A while ago, I was riding with a friend in his car.  His driving style made me quite nervous because he had this nasty driving style of having his right foot on the gas pedal and then braking aggressively using his left foot!   His jerky driving style had him taking off like a rocket when the traffic light turned green and then braking hard to tail gate behind the car in front of us.  I believe that he thought he was a young Richard Petty! (www.richardpetty.com)  Because I was appreciative of the free ride, I did not say anything about his driving.  I did, however, promise myself that I would not actively seek a ride from him ever again.

My friend’s driving habits were developed over the many years since he was 12 years old on the farm.  He was typical of young men and boys helping parents by doing different chores that included driving small and medium sized tractors.  The skills he developed early in his formative years were all self taught and over the 34 years since he started driving, the habits that he had, served him well because he had never been in an accident!

The coaching program, Strategic Coach, taught me a lot about habits. Dan Sullivan, the founder and owner of this program designed exclusively for entrepreneurs, says that all habits feel totally natural.  The difference between a bad habit and a good habit is that you get totally different results!

Now that we are getting close to January 1^st, 2023, we are going to engage in the annual ritual of stating our New Year’s resolutions.  Most of us will blow up our resolutions by noon, January 2^nd because we will try to change at least 15 resolutions at once. 

The trick to making changes in your life is to change one habit at a time.  According to psychologists, a habit takes 21 days to feel totally natural.  In theory then, you should be able to develop 17 new habits in 2023.  In my case, some resolutions that I want to embrace are:

1. Exercise for 40 minutes everyday
2. Turn off all electronics when visiting with someone
3. Write down 3 things for which I am grateful
4. Read a “hard book” for 40 minutes everyday

If you look at these 4 resolutions, you will notice that these desires are about “doing something positive” as opposed to “stopping” something.  Another coaching friend of mine, Peter Neufeldt, of Peak Performance Executive Coaching, notes that a powerful positive new habit will displace a weaker negative lifestyle.  Therefore, a resolution to “stop smoking” will not be as effective as “embrace a healthy lifestyle by exercising for 40 minutes when I get out of bed”.

I wish everyone a terrific end to 2022!

Al’s Nuggets

1.  Embrace only one new habit at a time.
2. Drink lots of water.
3. Look for ways to be generous with your money and time with those less fortunate.  More on this in my next blog.

When I was in business, I learned about competition.  Early in my business, I defined competition as the other financial services firms and salespeople in the city of Cranbrook.  There were the banks, the credit unions, the investment brokers, and the other life insurance agents who did business in my community.  In total, there were over 85 people representing these organizations including the other advisors with the firm that I represented! 

Over the years, I had to change my concept of competition to include “all items and concepts” that competed for the money that existed in the marketplace.  In a previous blog, I said that “scarce resources have alternative uses” and this truism expanded my definition of competition to include new vehicles, birthday parties, holidays, booze, cigarettes, rep hockey and snowmobiles.  Basically, my competition definition includes everything and anything that someone feels is desirable at any given moment in time.  I learned that if I thought a deal was complete, it really wasn’t, because people can always change their mind a day or two later.

To thrive within this reality, I had to learn to be “winsome’.  The definition of winsome is to “be attractive and appealing in character”.  Most people are appealing and attractive to a large degree, however, I observed that many people also believe that they “have to be true to themselves”.  This idea that what I am today is as good as things will ever be, is a malady that afflicts most people, and results in people becoming stagnant in the marketplace.  For example, I know people who have not read a difficult book since they graduated from school!

When I saw how many people really were in the marketplace, I made the decision to become more winsome.  The first thing I did was to invest my “free” time into really learning the my profession.  This meant that I started to learn the technical aspects of the business as opposed to just learning the basics.  I learned that going to seminars in other provinces and countries resulted in meeting new people and being exposed to new concepts.  The best investment that I made was in surrounding myself with a team of experts who allowed me to focus on my gifts while they used theirs to take care of the things that I did poorly.  It was revolutionary for me to learn the art of delegation; to leverage my time and skills to provide much better customer service for all my clients.

One of the simplest concepts which I became quite proficient at, was the habit of being on time. My goal for myself and my team was to be ready 10 minutes ahead of time for every business and personal appointment.  We all know what it is like to wait for someone who is always late.  We also know how we good we feel when we are affirmed by not having to wait.  Time spent waiting for someone is often time spent deciding to whom your business can be moved in order to feel respected. 

There were many different personal and operational habits that I changed over the years.  All these changes were like getting compound interest on my money.  Writing a hand written note, a little more homework in advance of a meeting, humbly apologizing when we screwed up, to name but three things, resulted in deepening the relationships with my customers, friends and family.  One of the best compliments that I ever received was from a competitor who told me over a coffee, “I don’t know what you do, but all your clients will not move, regardless of what I offer them.  You have a tremendous, well-deserved reputation and your clients are lucky to have you as their advisor!” 

Al’s Nuggets:

1. You never “arrive” in your business or career.
2. Be a lifelong learner.  Read, Read, Read!
3. When you go to a conference, do not rush home.  Stay at the location and determine how you will apply your key learning on the first day back at work.
4. If you are not healthy, do your best to become healthy!
5. Surround yourself with people that will call you on your detrimental habits and behaviors.

I recently had a conversation with a friend that focused on investing.  My friend is quite engaged in a variety of investment strategies including options and margin trading.  He is quite sophisticated as a trader and devotes a lot of time to this type of trading because the opportunities for gain and loss are significant.  In fact, this gentleman considers this his daily work.  I asked this gentleman if he uses investment funds, such as mutual funds and Exchange Traded Funds (ETF’s) within his portfolio.  His answer was revealing because he does keep approximately 70% of his investable investments in a balanced growth portfolio while actively managing the remaining 30% within his trading account.  This man went on to explain that in his opinion, the only easy thing about money is losing it.  So, while his confidence in his investment skills is significant, he does rely on professional money managers to help lower his risk.

The focus on today’s blog is to provide an overview of the different choices available to investors in Canada.  According to Morningstar Research, there are more than 5,000 different mutual funds for purchase on any given day.  If you are working with a professional advisor, he or she should be able to recommend different investment solutions for the stage of life in which you are currently living.  Financial advisors cannot be intimately knowledgeable on all funds that exist in the marketplace.  For them to provide valuable service to you, advisors should be using 3^rd party tools like Morningstar to help filter the “good” from the “not so good” investment funds choices.

Increasing the Opportunity to Make a Big Return!  There are times when you may want to hit a “home run” within your portfolio.  You can do this by narrowing the choices to be more specific within a sector.  In the mutual fund universe, you can look for a sector such as Energy or Precious Metals or Technology to name just three.  For example, 3 years ago, a different client invested 15% of her portfolio into a Precious Metals Fund which resulted in a 95% per cent return in 2019.  Fortunately, she sold her “profit” and then redeployed that money into a lower risk “Growth Portfolio”.  Had she just held the “Precious Metals” fund, her profits would have evaporated in the 3 subsequent years.  The lesson here is to learn to take your profits or alternatively, take your losses, if you are going to be an active investor.

Most investors are passive in their style.  This means that they rely on the fund manager to make the trades within the portfolio that they are in.  This approach to investing is most popular because this allows each investor to stay focused on their jobs and families.  Not everyone wants to be an “expert” in the investment world because they want to be an expert in their world.  Many people are happy to have returns 3 or 4 percentage points higher than inflation or the GiC rate over a lifetime of investing.  These people do not have expectations of retiring as a multi-millionaire, they are pleased to simply retire as millionaires.  It is a choice they make given the way they want to live their lives.

Al’s Nuggets:

1.  Whenever you review your portfolio with your advisor, ask your advisor if he will analyze your portfolio using a tool like “Morningstar”.  If your advisor does not know what Morningstar is, consider getting a new advisor. 
2. Determine if you are an aggressive investor or a passive investor or if you are somewhere in-between.  Your advisor has questionnaires to help you determine your investment style and risk profile.
3. More funds are not necessarily better than fewer funds. For example, if you have 5 different Canadian Blue-Chip funds, all five funds will probably hold the Canadian Banks.  What’s the point of having 5 funds holding the same companies?
4. Don’t spread your investment money between too many advisors.  Have enough money with each advisor to be important to him or her! 

One of the constant themes within my stories is about how we need to take care of others.  There are many ways to show love and respect to those around us and today’s blog is about looking at the options that are available through Life Insurance.

Life Insurance is an old and noble product that has its roots as far back as 600 BC, during the times of the Greek and Roman eras.   In fact, it may have even been before that, because references have been found in the time of the Babylonian king, Hammurabi.  The concept that life insurance was addressing for the past 2500 years is that each life has future value that is worth protecting.

Our modern financial systems have created 3 broad categories of Life Insurance.  This blog will provide a brief synopsis of each.  We will not discuss Life Insurance provided by employer benefit plans nor will we discuss life insurance that protects creditor risk.  We will discuss those types of coverage later.

1.  Term Life Insurance:  This type of insurance is organized to have a fixed price for a pre-determined time.  These types of policies are most popular and common with young people whose incomes are limited but the cost of living can be quite high.  For instance, I know a young couple, in their 20’s, with two young children.  Their combined income is less than 90,000 before tax. They purchased Term Life Insurance.   Because of mortgage debt and the cost of raising a young family, the two responsible young parents are covering the potential lost income if either parent were to die due to illness or injury.

The main benefit of Term Life Insurance is the low cost of coverage when the insureds are young.  Over time the price of the coverage will increase.  Most term policies expire between age 70 and 80 depending on the company and the provisions within the contract.

• Permanent Life Insurance:  This type of insurance is created to have a fixed price of insurance for as long as someone lives.  These policies are most popular with young and middle-aged people who want coverage for as long as they live.  There are many ways in which these policies can be manufactured.  Some plans, called Term – 100, are permanent policies that have a guaranteed price for as long as the insured lives. These plans have no residual value, but the insured has the comfort of knowing the cost of insurance is fixed for many years.  Other plans, called Whole Life Plans, have higher premiums, but generate residual value that sometimes appeal to people.  Sometimes these plans can be “paid up” for life after 10 or 20 years.  There are many different and clever variations to the permanent plans, however, at its core, the insured always knows that if they keep the plan in place, the insurance will pay out regardless of when death occurs.

The main benefit of Permanent Life Coverage is that insured’s beneficiaries are guaranteed a fixed amount of money, usually tax-free in Canada.  This benefit is especially valuable because Canadians are so heavily taxed.

•  Universal Life Insurance:  This type of insurance can technically be called a permanent plan because these plans are designed for someone’s complete life.  This essay is creating Universal Life Insurance as a separate category for two main reasons.  The first is because these policies often have a “non-contractual” premium paying provision which allows the policy owner to pay very heavily into the policy.  Secondly, the policy owner can invest the premiums into a variety of different investment options that may appeal to the client’s desire for risk and reward within the policy.  These plans are designed to take on a lot of money, then grow the investment in a tax-free environment, and then pay out tax-free upon death.  Universal Life plans are quite sophisticated and have a lot of “moving parts”.  If this type of plan appeals to you, make you work very closely with your insurance specialist so that you get the lifetime coverage you expect.

The main benefit of Universal Life Insurance is that it can provide another way to tax shelter money for life.  In my experience, the people who really appreciate these plans are high net worth people who have an appetite for portfolio management, on an annual basis, regardless of their age.

Al’s Nuggets

1.  This blog is a very high-level overview of these types of policies.  Work with a qualified Life Insurance agent to understand the ins and outs of each of these plans.
2. Over 90% of term life policies never pay out.  This is because term life policies simply get too expensive as people age.
3. Many term policies have conversion options available.  This means that the insured can convert from a Term Insurance Plan to a Permanent Insurance plan, without having to give medical evidence.  This is a tremendous value proposition that should be explored while one can.
4. Getting life insurance requires medical underwriting.  If you apply for coverage, you can expect to provide medical and lifestyle evidence.  The company wants your business, just not at any price (risk)!

Over the years that I was in business, my clients were always optimistic about their futures and rightly so.  Living in small town Canada having good incomes, excellent housing, fantastic food, access to good health care and tremendous family and social support, there is much to look forward to.  Despite the doom and gloom that our mainstream media continually paint, the opportunities for success in life are mostly equal for anyone who wants to reach out for the brass ring.

One thing that we all must be mindful of is death.  My financial planning business had at its core, a conversation about the importance of having an up-to-date last will and testament.  We also reviewed our clients Life Insurance policies, be they group benefits from their company benefit plans, their creditor plans that covered their debts and the personal policies that they owned.  Over my career, I was involved with each claim that my client’s families made.  The death of an important person in one’s life is always a shock even if the person had been sick for some time.

The first death claim that I had to deal with was a relatively young man.  This young man was in his early 30’s and had contracted cancer.  This husband and father had purchased his coverage when he first got married in his 20’s so that if an untimely death occurred, his wife would have enough money to cover their mortgage principal.  The risk that the client felt that he had to cover, was due to an accident given that he travelled between his home and his work that took him out of town regularly.  This clean-living family man was surprised when he was diagnosed with an illness – brain cancer.  Fortunately, he did not suffer for a long time.  I attended his funeral seven months after the diagnosis and was able to deliver the cheque to his widow.  The widow and children were able to become and continue to be debt free.  In a conversation with her 28 years later, she commented how she had never expected that the purchase of life insurance would eventually pay out.  “I expected to have a long life with my husband.  The vow ‘til death do us part’ was assumed to be in our 80’s or 90’s”, she commented wistfully, “not 8 years after our wedding.”   

Another sad event that I will share, happened about 15 years ago.  This, too, involved a young family where the husband and father were estranged from his wife and children.  In a fit of anger, he came into my office to cancel his policy on a Thursday afternoon.  Nine days later, the man was out with his friends enjoying their ATV’s.  The man flipped his “man toy” and died instantly by hitting his head on a rock.  The following week, the estranged wife came to my office to start the claims process.  I had to inform her that the policy had just been cancelled less than 2 weeks earlier.  The young mother and her 3 children found out from the creditor that the mortgage coverage also had been cancelled.  She was able to make a claim on the group benefits plan, but that coverage, only paid 1 times annual income.  The lady and her children were forced to sell the house and property and the vehicles.  She was able to get some support from her parents who lived in Alberta where she continues to reside.

The third story is about a businessman who held a couple of polices within his corporation.  The polices were in place to provide “liquidity” to his company if he died.  At age 78, the client had an accident at home while working around his acreage.  The client’s wife found him at the corner of the property several hours after she got home from town.  The coroner’s report confirmed that he had died several hours after the accident.  We were able to pay out to his company the proceeds from the life insurance policies.  The wife, who became the sole shareholder, was able to wrap up the affairs of the family business, meet the final payroll and take care of the outstanding receivables from a position of strength as opposed to desperation.

These three stories are all true.  While I am being deliberately vague about the actual details of each event, my point is that there are no guarantees of longevity.  In previous blogs, I have referenced actuarial truths that Canadians, by and large, are living well into their 80’s.  Individually, though, there is no guarantee.  “Those that have ears, let them hear!”

Al’s Nuggets

1.  Don’t be cheap… keep your wills and affairs up to date!
2. Life Insurance is usually the most cost-effective way to guarantee money for those who rely on you for financial security
3.  An experienced and educated Life Insurance agent can be a great help in your Estate Planning.
4. The next two blogs will describe the different types of Life Insurance… Term, Permanent and Universal Life

After many years of hard work saving and investing money, it is typical to turn your investments into income.  Sometimes it replaces your total paycheck and sometimes it supplements other income.  This week’s blog is a story about clients of mine, Alejandro and his wife Elena de la Vega (not their real names), who sold their family business, a sole proprietorship, after a 40-year run.  They had done quite well in business and wanted to invest the proceeds to provide themselves with a nice income while preserving their capital.  They wanted something fairly simple that paid them monthly while being very liquid.

The amount Mr. and Mrs. de la Vega had to invest was 1,250,000.00.  What choices did I show them and what they do?

First, we looked at guaranteed investments.

At the time of their sale in 2019, the best that they could get was 2.3%, paid monthly, locked in for 5 years.  This investment would pay a monthly income of $2,397.83 per month.

Second, we looked at investing into an investment portfolio of 3 different mutual funds.  Two funds paid a distribution of 7 cents/unit per month, and the 3rd paid 2 cents/unit per month.  Which fund paid the best yield while having a low-medium risk as Alejandro and Elena did not want to put their money at much risk in the market?  All three funds were top funds as rated by Morningstar Canada; an unbiased 3^rd party that ranks all mutual funds in Canada. 

Showing the math: To determine the monthly income:   $’s to be invested divided by unit price = # of units held.  # of units owned x cents/unit/month = monthly income paid.

                                  Calculation of Annual Yield:  monthly income x 12 = annual income.  Annual income/amount of money invested = yield expressed as a percentage.

Fund #1

At the time of the investment, the unit value was $23.17.   The monthly income provided by this fund was and continues to be $3776.44.

The yield from this fund is 3.6%

Fund #2

At same time, the unit value of the second fund was $11.38.  The monthly income provided by this fund was and continues to be $7688.93.

The yield from this fund is 7.4%

Fund #3

At the time of the investment, the unit value was $4.41.  The monthly income provided by this fund was and continues to be $5668.93.

The yield from this fund is 5.4%

Conclusion:  When we look at the history of these over the past 10 years, we can see that 1) the amount paid (the distribution rate) on each of these funds have not changed for over 10 years. 2) Each of these funds have had a capital gain growth and 3) each fund was taxed more preferentially than the GIC.

Al’s Nuggets:

1.  Not all mutual funds are high risk! 
2. Taxation is a big deal.  Maximize your TFSA!
3. This story, which is true, resulted in the clients splitting up their investment among these 3 funds.  They liked fund #1 because that fund had a focus on capital growth over income!  They liked the other 2 funds for the income they provided.  3 funds, 2 different fund managers, 3 different philosophies = lots of diversification!
4. There is more going on behind the scenes which a 1-page blog cannot get into.  Always talk to your financial advisor to get the full story behind their recommendations.  Full disclosure is important because you worked hard for your money.
5. You can use these same principles for any investment – even if you own rental property.  What you really earn after-tax, after-expenses should be calculated in advance before taking the plunge!

When growing up on the farm, it was not always easy to understand how our family made money.  What I knew, when I was young, was that we had some land and that we milked between 30 and 40 cows depending on the time of year.  Some of the land was pasture for our stock to graze on, some of the land was for hay and the remainder was for our feed crops of barley and oats.  We did plant some wheat which we did sell at the local Pool elevator after harvest.  The dairy cows were a constant in that we had to milk them twice a day.  The milk that we got from them was put into a large bulk tank and then every 3^rd day, a large milk tanker truck came to our yard, pumped out our bulk tank and drove away.  A few days later when we went to the post office, there was a cheque in the mail that made mom and dad happy when they deposited it at the local credit union.

In my teen years, my parents started to invest in newer and better machinery and procedures that reduced the cost of production.  These changes were made because family labor was becoming scarce and therefore more expensive.  As each of my older siblings graduated from high school and university and got other jobs, those of us that were left behind had to pick up what the older ones were leaving behind.  When their unfinished work was coupled with our own chores, something had to give.   It was eye opening lesson to realize that “time” is a resource that needs to be considered both in daily business and in investments. 

To see how time and money interact, consider the Rule of 72.  The Rule of 72 helps to estimate how long it will take to double an investment at a given interest rate. For example, if you have money invested at 1% at your bank or credit union, divide 72 by that interest rate you are getting.  The answer will tell you the number of years your savings will double (72/1 = 72 years).  Alternatively, if you are getting 4%, it will take you 18 years (72/4=18).

The great Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”  It is for this reason people search for solid returns for their work and for their money.  Farmers want good yields because the fruit of their work is always translated into money.  Retirees want good returns on their money otherwise the capital will be used up sooner than later.  So, whether you are getting interest or are getting a dividend, your ability to calculate both return and time together will help you determine the best deal.

Al’s nuggets:

1.  Money is the great equalizer among people because it is the common language that all people speak.
2. Time and Money are two commodities that should be spent wisely.
3. Time is precious because you can never get a wasted moment back.

A couple of years ago, a client asked, “Is there such a thing such as a “No-Risk” Investment?”.  That question can be likened to the search for the Holy Grail.  A definition for the Holy Grail, according to Wikipedia, (a source of information that most people use and all academics disparage), is “any elusive object or goal of great significance.”

2022 has been a year of decline and some recovery for those of us invested in the equity markets.  For those of us who had money earmarked for a specific purpose, we would be either greatly disappointed or we put off our decision to turn the investment into cash.  I know several people who delayed renovations and vacations because they did not want to trigger a loss on their investments.  There are risks within the equity markets just as there are significant opportunities.  Welcome to the Stock and Bond Markets!  For those people who do not like the ups and downs of the equity markets and want certainty, luckily there exist Guaranteed Investment Certificates (GIC’s), Money Market Funds and other interest-bearing investments.

Investments that have guarantees attached to them are not truly risk-free.  For example, a local bank has advertised their GIC’s with a terrific, compounded rate of return of 3.50 % for 5 years.  That sounds wonderful, but what is the “Real Rate of Return” on this investment once inflation and taxation are factored in?  Presently, inflation is running at approximately 6.9% so it is not hard to see that your buying power will be less in the future than it is today.  On top of that, income tax must be paid on your non-registered GIC investment.  The net result of this type of investment shows that by locking in for 5 years, you are not as far ahead as you may think.

So, what is a person to do?  In Canada, we have access to 2 investment vehicles that can reduce the tax risk.  If you are still young and are investing for retirement, a Registered Retirement Savings Plan will defer your taxes to when you redeem cash for retirement.  The other option, called a Tax-Free Savings Account or TFSA, eliminates the tax-risk totally.   

When trying to determine what is the best investment, the answer is usually not one or the other.  It is usually a variety of investments so that all manners of risk are spread sensibly.  Three thousand years ago, King Solomon, attributed to be the wisest and most wealthy man in the civilized world ever wrote: “Give portions to seven, yes to eight, for you do not know what disaster may come upon the land.” (Ecclesiastes 11:2)

In conclusion, work with a competent financial advisor, especially as your wealth grows.  Because one’s money is so emotionally linked to us, a good advisor helps drain the emotion from your buying and selling decisions, while being able to supply some guidance on taxation.

Al’s Nuggets:

1. The advertised rate of return on a GIC is not what you really earn.  Get your advisor to calculate the “Real Rate of Return” factoring Inflation and taxes into the equation.  A good advisor should be able to figure it out on a financial calculator at their desk.
2. If you want to figure it out yourself, here is a good starting place:   https://www.investopedia.com/terms/a/after-tax-real-rate-of-return.asp#:~:text=To%20calculate%20the%20real%20rate,a%20dollar%20in%20hand%20tomorrow.
3. For most investments, especially mutual funds, you never lose until you sell! 
4. Next week’s blog will focus on income from investment funds.  Have a great week!

This past week was very nice for those of us who were broadly invested in both the Toronto and Dow Jones stock markets.  We were patiently anticipating a recovery and were at least partially rewarded for not selling and triggering a loss.  For those of you who are playing the long game by purchasing regularly, regardless of how the stock market is doing, you might have larger smiles on your faces because the purchases made through the spring and summer months should be showing gains due to Dollar Cost Averaging.

This week’s story will show you what can happen when you invest a consistent amount of money into an investment that is going up in value each month.  The attached spreadsheet shows that in each successive month as the price is going up, you will be purchasing fewer and fewer units with each dollar invested.  The average price per unit in this illustration is $14.70/unit.  The value of the account after the last purchase in December is ($14.70 x 816.39) =$12,000.93 – which is simply a breakeven proposition. 

The lesson from this week’s illustration, after you compare it to last week’s blog, shows that a continual upmarket is not necessarily your best friend if you are purchasing in small amounts every period, especially if you are a short-term investor. 

**For those of us with a significant amount of money just sitting in our savings/checking accounts, had we invested $12,000 in January of this hypothetical calendar year, we would have doubled our money in this illustration.  Showing the math, ((On January 1^st we purchased 1200 units at $10/unit.  In December the price is now $21/unit.) (1200 units x $21 = $25,200)).  ?**

Al’s Nuggets:

1. The stock market is simply a gathering place where people buy and sell goods, commodities, or livestock.  If you have mutual funds or participate through your employer’s group retirement plan, you are in the stock market!
2. It’s been my experience that trust, time, research and discipline are vital to making money.
3. The only thing easy about money is losing it.  If you want to get ahead, see #2 above!
4. You cannot time the market!  We never know when the value of an investment will drop or rise in price.  For this reason, it’s ideal to embrace a variety of strategies!
5. Guaranteed savings are not risk free!  That is next week’s story!

When contemplating investing with a long-term perspective, it probably is overwhelming to consider all the different options that are available to you.  For many of us that do not have a lot an extra money at the end of a month, a simple way to invest is put a small amount away on a regular basis.  This type of investing, called Dollar Cost Averaging, is very boring, but very effective especially when one is just starting out with a new account.  Many of my former clients engaged in this concept on a weekly, bi-weekly, monthly, or even annually depending on their desires and availability of cash. 

I have created this spread sheet to show what would happen if an investor were to invest $1,000/month to purchase units in a mutual fund that has a price of $10/unit on January 1^st.  On the first of each of the following months to July 1^st, the price drops by $1.00 per month and then in August the price starts go up by $1.00/month.  At the end of the 12-month cycle, the price has recovered to $9.00.   At year end year, the investor has 1841.27 units at $9.00/unit for a total investment value of $16,571.43.  The rate of return for this happy person is 38% (16,571.43/12,000.00)!

Your investment goal is to look for ways to get the highest number of units or shares at the lowest possible price per unit.  Having a low ACB (adjusted cost base) should always be your goal! 

My next blog will continue the theme of Dollar Cost Averaging.

*Dollar Cost Averaging works quite well with investment funds, but one should be careful with highly speculative investments whose underlying companies could go under. *

Al’s Nuggets: 

1. If you were wondering if you should work with an advisor, check out this:  https://www.fidelity.ca/en/advicecreateswealth/
2. People will purchase tomato soup by the case when on sale…. buying investment funds is like buying tomato soup on sale!