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 that protects 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.

Private Investment Portfolios. Long-term investments that grow and preserve value!

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 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.

 Avoid market chills with all-weather portfolios

[Disclaimer: “WealthBar Private Investment Portfolio” in the chart above refers to the WealthBar Balanced Private Investment Portfolio which holds the NWM Core Portfolio Fund. The chart shows the historic performance of NWM Core Performance. 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 2011.

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 Portfolio returns almost 9 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 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 simply preserved value far better than most other investments – and when markets did finally rally back, they were positioned to take advantage.

Premium investments and diversification

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

Premium investment strategies helping your money make money

One of the reasons for the high consistent returns from PIPs is sophisticated investment strategies such as short-selling and leveraging.

Short-selling is where an investor borrows a security (eg. a stock), sells it at a higher price, buys it back at a lower price and gives it back to the borrower while pocketing a profit. Now, if the stock being sold short continued to increase in value, this would result in a loss. It’s good for an investor to understand the risks of investing, not just the potential rewards.

Leveraging involves borrowing money to invest it. When the cost of borrowing is low and there are good investment opportunities, leveraging makes sense.

Now, it is possible for a leveraged investment to drop in value, like any investment. In fact, a leveraged investment could even have a loss that’s higher than the assets held in the account. In that case, the amount borrowed must still be repaid. In a WealthBar portfolio that uses short-selling or leveraging, the portfolio’s value could go down as much as 10 percent in a single day.

The market can go down — but what goes down can come right back up! These strategies are actually one reason why we’ve had such a track record of high returns for PIPs.

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 and lock in your gains 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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