An investment policy is about defining the structure of a portfolio, or even the distribution between the low-risk and high-risk parts of a portfolio. Specifically, the investment policy defines the allocation of the portfolio among different asset classes: bonds (either Canadian or foreign) and equities (Canadian, US or international).
In terms of investments, at Hudon & Gauthier, we look for portfolio structures that minimize risks while respecting your risk tolerance. This is based on essentially two (2) criteria: term to maturity matching and your tolerance for downward fluctuations.
Term to maturity matching
Matching means pairing. On the one hand, you have assets such as RRSPs, TFSAs, etc. and on the other hand, you have a liability consisting of the projects you want to finance with your assets. In the spirit of term to maturity matching, the conservative portion of your portfolio will have enough money to finance your projects over the next 10 years.
This way, we aim for a very high degree of certainty in your ability to finance your projects, even in years when equity markets were to follow a sharp downward trend. The large conservative provision of your portfolio will ensure that you will not be forced to sell sharply-falling assets value to finance your projects.
This approach allows us to structure your portfolio according to a financial plan that identifies your annual needs based on the projects you have in mind.
Tolerance to downward fluctuations
Despite the benefits of the term of maturity matching, you might not be comfortable with the portfolio we offer you. With an investor profile, we will determine your tolerance to downward fluctuations in your portfolio in order to determine a more appropriate structure for your portfolio.
The difference in returns between the asset classes that make up an investment portfolio results in a spread between the weighting of each asset class and the asset target allocation. When the difference exceeds a certain threshold, the portfolio must be rebalanced by selling certain securities of the overweighted asset class in order to acquire securities of the lower performing class, so as to ensure that the portfolio follows the asset target allocation once more.
Come visit us to discuss the following questions about your investment portfolio:
- Is my portfolio well diversified?
- Is my portfolio scattered?
- Will my retirement disbursement plan be solid and shield me from market fluctuations?
- Is the long-term return on my investments adequate to fund my retirement?
- Is my periodic savings plan:
- respected? And;
- Does it meet my objectives?
- Do I understand the management fees I pay on my investments?