(Than we were)

Inspire your kids to be better investors

• Linda and Erin of NAFR Ottawa Branch• Frank Schilder our Zoom Master• Dave Gass for the video• Dyane for acting as MC

Acknowledgements

• Nothing in this presentation is advice or recommendation and is for information only• All investing involves risk• Readers should seek the advice of a registered

financial/investment adviser or conduct their own due diligence before making any investment decision

Disclaimer

If I knew then what I know nowI would be sitting on this yacht

• Exchange Traded Funds (ETFs)• All in One ETFs• One Click solutions

• Discount Brokers• Robo Advisors• “D” Series Mutual Funds• High Interest savings Accounts

Intelligent investing available to all

• The average annual compound total return of the S&P 500 (US large companies) over the long term is:• 1. <9%• 2. 9%• 3. >9%

Poll question 1

Average return of the S&P 5009% average camouflages a lot of variability

• Over the next ten years, considering the economic impact of Covid 19, the total return of the S&P 500 will be:• 1. < 9%• 2. > 9%• 3. about 9%• 4. < 5%

Poll question 2

0

500

1000

1500

2000

2500

3000

3500

10 years 20 years 30 years 40 years

Future Value of $100 invested in a tax free account

9%/yr 8%/yr 7%/yr

The magic of compound growthAnd the misery of high fees

Don’t try to beat the marketThe wisdom of Warren Buffett

• Low fees• No taxes• Diversification• Automatic investments• Time in the market• 94% positive return over any 10 year period

Five secrets to investing success

• What percentage of actively managed Canadian stock mutual funds beat the market over ten years?• 1. 90%• 2. 50%• 3. 12%• 4. 5%

Poll question 3

The “Active” vs “Passive” debate

• Actively managed funds try to beat the market (ie the index)• Active management incurs higher fees for the stock

pickers’ salaries• Passive funds simply mimic an index such as:• S&P 500 largest US stocks• TSX 250 selected Canadian stocks• EAFE Europe, Australasia, Far East• EM Emerging Markets

The broken promise of Actively Managed Mutual Funds

% who have beaten indexes

5 years 10 years

Cdn Equity 1.5 16

Cdn Dividend 15 9

US Equity 11 5

Intl Equity 22 16

Simple Average 12 12

Chance of picking a winner

1/8 1/8

Source: SPIVA 2020

Fund Type % Management Expense Ratio (MER)

Managed MF 2.2

Index ETF .05

All in One ETF .25

Why do managed mutual funds underperform ?

Fees

Exchange Traded Funds (ETFs) (usually) have the lowest fees

• Bought and sold like a stock• $9.95 or lower commission through discount brokers

• Same as a Mutual Fund• No Advisers to pay• Simple administration• Management Expenses (MERs) as low as .05%/year

• What’s an Index ?• TSX 250• S&P 500• Dow Jones

• What are the fees (MERs)• .05% or less for broad based index ETFs

Index Tracking Exchange Traded Funds (ETFs)

All in One ETFs

• What’s an All in One (AKA Asset Allocation) ETF ?• Wide diversification of stocks and bonds • Professional management

• What do they contain ?• Stocks of the world• Canada and US bonds if selected

• What’s the fee (MER) ?• 0.2 – 0.25%

Selected Vanguard All in One ETFs

• Available through discount online brokers• Same funds as available through banks or advisers• No “Trailing Commissions” = 1% lower fees• Balanced Funds offer One Stop investing• Example: Mawer Balanced, MER 0.9%

“D” Series Mutual Funds

VBAL vs VGRO vs MAW Balanced3 Years

High Interest Savings Accounts (HISA)

• What’s a HISA?• What’s the interest rate?• Who provides them ?• On Line Banks

• What’s a Discount Broker ?• What are their fees (commissions) ?• Are they secure ?• Examples:• Questrade• Q Trade• All the Banks

Discount Online Brokers

• What’s a Robo Advisor ?• What are their fees ?• Are they secure ?• Examples:• Wealth Simple• Questwealth• BMO SmartFolio

Robo Advisors

“We don’t get fooled again”

Globe and Mail, March 24, 202

“Investors face regulatory nightmare after advisers’ moves

trigger big losses”

• Fee based• 1% +- depending on portfolio size

• Certified Financial Planner (CFP)• Fiduciary responsibility (in writing)

If you do use a Financial Adviser

• Registered Retirement Savings Plan (RSP)• Tax Free Savings Account (TFSA)• $6000/year contribution room from 18 years old

• Registered Education Savings Plan (RESP)• 20% government top up of annual contribution up to $500

Max out Tax Sheltered Accounts

• Typically, 100% match• Usually limit of 3-5% of salary

Max out company match RSPs

Are stocks risky ?Not in a diversified, long term portfolio

The longer your time horizon, the more stocks you should own.

Years to retirement/House Purchase

HISAStock/Bond %

All in One ETF/D series MF example

<5 5030/20

HISAVBAL in TFSA

5-10 60/4070/30

VBALMAW Balanced A

10-20 80/20 VGRO

20+ 100/0 VEQT

Note: similar offerings from Ishares and BMO

Future Value Calculations$500 per month invested

In thousands

Return after fees

10 Years 20 Years 30 Years

7% 87 262 613

8% 92 297 751

9% 97 336 922

Note the effect of later years’ compoundingStarting early is key

Conclusions

• Invest regularly no matter what • Invest through a Discount Broker• Realize that you ain’t no Warren Buffett• Buy All in One ETFs• Ignore the Financial media• AKA “Financial Pornography”

• Introduction to Investing For Retirees• Three parts• How to develop an investing strategy• How to choose an adviser• How to select the right investments

• April 21, 28 & May 5

Future Seminars

Questions ?Sleep well. Retire well

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