You have 4 free articles remaining. Subscribe
Jun 2, 2021

Portfolio Confidential

by Barbara Stewart
Thumbnail for Portfolio Confidential

Real world confidential portfolio discussions:

My partner Horaldo and I work as engineers at the same firm and we are both turning 37 this year. We each have a TFSA, a company RRSP, a regular RRSP and a small non-registered account. Our total combined portfolio value is just under $900,000 and I have attached the holdings in each account for your review. We have a few questions for you:


#1: What is the most important thing we should be doing right now?

You should clearly articulate your investment objectives and then determine your overall strategic asset mix. Briefly, the individual securities and ETFs in the accounts look perfectly fine – provided that your objective is long-term growth with a corresponding asset mix of 90% equities. I advise putting together a one-page Investment Policy Statement (IPS) to act as a reference for all your future financial discussions. Here is an example:

Investment Objectives

Return requirements: Define your short and long-term goals. What is your expected rate of return over time? Do you currently draw income from your portfolio to cover living and other expenses?

Risk tolerance and capacity: Do you have the financial means overall to withstand losses in the value of your portfolio without impacting your standard of living? How have you reacted emotionally in various market conditions?

Investment Constraints

  • Liquidity needs: Do you need to keep cash on hand for short-term needs (under one year)?
  • Time horizon: What is the timing of all future events that will require funding/income? How long do you plan to invest for?
  • Tax considerations: What is your marginal rate? Do you have any tax loss carry forwards? Do you have structures in place to optimize your tax situation?
  • Legal constraints: Are you an insider of any public companies? Are you a US person?
  • Unique preferences: Do you prefer to avoid investments in specific sectors or companies?

#2: What is the most important thing we should be doing right now?

Well a great start is a subscription to Canadian MoneySaver magazine! Reading is critical whether it is investment magazines or the finance section of the newspaper. Make this a daily habit. If you want to take a formal course, the Canadian Securities Course (CSC) offered by the Canadian Securities Institute covers all the basics. But based on my own research, the best way to become financially savvy is to practice trading. Take a small amount of your money and trade online: you will gain a depth of knowledge just by ‘doing’. In 2013 I interviewed Jane Barratt, Founder and CEO of GoldBean in New York City. Jane began to invest because she realized that she was earning good money but spending it all, and that she was making money for others rather than for herself: “I took a look at my own spending habits and bought stocks accordingly. My first was Apple. The iPod had just come out and I could see that it was so different it was going to shake up the category. I bought $1,000 worth of Apple and sold it a year later for $2,000. I don’t regret it at all, that first win gave me the confidence to continue to learn, and use investing as a second income stream.”

#3: What do you think of Horaldo’s equity holdings in his RRSP?

Often investors focus on what they are holding in their individual accounts when it is way more relevant to understand what is in the consolidated portfolio and why. Critically, every security should have a role to play in your overall portfolio. What is held in each individual account will be more based on the legal/tax structure of the account. For example, interest is taxed at a higher rate than dividends so if you have income-generating securities it is generally more tax efficient to house them in registered accounts.

Understand your asset mix, because (depending on the research study) asset allocation determines somewhere between 75% and 94% of the long-term success of an investment plan. Here are my seven simple steps for figuring out your overall asset mix:

Put all of your investment statements on a big empty table. You may want to put a cup of tea (or gin) on the table too! Separate them into piles — one pile for each type of account. Most families have several accounts such as non-registered, corporate, trust, RRSP, spousal RRSP, locked-in RRSP and TFSA.

Put four headings at the top of a piece of paper — cash, bonds, stocks and real estate. You may have additional asset classes (such as wine, art, etc.) depending on your situation.

Look at each account separately and write down the amount invested in each asset class under the appropriate column heading on your piece of paper.

Some items on your statements (such as various mutual funds) might not show the underlying investments. You will need to do a Google search or check a mutual fund web site to pull up a list of the types of holdings in each fund. From there you can determine whether the item should go under the heading cash, bonds, stocks or real estate.

  1. The value of your home and cottage goes under the real estate column.
  2. Total each column to get the dollar value invested in each asset class.
  3. Divide the total of each column by the overall dollar value of your portfolio. This will give you the percentage weighting in each asset class.

Voila! You now have your asset mix. Each asset class has different risk characteristics and historical returns. The decision to be in a particular asset class at any point is a serious one — it will determine your chances of meeting your long-term investment objectives. Take the time to understand what you are invested in and why, or work with a trusted adviser to make sure that your asset mix makes sense.

#4: I am curious to know what you think about RioCan Real Estate Investment Trust(REI-UN.TO)?

I ran this question by a trusted analyst and he said “I wouldn’t touch it with a 29 foot pole. Although historically this was a solid stock, the world has changed dramatically. The future is unlikely to look at all the same for REITS – especially those in the retail sector like this one. Ecommerce will continue to grow and retail will probably continue to implode. We are only starting to see the fall out of the pandemic in this regard. The market knocked it down back in March, and it has recovered a bit. But it’s kind of like buying Blockbuster on the way down. So…buy it as a wildly speculative pick if you like…maybe for a short term pop up in price on any good news?”


Do you have questions about your own investment portfolio? I have recently set up The Rich Thinking® Financial Advice Hotline. This will be a win/win: you get a free 30-minute confidential Zoom chat offering an independent, unbiased perspective on your financial situation with no sales pitch! In exchange, I get to use the anonymized data that will come from these conversations to make my Rich Thinking research even better. Email me to book your Zoom discussion: