When you decide to review your investment portfolio there are usually more questions than answers, such as; am I getting a proper return? Is my portfolio constructed to meet my specific needs? How much am I paying in fees? Is my portfolio efficient?
Are you getting a proper return?
Look at the composition of your portfolio, is it 100% invested in Canada with 70% equity and 30% bonds? Is your portfolio 50% Canada and 50% US? Or maybe your portfolio has many different asset classes across many different countries? To see if you are getting a proper return take your portfolio and create a mock portfolio of passive ETF’s (exchange traded funds) with the same asset class weighting. Using our first example of the 100% Canadian portfolio with 70% Canadian equity and 30% Canadian bonds, simply go to google finance and look at XIU (a proxy for the TSX 60) and look at XBB (a proxy for the Canadian bond market). If your performance is significantly different from your benchmark or if you cannot find a relevant benchmark, you should take advantage of our free, no-obligation portfolio review.
Is your portfolio structured to meet your specific needs?
Your portfolio should be constructed with your specific needs in mind. You might be saving for retirement, a retiree drawing income or investing for future generation; these three goals will have drastically different portfolios. You’ll want to write down your goals such as your retirement date or your target return. Your goal might be focused on risk…what is your pain threshold? Each portfolio is as unique as the individual who is behind the portfolio.
How much are you paying in fees?
The two main costs of investing are management fees and trading costs. Management fees are charged on all mutual funds, ETFs and professionally managed accounts. Trading fees are required to buy or sell any stock, bond or ETF. Typically if your portfolio is managed using mutual funds you are likely paying 1.5%-3.0% in management fees. The larger your portfolio, the lesser as a % you should be paying in fees. Fees are the second most important factor that will impact your returns after asset allocation. Do you know how much in fees you are paying? If you unsure, you need to take advantage of our free, no-obligation portfolio review.
Is your portfolio efficient?
An efficient portfolio must be tax-efficient and well diversified at a reasonable cost. One of the common problems we see is over-diversification. This simply means that, although some portfolios hold various mutual funds, exchange traded funds, stocks and bonds, the holdings still exhibit high correlation. In these situations, reducing the number of holdings is highly beneficial as they directly translate to lower transaction costs. Furthermore, higher fee funds can be substituted for lower fee funds with similar characteristics.
You will also want to ensure your portfolio is as tax efficient as possible. With the myriad of different tax deferred accounts such as RRSP, TFSA etc., very often, you can reduce your tax bill and increase your after tax return by moving certain securities to a more tax-efficient account in your portfolio.
Get your portfolio professionally reviewed today.
At Exponent, we have the tools to give you a comprehensive portfolio review at no cost. For a review we require a recent portfolio statement. We can give you the results via email, in person or on the phone, the choice is yours. To get started, simply get in touch with us at inves[email protected] or give us a call 613-747-2458 ext 45.