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A View From Here March 2014

March 11, 2014 • Print This Article

Life can only be understood backwards; but it must be lived forwards. – Soren Kierkegaard

Financial Planning

In planning for our future it is imperative that we build wealth and I don't believe that simply saving money will fill that void.  In order to achieve this we need growth from our investments.  For many people, financial planning is like trying to figure out how electricity works.  Instead of trying to understand how power travels from the outlet to a generating station, we pay an electric company to take the difficulty out of the equation.  Similarly, many hire professionals to guide them through a seemingly complicated situation. 

In Canada, the government has created a series of inducements via financial accounts to provide funds for future needs.  These come in the form of RRSP (retirement), TFSA (tax free investment account) and the RESP (children's post-secondary education).  For most Canadians, putting money away for these accounts is a large financial toll, but it might be all you ever need.  Putting money away for your future is expensive and can cost upwards of six figures* of pre-tax income to maximize contributions annually.  That's a lot to ask of people who are busy living their lives.  Thus the importance of actually growing this wealth must be a major component.

I view these accounts as life insurance: money you will use in your life and the right investments can go a long way to increasing your wealth over time.    

It's all About Growth

I am often contacted by individual's looking for a 'low risk' 7% rate of return in a 1% interest rate environment.  When rates are low, many take risk that they are unaware of to secure better income flow.  I might as well be speaking Vulcan when I mention that growth in an investment rather than just the income might provide a better total return…perhaps with much lower long-term risk.

Making investments and holding them for appreciation in value can produce significant real returns.  This can make a genuine difference to one's life in the future.  If you look at returns from long standing investments such as Easyhome, Methanex and FirstService, you can better understand the potential.

Retirees

I have had a series of informal discussions with clients who have retired and the first thing we should know is that for the most part all is well financially at their age.  Most are living well within their means, so their earlier anxiety about their financial future was unfounded.  When I asked one of them if he could live his life over again, what was the one thing he would omit:  His answer came swiftly: "Worry".  He went on to say, "I spent too much of my life worrying, when things tend to work out in the long run."   Another, who sold his home and his two taxi licenses said that one of his regrets was not being a smarter investor, and that he avoided most opportunities for fear of failure. 

One situation that I have watched in real time is a couple for whom I have helped manage their investments for over 20 years.  Their willingness to invest has resulted in wealth well beyond their original vision.  They have succeeded in living a well-balanced lifestyle beyond their working years.  They agree that the key to this situation has been the successful growth that has occurred in their investments rather than the money that they had contributed. 

The point is that the key is to grow your investments and that it takes time, but it has a significant effect your ability to fund future needs.  Many live in fear of the next financial apocalypse and how to avoid its consequences.  Unfortunately, as we have seen from such periods as recent as 2007-2009, they tend to sneak up on us but the good news is – we have always recovered and resumed growth. 

* Based on a family of Four

Thanks for taking a look,

And,

All Good Things,

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

Mackie Research Capital Corporation (MRCC) makes no representations whatsoever about any other website which you may access through this one. When you access a non-MRCC website please understand that it is independent from MRCC and that MRCC has no control over the content on that website. The content, accuracy, opinions expressed, and other links provided by these resources are not investigated, verified, monitored, or endorsed by MRCC.

 

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