HoolisWealthLogo-Web

The Art Of Creating A Portfolio For Retirees

WFR-7-ArtOfCreatingPortfolioRetirees-B

Over the last few years, creating portfolios specifically tailored to the needs of retired investors has become more complex. The days of buying an investment and holding it for the long term are long gone. With volatility as prevalent as it is today, and with all the different risks that can influence investment decisions, retired investors have to be very focused on having the right investment mix for their portfolio.

Always Starting With Your Needs

Building or restructuring a portfolio always starts with you – the investor. What are you investing for? What is your time horizon? What is your risk tolerance? Is there a certain investment amount needed to achieve your lifestyle goals?

Having the answers to these questions allows us to determine what investments should be in your portfolio to obtain the appropriate rates of return to achieve your objectives.

Balanced Portfolios Protect Against Risk

Your portfolio needs to be well balanced to be able to protect against three main risks:

  • Market Risk – volatility due to financial market ups and downs, corrections, or political turmoil
  • Currency Risk – today, we are feeling the pain of a low Canadian dollar against the US dollar, and
  • Interest Rate Risk – many people believe that the future direction of interest rates is higher

Building / Restructuring Investment Portfolios

When building or restructuring a portfolio for retired investors today, I tailor the portfolio for the individual investor but following some key guiding principles:

The Right Diversification Balance

As a retiree, you must have a diversified portfolio to protect against the risks above – but not so over-diversified that it dilutes your investment opportunity. While every portfolio is different and customized to your needs, an example of a possible portfolio could look like this: Corporate bonds, Preferred Shares, and Floating Rate Loans (rates rise with interest rate increases) - 50%; Financials - 15%; Telecommunications - 10%; Utilities / Pipelines - 10%; Biotech / Pharmaceutical - 10%; and Real Estate Trusts - 5%. You should speak to an Investment Advisor before making any investment decisions.

The Right Foreign Content In A Portfolio

Many of the portfolio's I see today don't have enough foreign content. Sometimes, it may seem harder to own investments outside of Canada if the Canadian dollar is weak. But if you look at where much of the global growth has come from over the past 7 years since the 2008 recession, you will see it has been from U.S. and other foreign investments. I believe it is quite important to own investments outside of Canada. This is something I look for in portfolios I take management of.

The Right Sectors

When I build portfolios or take over management of existing portfolios, I focus on limiting exposure to areas of the market that I believe will not do well for the foreseeable future. While it is very difficult to predict the future, I try to limit certain sectors of the market that are struggling and will continue to struggle in the near term.

As an example - lately oil investments have struggled. Some may look at this as an opportunity to buy oil investments because they are so low, but I am continuing to reduce exposure, and not buy when the price is low - because I see no reason for oil to move significantly higher in the near term. So when I create or restructure a portfolio, I look to reduce areas of the portfolio I feel will not do well and move cash to areas that I believe have a brighter future but are still cheap to purchase.

The Right Dividend Paying Investments

Creating a portfolio that revolves around dividends and dividend paying investments over time seems to be the best recipe for success over many years. Getting paid something while you wait for the growth in the portfolio to happen is quite powerful. For those retirees that can handle the risk that dividend paying investments inherently have, over time, have shown to be rewarded. For retiree's, dividend paying investments can help provide a steady stream of income in retirement and should be considered for many types of investors.

The Right Amount Of Fees

One of the final areas I concentrate on when building portfolio's are fees. I do believe in the theory you get what you pay for - however there are times when clients are paying too much for the returns they are getting. Can I build a portfolio that protects the client in the same way but at a lesser cost? If the answer is yes, then changes need to be made. Investors sometimes focus on the fees and don't realize the gains and protection the investment provides (e.g. mutual funds). Thus you always have to look at the portfolio as a whole and figure out if the rewards outweigh the costs.

Building a portfolio to me is like putting together a jigsaw puzzle. Everything in the portfolio should have a purpose and have its own place in the account. Keeping in mind your risk levels, your time horizon, your investment / lifestyle objectives, I create portfolios to meet your needs so you can enjoy worry-free retirement.  Call me at 416-332-3863 or email me at This email address is being protected from spambots. You need JavaScript enabled to view it. to discuss how your portfolio can continue to grow during retirement.


Meet Allan Small

Recent Articles & News

Phone: 416 332 3863
Toll Free: 1 866 402 2641 x6602
Fax: 416 412 8046
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

LOGIN TO YOUR ACCOUNT

2075 Kennedy Road, 5th Floor
Scarborough, ON M1T 3V3
Google Map

26 Wellington East, Suite 900
Toronto, ON M5E 1S2
Google Map