Page 264 - A Canuck's Guide to Financial Literacy 2020

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The Bottom Line

When it comes to investing, Canadians have thousands of choices which at times can be
overwhelming. However, it shouldn’t be. A good investment strategy should start off with a
goal where you ask yourself, “what am I trying to achieve?”

Once you’ve determined what your goal is, the next step is outlining a vision and steps that
will help you achieve it. You’d have to start off by determining your risk appetite and how
comfortable you are with volatility. As discussed, the more risk you take, the quicker that
you might be able to achieve your goal. However, with higher risk comes higher volatility.
Any investment product that you purchase should be in line with your risk appetite and your
comfort with risk. A great rule of thumb is to conduct a risk tolerance questionnaire to truly
understand your risk appetite.

Depending on your goal, there are plenty of investment vehicles or investment accounts
that can help you achieve. If your goal is to prepare for retirement, a Registered Retirement
Savings Plan would be the main vehicle. If your goal is to fund your children’s education
than it’s important to learn as much as you can about Registered Education Savings Plan. If
your goal is short term in nature, then Tax Free Savings Accounts would be recommended.
Always remember that there may be different investment vehicles depending on what you’re
trying to achieve.
One last thing to keep in mind is that while you’re aiming for financial freedom, keep in mind
the various risk exposures that your family might face. When conducting a comprehensive
financial plan, don’t forget to incorporate the six pillars of financial planning to make sure
that your family is covered.

1. Cash Flow – what is the savings/spending ratio of your family?
2. Risk Management – is your family protected with insurance?
3. Tax Planning – are you saving on tax each year?
4. Retirement Planning – do you know your retirement income sources?
5. Asset Management – is your portfolio in line with your risk appetite?
6. Estate Planning – what will your legacy be like upon death?
By following the six pillars of financial planning, you can make sure that your family is
protected and you’re able to achieve your financial goals in a manner that’s in line with your
personal objectives.