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Successfully investing
- 1. SUCCESSFULLY INVESTING IN A SECURE FINANCIAL FUTURE BROCK MELNYK, B.Mgt, CFP – FINANCIAL ADVISOR
- 2. WHO ARE WE? ATB Financial serves more customers, in more locations, than any other financial institution in Alberta • 600,000 Customers • 4,300 Associates • $25 Billion in Assets • Four lines of business
- 3. WHO ARE WE? • Wealth management arm of ATB • Began in 1997 • Greatly expanded in 2002 • Team of over 300 Investment professionals • Manage $5 Billion for 40,000 clients
- 4. OUR DREAM To be the world leader in understanding and helping clients become better investors, so they realize their dreams in spite of inevitable and unpredictable challenges. Sheldon Dyck – President ATB Investor Services ATB Securities Inc. is a wholly owned subsidiary of ATB Financial and a licensed user of the registered trademark ATB Investor Services. ATB Securities Inc., Member CIPF. The content of this presentation is taken from sources that ATB Securities Inc. believed to be reliable as of the date the information was accessed. However, ATB Securities Inc. makes no assurances as to the accuracy of the material. This presentation should not be construed as an invitation to purchase any investment or as independent investment advice. Individuals should not make any investment decisions without first consulting their investment advisor.
- 5. CHARACTERISTICS OF SUCCESSFUL INVESTORS They don’t hesitate to ask questions; They are quick to seek help; They avoid unnecessary risk; They do their research and preparation; They are able to think long term
- 6. THE BENEFITS OF ASKING QUESTIONS AND SEEKING HELP • Advisors are financial experts that contribute to the success of individual investors: • Help to prevent errors arising from the “Illusion on Knowledge” • Help to eliminate the effects of making emotional decisions when investing
- 7. THE ILLUSION OF KNOWLEDGE Source: Psychology of Intelligence Analysis, Richards J. Heuer, Jr. 1999
- 9. MOST INVESTORS UNDERPERFORM THEIR INVESTMENT
- 10. BENEFITS OF MITIGATING RISK AND DOING RESEARCH Asset Allocation 91.5% Successful asset allocation is responsible for over 90% of portfolio returns Other Market Security 1.8% Timing Selection 2.1% 4.6%
- 11. BENEFITS OF MITIGATING RISK AND DOING RESEARCH 10% US Equities Small-Cap Equities 8% Efficient Frontier REITs Cdn Prudent Investor: Efficient Frontier Return 6% Intl Equities High-Yield Bonds Equities 4% Cdn Bonds Money Mkt 2% 0% 0% 5% 10% 15% 20% Risk
- 12. BENEFITS OF MITIGATING RISK AND DOING RESEARCH
- 13. BENEFITS OF MITIGATING RISK AND DOING RESEARCH 14 Combining 12 assets that 10 move in “opposite” Return 8 directions 6 (negatively correlated) 4 reduce risk 2 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TIME
- 14. BENEFITS OF THINKING LONG TERM # of Calendar Year Periods Expected Worst Calendar Best Calendar with a loss greater than Long Term Average Portfolio* Year Return (%) Year Return (%) 5% 10% 15% 20% 30% Return (%) Conservative -3.54% 25.86% 0 0 0 0 0 5.1% Conservative Bal -8.99% 28.21% 2 0 0 0 0 5.8% Balanced -15.91% 32.90% 5 2 1 0 0 6.8% Balanced Growth -21.53% 38.00% 6 3 2 1 0 7.5% Growth -27.03% 41.68% 8 5 3 2 0 8.0% Max Growth -28.19% 43.76% 8 5 3 2 0 8.4% *Portfolios consist of the Dex Bond 91 Day T-Bill Index, Dex Bond Index, S&P/TSX Index, S&P 500 Index, MSCI EAFE Index using similar weights as the appropriate Compass Series Portfolio
- 15. BENEFITS OF THINKING LONG TERM Source: MorningStar Canada
- 16. HAVE YOU THOUGHT ABOUT YOUR FINANCIAL FUTURE? Assuming you are a “Conservative” investor in retirement, earning a 5.1% annual return: How much in savings do you need at age 65 to generate $40,000 in annual pre-tax income until age 86? $500,000
- 17. THANK YOU!
Editor's Notes
- 20 – 25 minutesFeel free to ask questions at any time!
- Its great to have these characteristics, but how do you benefit from them?
- First we’ll touch on the advantages of seeking advice.Who has heard of the concept of “illusion of knowledge”Who has heard Donald Trump’s “Knowledge is Power?”It is true, but what the saying does not identify is source of the knowledge. <click>
- A group of psychologists conducted an experiment by providing horserace handicappers meaningless information regarding upcoming races. With the extra knowledge their confidence increased but their results stayed the same. I like to use this as an analogy for stock tips. Market may not be perfectly efficient, but it probably is efficient enough that your neighbour’s cousin’s co-worker’s uncle might not be the best source.It is important to know the source of your information when making investment decisions. The “experts” on BNN and QR770, AM660 – advertisers. However I will steal a line from TD’s Money Talk Minute: ‘Emotion is the single worst enemy of successful investing”I’ll ask a true of false question to the group: “Buying High and Selling Low is a great way to make money” T or F?
- But during periods of extreme negative volatility what is the most common response. That doesn’t make any sense. If you bought something for $10 and thought it was a good investment, if its at $8, isn’t it a better deal? Its on sale. You should buy more!It is an emotional decision that is driven by fear…. Intuitively everyone knows the most important strategy in investing is to buy low and sell high. But it is our emotions that force us to do what we logically know is wrong and that is to sell low and buy high.As soon as the papers start telling us everything is okay, we decide to invest again. We’ve missed most of the rally!Economists will tell us the market is a leading indictor… In fact, on September 20th, 2010; the National Bureau of Economic Research stated that the US is no longer in a recession.What is the effect of this emotion response on the individual investor?
- That’s the mix of bonds, small and large cap Cnd stocks, small and large cap us stocks, global equity, real estate etc.It is not stock picking is less than 5% or market timing. Nobody has a crystal ball.Why you hear the old adage: Time in the market, not Timing the marketIt is asset allocation is what gives you a smoother more comfortable ride to retirement.Professionals take an institutional approach to investing by utilizing the total portfolio approach…
- This is a comparison to the sub-prime mortgages. Somehow the talking heads on wall street thought that lumping a bunch of garbage together would make them viable investments.Its proof that the next cool idea – isn’t always the bestAlways think how it fits your plan and gets you to your end goal“If its too good to be true, it probably is”
- This chart highlights 6 different asset allocations and the number of calendar returns over close to a forty year periodYou can see a conservative balanced portfolio that is a mix of 35% equity and 65% fixed income had only 2 years out of 40 with a loss greater than 5%, with the worst year being 9% and the best over 28%This is calculated risk. You are avoiding unnecessary risk, but still achieving higher returns than a savings account.And why is this long term thinking approach good? Not reacting to every bit of media?
- That’s 20 years, pulling out $40,000 pre-tax. A total of $800,000 over that time frame.Answer:$500,000In closing: When you choose an investment firm and a financial advisor:1. Take chargeand do your research!2. Develop a formal ‘financial plan’ 3.Get involved in managing your investments, don’t be afraid to ask the tough questions4. AND Remember to think long term andavoid unnecessary riskTo finish – another Dogbert slide!Any questions?