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2020 Investment Expectations
“Markets Do A 360 Turn Around"
After a dismal December and finish for 2018…the USA and Canadian markets did a 360 in 2019 generating record breaking returns. So much for timing the markets!
Thanks to three interest rate cuts by the USA Federal Bank and more Quantitative Easing the longest Bull market in history remains intact.
Nonetheless, I do remain cautious and still recommend that clients position their asset allocation in a conservative manner with 60% of their holdings to be invested in GIC’s with British Columbia Credit Unions. The current on year rate is now offered at 2.25% and 2.30% for three year deposits.
The current strategic thinking has now moved from a Recession scenario to a new slow growth Global recovery. Based on this theory I believe clients should be open to a “Barbell Approach”, one end of the Barbell should be extra conservative (i.e. GIC’s) and the other side should take advantage of more cyclical sectors as Energy, Industrials, Financials and Materials all of which can be found in Canadian Dividend Funds.
Energy, Industrials, Financials & Materials 40%
For example, in 2019 the Industrial Alliance Canadian Dividend Growth Fund earned 18.08% Net after all management expenses and fees. This rate combined with a Guaranteed GIC would have provided a high single digit return with a reasonable downside risk in 2019. I believe this is a sensible strategic approach for 2020. Of course each client’s risk tolerance must be considered at all times. This is just one area where a qualified Advisor can be crucial to your long term investment results.
*In 2019 Industrial Alliance Financial along with other companies introduced new Indexia type funds with lowered management fees. Many of my clients chose to take advantage of these funds as they performed admirably.
2020 Asset Allocations For Retired Clients
Investment Vehicle % Holdings Risk Tolerance/Strategy
Credit Union GICs 60% Very Conservative Growth
Canadian Dividend Fund 20% Growth
Real Estate Income 15% Moderate Growth
Global Health Care 5% Growth
Total Asset Allocation 100% Conservative/Moderate Growth
FUNDS 1YR 3YR 5YR 10YR
Canadian Diversified Fund 11.53 2.99 3.27 4.40
Canadian Dividend Fund 18.08 5.07 5.42 6.37
USA Dividend Fund 19.31 6.22 7.46 9.04
Global Equity Fund 7.40 4.50 5.90 7.28
Global Heath Care 16.37 8.93 7.81 13.26
Asia Pacific Fund 26.12 12.03 7.24 6.79
Real Estate Fund 16.67 7.85 6.75 8.48
Guaranteed GIC's 1YR 3RY 5YR
BC Credit Union 2.25 2.30 2.45 (Non-Redeemable)
BC Credit Union 1.00 (Redeemable after 30 days)
*Allocation formula using age 100 minus your current age is a simple but effective formula for many of my clients: i.e.
Age 100 minus current age 50 equals 50% allocation to stocks.
Age 100 minus current age 65 equals 35% allocation to stocks
Age 100 minus current age 75 equals 25% allocation to stocks
Segfunds which have a 75% Guarantee at Maturity have lower Management Fees compared to Segunds offering a 100% Maturity and Death Guarantee. It is important that each client has their Asset Allocation designed to match their individual Risk Tolerance i.e. Conservative, Moderate, Aggressive.
– Rick Reynolds CLU CH.F.C. PRESIDENT
Please contact us if you have questions
or would like us to prepare a custom service
package based on your needs.
Tel : (250) 595-2419 Fax : (250) 592-4953
Victoria Office, #206 - 2187 Oak Bay Avenue
Victoria, B.C. V8R 1G1
North island Office, 3713 Shoreline Drive,
Campbell River, B.C. V9H 1L8
R. E. Reynolds Investments
& INSURANCE SERVICES LTD.
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