Planning & Advice

Avoid market chills with all-weather portfolios

April 4, 2018


Avoid market chills with all-weather portfolios

Planning & Advice

Who likes risk? Nobody. Maybe you’ve already been through a market correction or two — and getting closer to retirement, volatility can make you antsy. You want a diversified, all-weather investment portfolio. You want protection for your investment when you’re getting the blues from bad stock market news.

So, how can you get that peace of mind? Private Investment Portfolios (PIPs) might be just what you need to lock-in those gains for your nest egg.

Long-term investments that grow and preserve value!

We help you invest like a millionaire – starting with as little as $1,000. How is this possible? We made a strategic partnership with Nicola Wealth Management (NWM) to offer these premium investments. With our robo-adviser technology and using pools of capital from multiple investors, we’re able to offer these premium investments for everyday Canadians.

PIPs give you access to exclusive investments like mortgages, real estate LPs, income strategies and other opportunities that you just can’t easily get elsewhere. These PIPs use the same kind of strategy used for high-net-worth individuals and pension funds, aiming to avoid volatility that can leave investors with little to show for their diligent saving.

With PIPs, you get best-in-class investment managers. Through active management, they make sure those investments are working out, optimizing for performance.

The chart shows the historic performance of NWM Core Performance reflects the total returns of a composite of fee-paying portfolios with a NWM Core investment mandate, as calculated by NWM for the period since inception of the NWM Core investment mandate in 2000 until December 31, 2017. Composite performance is calculated net of fees and presented before tax but after deduction of custody fees based on the asset-weighted monthly composite constituents based on beginning of month asset mix and including the reinvestment of all earnings as of the payment date. Composite returns represent past performance are not to be used as an indication of future results. Balanced Mutual Funds refers to the Morningstar Canadian Neutral Balanced Fund Index.

Source for related performance data: Nicola Wealth Management and Morningstar.

Cash flow. Providing an income in retirement

With these premium investments, clients get a regular paycheque. Again, this is possible because of the asset classes the PIPs invest in. By going beyond equities and bonds to focus on income-generating investments, your investment provides reliable gains.

Most Canadians don’t get access to this kind of income-generating investment. Since it is labor-intensive for a portfolio manager to do, it was available only to millionaire investors – until WealthBar implemented the technology and processes to make this happen.

Reinvesting that cash flow helps generate a better return

Let’s take an example you could calculate easily from historical market data. Imagine that in 1950, you had invested $10,000 in the S&P 500. Your portfolio would have been worth $750,000 by the end of 2018. In this hypothetical situation, dividends are not reinvested.

But wait — there’s an advantage to focusing on cash flow: a better return! If you reinvested the dividends from that investment (ie. all of the cash flow) – your investment would be worth $6.3 million! That’s over 8 times the size, if you had just let the S&P 500 investment grow on its own.

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Cash flow also brings stability. Imagine you had a rental property, with tenants providing steady, reliable income every month. Now you don’t need to focus as much on the ups and downs of the market – because you have that stability. Well, a PIP investment operates like that.

Let’s say you were aiming for a reasonable rate of return like 6 percent a year and 4 percent came from cash flow alone. Then, you would only need a small percentage of your return to come from the less predictable capital gains. Reliable cash flow makes it easier for you to meet your investment goals – without relying on the ups and downs of the market.

Performance, without a lot of risk

All-weather portfolios are able to offer better diversification that preserves value while providing a good return. For instance, the Private Balanced Portfolio returns almost 7 percent, with 40 percent less volatility than the RBC Select Mutual Fund, the most popular mutual fund in Canada.

This affects how PIPs perform during times when the market gets rocky. In the market correction in 2016, our own Private Investment Portfolios did not drop as far as the market in general.

Look back further. The financial crisis of 2008. When the market dropped 30 percent, this strategy (managed by NWM) resulted in a drop of just 8 percent. Another way of looking at it: this diversified approach beat the market by 22 percent!

Our Private Portfolios that used this strategy developed by NWM simply preserved value far better than most other investments. And when markets did finally rally back, they were positioned to take advantage.

Our PIPs are all focused on lowering risk, while offering improved cash flow for clients through distributions: a win-win for any investor.

A premium investment now open to all Canadians

WealthBar is the only low-cost robo-adviser in Canada to deliver access to these premium investment portfolios that provide unique advantages you can’t see elsewhere. Invest like a millionaire, starting with as little as $1,000.

Learn more about how you can protect your money over the long term with Private Investment Portfolios. Or sign up now to start investing.

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One Comment
  1. Miguel Adam

    Awesome post, I will consider using the PIP strategy this year and see all options possible for cash-flow investment

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