is coaching investors, Vanguard found. During market swings, fear and euphoria can push investors toward rash actions that undermine their plans. A knowledgeable, experienced advisor can help clients hold steady when markets fall and avoid overconfidence when they rise.

Vanguard’s research shows that investors who stuck with a 50-50% stock-bond mix through the 2008 financial crisis enjoyed a 209% return by 2024—versus a 16% loss for those who moved fully to cash.

Those who held a mixed stock-bond portfolio through the Covid crisis gained 31%, while investors who went to cash lost 12%.

“These figures demonstrate how a diversified investor has fared well by sticking with a balanced portfolio even through severe market downturns,” Vanguard said.

“Moving to a more conservative allocation… is a natural response. However, while it’s understandable to want to alleviate immediate emotional pain and anxiety, deviating from one’s long-term asset allocation after market declines has proven detrimental to the portfolio’s long-term growth.”

Emotional circuit breakers

This is a key insight. Since Vanguard’s report came out in 2001, many advisors were persuaded to shift their focus more toward educating clients. This is a role we strongly embrace at PWL.

As Vanguard puts it, “Advisors acting as ‘emotional circuit breakers’ for their clients can prevent significant wealth destruction. Advisors have increasingly helped their clients understand the rationale behind their asset allocation, the potential outcomes and the inherent risks. By setting realistic expectations, advisors have helped clients be in a better position to ‘tune out the noise’ and reach their investment goals.”

Tax-loss harvesting—up to 1.5%

Advisors can add up to a 1.5% net annual return for clients through tax-loss harvesting. This involves selling investments that have declined in value to realize a loss, which can offset taxable gains. Those proceeds are then reinvested to maintain exposure to the market.

Investment selection and asset allocation—up to 1% or more

Advisors can add 1% or more for investors by devising a broadly diversified, low-fee portfolio based on the client’s goals and risk tolerance. The exact amount of value varies widely based on the investor’s portfolio.

A well-diversified mix ensures that investors get exposure to top market performers, while avoiding chasing yesterday’s gains. As we reported in a recent blog, a tiny portion of stocks—just 4%—was responsible for all stock market wealth creation from 1926 to 2023 above a risk-free investment in Treasury bills. Slightly over half of stocks lost money over their life.

We can’t know what the winners will be in the coming years, but we can get exposure to them by holding broad index funds that own all the companies in various market indexes. We can further diversify by holding a mix of US, international and domestic stocks, along with bonds.

Withdrawal strategy—up to 1%

How to spend from your portfolio is a crucial question. Whether for retirement or another purpose, a planned sequence of withdrawals can minimize taxes and help assets last longer.

Advisors can make a big impact for investors. Vanguard found that a coordinated approach can add up to 1% to annualized returns compared with random withdrawals, while reducing the risk of depleting assets too soon.

Rebalancing—up to 0.12%

Good advisors help investors by regularly rebalancing their portfolio back to its target allocation. Rebalancing trims positions that have grown too large and reinvests in those that have lagged. The idea is to keep portfolios aligned with goals and risk tolerance and ensure exposure to market winners.

This can add up to 0.12% in value annually, Vanguard found. It might seem like a small impact, but the value becomes significant when compounded over many years.

Instilling confidence

Vanguard’s figures are impressive, but I believe they capture only part of what great advisors deliver. Much of an advisor’s impact can’t be captured in percentages. It shows up in better investor decisions, reduced stress and the confidence needed to maintain the discipline key to financial success.

We at PWL take pride in our craft, and Vanguard’s research underscores why. It’s about helping people build perspective, resilience and wealth that endures far longer than any market cycle.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

Passive Beats Active Again in 2024

Passive Beats Active Again in 2024

By James Parkyn - PWL Capital - Montreal

Passive funds offer better results and a steadier path to navigate tough markets

It’s during challenging times like this that people find out what kind of investor they really are.

What is your tolerance for risk and volatility? Do you react to the headlines (which often means buying high and selling low)? Are you paralyzed by indecision—possibly missing opportunities because you’re waiting for the right time to act?

Mindset makes all the difference. When you adopt a long-term investor mindset, short-term macroeconomic events shouldn’t change your investment plan. Markets are out of our control and can’t be predicted—but you can control your own emotions and tune out the noise.

Sticking to the plan

Of course this isn’t always easy, and today’s volatility can test our discipline. At PWL, we like to keep in mind the words of the world’s most famous investor, Warren Buffett. He is a well-known advocate for tuning out the noise, managing emotions and sticking to a long-term investment plan.

As Mr. Buffett puts it, “Stocks are safe for the long-run and they’re very unsafe for tomorrow.”

This quote is a good jumping-off point to the topic of our latest Capital Topics podcast—passive versus active management.

80% of active funds underperformed

Readers of this blog will know we aren’t fans of market timing and active management. Two new reports add to the ample evidence supporting our view. The SPIVA Canada Scorecard measures the performance of actively managed Canadian funds against their benchmark or index.

This year’s findings are similar to the results we’ve written about in the past. Over 80% of active funds underperformed their benchmarks in 2024. This includes 72% of international equity funds, 89% of Canadian Equity funds and a remarkable 96% of Dividend and Income Equity funds.

This wasn’t just a fluke bad year, either. The underperformance generally gets worse with longer time horizons. Over 10 years, 93% of active funds underperformed their benchmarks, including 82% of Canadian Small and Mid-Cap funds and 100% of Canadian Focused Equity funds.

A minority of stocks drove most gains

The stark underperformance isn’t explained only by fees. Funds benchmarked against the S&P/TSX Composite Index underperformed by 4 percentage points last year, while funds benchmarked to the S&P World Index underperformed by 9 points. The active managers in the S&P World Index category left a third of the performance on the table last year since the benchmark gained 30%.

A key reason for the poor results, SPIVA found, is that “a minority of stocks drove most of the gains…. active stock selection delivered worse-than-random results….

“Opportunities to generate outperformance through astute stock selection, sector and capitalization tilts were present, but difficult to capture,” the report concluded. “Patterns of majority underperformance continue to illustrate the headwinds facing many active managers year after year.”

Just 4% of stocks generated wealth

The finding reinforces data we published last year that just 4% of stocks generated all U.S. stock market wealth from 1926 to 2023 above a risk-free investment in Treasuries. A majority of stocks—51.6%—actually had negative compound returns.

This means if you didn’t own those 4%, you would have lost out on the massive 22,940% gain in equities during that period. How do you ensure you own that 4%? Not through jumping in and out of stocks, but via owning the entire market with broadly diversified, passively managed index funds, as our clients do at PWL.

Only 22% of actively managed funds outperformed over 10 years

The story is similarly sad for actively managed funds in the U.S., according to the Morningstar U.S. Active vs Passive Barometer. The Morningstar report measures active fund performance against passive peers net of fees.

It found that 42% of actively managed mutual funds and exchange-traded funds beat their passive counterparts in 2024. Over 10 years, the underperformance was worse. Just 22% of active funds survived and beat their passive peers.

Our good friend and colleague Raymond Kerzerho nicely summed up the benefits of passively managed funds in his new report, “The Passive Versus Active Fund Monitor.”

“Passive funds offer advantages that active funds can hardly compete with, including lower management fees, lower transaction costs, consistently higher returns, transparency, tax efficiency, and peace of mind for investors,” Raymond wrote.

Passive funds grow quickly

It seems that investors have taken note of the overwhelming data about the advantages of passive funds.

Passive funds have increased their global market share every year for the past decade and now account for 43% of the market, up from 23% in 2015, according to Raymond’s report.

Even more impressively, passive funds’ assets under management worldwide have grown 291% to USD $21.8 trillion during that period. This rapid growth far outpaced that of active funds, which added a more modest 53% in assets, now totalling $28.3 trillion.

Focus on evidence

Raymond cautions, however, against the perception that “the whole market is turning passive.”

For one thing, many people own passive funds, but use them to actively trade—buying and selling to time the market. Doing so, they risk underperforming in the same way that active funds tend to.

Tough markets may test your nerves. But they can be a chance to revisit your risk comfort level and make sure your long-term investment plan is still in sync with your needs.

They’re also a good reminder that smart investing relies on evidence, not drama.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

For more commentary and insights on investing and personal finance, listen to our Capital Topics podcast and subscribe to never miss an episode. And download your free copy of our popular eBook Seven Deadly Sins of Investing.

Hedge Funds—Facts Versus Hype: What the Data Shows

Hedge Funds—Facts Versus Hype: What the Data Shows 

By James Parkyn - PWL Capital - Montreal

Studies reveal high fees, lack of transparency and limited diversification benefits

High-net worth Canadians are often approached by advisors trying to sell them on alternative investments such as hedge funds. Such investments are usually promoted as a way to increase returns and reduce the volatility of a portfolio.

It may sound interesting at first blush, but what does the evidence say? Data on hedge funds suggests investors should exercise extreme caution and skepticism, according to Raymond Kerzerho, PWL’s Senior Researcher.

Raymond wrote a detailed three-part series about hedge funds for the CFA Institute’s prestigious “Enterprising Investor” blog in February and March. Raymond reviewed numerous studies about hedge funds for the series. His conclusion: Stay away.

“A black box”

Raymond’s article headings reveal some of the reasons for caution: “The returns aren’t great,” “The diversification benefits are limited,” “The fees are way too high.”

Another concern, Raymond reported, is that hedge funds tend to have complex, hard-to-understand fees and to be opaque about their investing strategies. This makes it harder for clients to gauge the benefits and costs of investing. “It’s what we call a black box,” Raymond says.

For our podcast episode #73, Raymond sat down to discuss his findings. Here are the main takeaways.

What is a hedge fund?

Hedge funds are investment pools that typically promise high returns in any market environment. They use complex and often aggressive strategies to achieve returns that they generally tout as being uncorrelated with traditional asset classes. The funds promote the idea that such uncorrelated returns can offer diversification benefits to a portfolio.

Hedge funds are usually accessible only to institutions and accredited (high-income) investors. In 2019, they managed USD $6 trillion in assets (compared to USD $69 trillion under management by mutual funds worldwide).

How do hedge funds work?

Various hedge funds use dozens of strategies to try to achieve their returns. These can include use of leverage (borrowed money), derivatives (futures and options) and short selling (a strategy to profit when an asset declines in price).

Most of the strategies can be grouped into three categories.

Relative value—This strategy combines long and short positions in highly correlated stocks. For example, a fund may buy shares of a bank while selling short shares of a different bank. The idea is to profit off price discrepancies and reduce risk.

Event driven—Some hedge funds focus on taking advantage of events, such as merger announcements. They may, for example, take a long position in the stock of the target company, while shorting the acquirer.

Directional—This strategy involves taking a bet on stocks, commodities, currencies or other assets.

Do hedge funds deliver the claimed benefits?

Hedge funds generally offer mediocre returns, according to the research. One study in the Journal of Financial Economics found that hedge fund investors had annualized dollar-weighted returns that were 3% to 7% lower than corresponding buy-and-hold fund returns, largely because of poor timing of investors’ inflows and outflows.

“The real alpha of hedge fund investors is close to zero. In absolute terms, dollar-weighted returns are reliably lower than the return on the Standard & Poor's (S&P) 500 index,” the study said.

Hedge funds may also offer less diversification than expected. A paper in the Financial Analysts Journal estimated that the correlation between the Hedge Fund Research Weighted Composite Index and the S&P 500 Index was 0.89 from 2010 to 2020.

The best hedge funds can generate excess return and diversification, but high fees absorb a significant part of the excess returns of even these funds. Holding several hedge funds amplifies the impact of performance fees. One study found that managers may end up with as much as 64% of the gross profit in a diversified portfolio of hedge funds.

It’s also very difficult to predict which hedge funds will deliver superior results. The data shows that there is limited “persistence” in hedge fund returns. In other words, there’s little evidence that a hedge fund which has performed well in the past will keep doing so in future.

How do hedge fund fees work?

A typical hedge fund charges a base fee and a performance fee. The base fee can be 1.5 to 2% of assets, while the performance fee may be 20% of the profit of the hedge fund.

In the past, many hedge funds had what was called a “hurdle rate”—a certain threshold of profit that the hedge fund had to earn (for example, the T-bill rate of return) before it started to charge the performance fee. Today, the vast majority of hedge funds—86%—do not have a contractual hurdle rate for performance fees.

Many hedge funds also have a high watermark. This is a level of the fund’s net asset value above which the hedge fund is allowed to charge performance fees. The idea of the high watermark is that the fund can levy performance fees only on new profits. If the fund loses value, it can’t charge performance fees until it has returned to the high watermark.

But one third of hedge funds don’t have a high watermark. This means they can charge performance fees even if their net asset value has fallen.

How transparent are hedge funds?

Hedge funds have a lot of discretion about what they disclose. They’re generally reluctant to reveal much about their investing strategies, claiming they don’t want to reveal competitive information.

This lack of transparency is a red flag. “Financial firms can make complex products look attractive by exploiting investors’ cognitive biases,” Raymond notes. “As economist John Cochrane once said: ‘The financial industry is a marketing industry, 100%.’ Investors beware.”

As Raymond elaborated in the podcast, “When you’re talking about an advisor working for the product manufacturer, I wouldn’t call that an advisor. I would call them a salesperson.”

What’s the final verdict on hedge funds?

Think twice about hedge funds. “I think if you’re not a multi-billion-dollar institution, the chances of improving your financial outcome with hedge funds are very close to zero,” Raymond says.

His advice is to stay focused on a long-term investing strategy with low fees and transparent holdings. “I generally recommend sticking to stocks and bonds,” Raymond writes. “Financial success depends on disciplined saving and investing, not fancy investment products and high returns.”

Read more commentary and insights on personal finance and investing in our past blog posts, eBooks and podcast on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website. 

Find the three-part series about hedge funds that PWL Senior Researcher Raymond Kerzerho wrote for the CFA Institute here, here and here.

TAKE ADVANTAGE OF THE EXPERTISE OF JAMES PARKYN, Portfolio Manager at PWL Capital Montreal to determine the best solution for you.

Working with Parkyn—Doyon La Rochelle: Our Approach to Managing Wealth

Working with Parkyn—Doyon La Rochelle: Our Approach to Managing Wealth

By James Parkyn - PWL Capital - Montreal

Managing wealth is at the heart of everything we do as portfolio managers and financial advisors at Parkyn—Doyon La Rochelle. After all, wealth is the foundation of your financial independence and money properly invested will help you reach your goals.

With so many options, and so many preconceived ideas, where do you start?

When it comes to investing money, we think transparency is always the way forward. So, let’s go back-to-basics, and answer fundamental questions regarding how we manage your wealth.

Here is how we work at Parkyn—Doyon la Rochelle.       

Why invest in financial markets?

A successful financial plan hinges on your money being properly invested to grow and generate returns. But why invest in financial markets? There are several reasons:

• Grow wealth over time: Historically, investing in financial markets tends to offer a higher return than savings accounts for example. This means your money has the potential to grow at a faster rate, allowing you to build wealth for your retirement or future goals.

• Beat inflation: Inflation slowly reduces the buying power of your money over time. Investing can potentially help your money grow faster than inflation, which means you maintain or even increase your purchasing power in the future.

• Diversification: Investing in a variety of assets can help spread out your risk. This means that if one investment goes down in value, the others may help balance it out.

What is a financial plan?

A financial plan is a comprehensive strategy for managing finances to achieve long-term goals. For high wealth individuals, this typically means preserving and growing wealth through tailored approaches to investing, tax optimization, and legacy planning. A financial plan for affluent clients might involve structuring trusts and philanthropic endeavors alongside traditional asset management.

How do we invest your money?

The Parkyn—Doyon La Rochelle approach starts with discussing and understanding your goals. Is it simply to retire comfortably? Travel more or acquire a vacation property? Fund post-secondary education for your kids and grandchildren? Give back through philanthropy? All of the above?

Based on your goals, we create an investment plan designed to achieve the returns you need to attain these goals, taking into consideration the level of risk you are comfortable with.         

How do we approach risk?

We know that returns are closely correlated to risk. That is why we take the time to discuss your tolerance to risk and risk capacity and answer all your questions about how markets fluctuate.

Your goals and risk tolerance will dictate how we design your investment portfolio, as well as where and how your money will be invested.

When building a portfolio, we subscribe to evidence-based and data-driven investment principles that minimize costs and maximize your diversification. This allows us to ensure greater, more reliable returns.

How do we design a tailored portfolio for you?

Here are all the dimensions we consider while designing your portfolio:

• Asset allocation: This is the foundation of your portfolio. It involves dividing your investments among different asset classes based on your tolerance to risk and risk capacity and goals.
  Here's a general breakdown:

  • Stocks: Ownership in companies; generally, offer higher growth potential than other asset classes, but also higher risk.

  • Bonds: Loans to governments or companies; provide regular income but typically lower growth than other asset classes.

  • Cash equivalents: Very low-risk investments like savings accounts or money market funds; used for short-term goals or emergencies.

• Diversification: We don't put all your eggs in one basket. We carefully distribute your investments across various asset classes, sectors, and geographical locations. This helps to mitigate risk because if one investment loses value, others may compensate.

What is an asset class?

An asset class is a grouping of investments with similar characteristics and subject to the same laws and regulations. Common examples of asset classes include: Equities (e.g., stocks), fixed income (e.g., bonds), cash and cash equivalents, real estate, commodities, and currencies. Focusing on asset classes is one way to help investors diversify their portfolios.

• Investments: We invest in broad-market ETFs from reputable providers such as Vanguard, iShares, BMO, and institutional calibre mutual funds sourced from Dimensional Fund Advisors Canada ULC (DFA).

What is a broad-market ETF?

A broad-market ETF is a type of exchange traded fund that tracks major indices such as the S&P 500. They diversify exposure to the overall market, reducing risk while providing potential long-term growth. ETFs are similar to stocks since they both trade on stock exchanges. An example of a broad-market ETF is the is the SPDR S&P 500

What is an institutional calibre mutual fund?

An institutional calibre mutual fund is a high-quality fund designed for large investors, offering professional management and lower fees. These funds have rigorous selection criteria and are often used in portfolios for stability and growth. An example is Dimensional Canadian Core Fund Class F.

• Fees and taxes: Investment fees and taxes can eat into your returns. That is why we use low expense-ratio mutual funds and ETFs. We minimize potential tax implications in your investment choices.

What is a low expense-ratio mutual fund or ETF?

A low expense-ratio mutual fund or ETF has fewer fees deducted from returns. Investors use them to maximize gains and reduce costs. An example is the Vanguard US Total Market Index ETF (VUN), known for its minimal expense ratio while offering broad market exposure.

• Rebalance and review: Over time, the value of your investments will fluctuate, causing your asset allocation to drift. We periodically rebalance your portfolio to get back to your target asset allocation. We also regularly review your financial situation and tolerance to risk and risk capacity and adjust your portfolio accordingly.

What is our role as a portfolio manager?

Expertly managing your wealth and helping you achieve your financial goals is at the core of our mission as portfolio managers and financial advisors.

• Risk mitigation and diversification: One of our primary objectives as portfolio managers is to spread risk across a variety of assets. This reduces the impact of poor performance in any one given area to ensure more stable returns over time.

• Return optimization: We aim to maximize returns given your specific level of tolerance to risk and risk capacity. This involves a careful balance between conservative and more aggressive investments to achieve the highest possible return on investment.

• Behavioural coaching: Through behavioural financial coaching, our role is to provide guidance, helping you stay on course and adhere to your financial plan, preventing decisions that may impact your long-term objectives.

• Capital preservation: While seeking returns is important, preserving capital is equally vital. As portfolio managers, we strive to protect your initial investment, especially if you have a lower risk appetite.

• Liquidity management: We ensure that your portfolio maintains sufficient liquidity to meet your short-term financial needs.

• Tax efficiency: Portfolio management often involves strategies to minimize tax liabilities, such as tax-loss harvesting and asset location, to enhance after-tax returns. We identify opportunities to optimize tax efficiency.

• Long-term growth: We help prioritize long-term growth in our clients’ portfolios, to build wealth for retirement or other significant financial goals.

• Cost management: Reducing investment costs such as fees and expenses can significantly impact overall returns. We efficiently manage these costs to enhance your outcomes.

Why partner with Parkyn—Doyon La Rochelle?

We understand the importance of investing wisely to build wealth, beat inflation, and diversify risk.

When you partner with us, you get a personalized approach grounded in transparency, evidence-based strategies, and a deep understanding of your unique goals and tolerance to risk and risk capacity. You also gain a trusted advisor who can help you navigate the complexities of the financial markets and secure a prosperous future.

Let’s start building your roadmap to financial prosperity today

For more commentary and insights on investing and personal finance, listen to our Capital Topics podcast and subscribe to never miss an episode. And download your free copy of our popular eBook Seven Deadly Sins of Investing.