What kind of investor are you? With so many investment options, how do you know what is right for you?


If you’re like many of us, you’re feeling overwhelmed about what investment option is best. There are more and more options.  Frankly, it’s hard to know which is the right way to go.  

In helping you decide, there are 3 basic criteria.  

  1.  How interested am I in managing my own money
  2.  How much security do I really need
  3.  How much do I have to invest


A bit more about those

  1.  How interested am I in managing my money? Do you look at your stock picks daily? Weeky? Notice when there has been a market correction?  Or are you the kind of investor that looks at your investments only when your annual statement arrives and perhaps talks with your Advisor once or twice a year?   Yes, we all want to know that our money is in good hands but some enjoy actively participating in the investing process and others do not.


  1.  What amount of security do you and your money require? Typically more security translates into either lower long term performance or an increase in fees for Guarantees.  For example, a portfolio of Fixed Income investments like GICs are a good example of low risk but in today’s low interest rate environment, you will earn a very low return on your money.  Looking for Guarantees? Segregated funds offered by Life Insurance companies offer Guarantees in addition to other protections but this can push the fees for that fund over 3% which come right off the top and will affect your net return. Looking for Guarantees? You need to know what this will cost you.


  1. How much do you have to invest?   Is this number less than $1million? $250,000? $5,000? In order to attract the attention of a Portfolio Manager to actively manage your portfolio, there are ‘thresholds’ or ‘investment minimums’ and many PM’s will not take on clients without a minimum balance of $200,000 or $300,000.  Does your current Advisor group according to ‘household’ and offer a reduced fee for combined balances?  Like many Canadians who have under $100,000 to invest, you need to adjust your expectations of your investment options. The good news is that there are choices available.


What now?

If you have a modest amount to invest and want diversification without expensive guarantees, then consider Exchange Traded Funds (ETFs) through an Online Wealth Management Service.  You can expect a low fee option with professional management and real time access to account balances. Your Financial Advisor may recommend this option in conjunction with Financial Planning Advice being provided.  Set up the account from the comfort of your kitchen table, decide what amount to contribute automatically each month and then pay as much or as little attention to your investment as you’d like to.   


If you want to have more hands on management of your money, consider a low fee stock trading service.  Most Banks offer a Discount Brokerage account which you can link to your bank account. Or consider a non denominational service like QTrade. These services do not offer advice. These are easy to set up and typically require just a few days and a bank account.

You do the rest.  

For Investors who have smaller balances and are with a financial institution, consider Mutual funds where you can still have an enviable amount of diversification for the dollar. Hands off, professional management and access to an licensed professional are included in the cost of the management fee. Expect to pay somewhere between 2.0 to 2.4% for this expertise.  Most of this goes to the fund company/managers with only a portion going to the Advisor or bank. All mutual fund returns are net of the MERs

If you are the kind of investor who requires Guarantees, Segregated funds are a good choice. In addition to Maturity Guarantees and Death Benefit Guarantees that ensure the value of your investment is protected at any point regardless of market volatility, there are valuable benefits that make Estate planning easier whether you have a WILL or not.  Some of these benefits include being able to name a successor owner.  You maintain full control until you pass away. At that time, ownership of the investment contract transfers to the other owner. This ensures your wealth goes directly to your son/daughter only.  Your hard earned cash does not form part of your beneficiaries marital property. These contracts also allow for named beneficiaries.  A payout will bypass the Probate process to ensure the cash is paid directly and discreetly to your loved ones.  Segregated funds can also be an effective way to Creditor proof your estate. Yes, with fees in the range of 2.5% – 3.25%+, this Insurance wrapper protection will cost a little more but is often well worth it for the benefits and professional management.  You will need to work with a licensed Advisor to set this up. The best part?  The amount of investable assets can be as low as $500 – $1000 to get started.      

Can you try more than one of these?  Yes.  

The investment option you choose depends on what kind of investor you are, your timeline and how much you have to invest. Be sure to talk to a Financial Planner to put a strategy in place before you put your hard earned cash into the market.