These objectives provide a framework to guide your decision-making when you evaluate an investment you are considering. By using that framework, you’ll be more likely to make smart decisions that are based not on emotion but on facts, sound fundamentals, and common sense.
This is the risk that the price of an investment will go up or down on any given day due to normal stock market fluctuations. No one can accurately predict which day the market will move in a particular direction. What we do know, however, is that the long-term trend has been upward for the past 30 years. Thus, it is important to base your decisions on a long-term strategy.
This refers to the quality of the business or fund in which you are going to invest. Ask yourself these questions when looking at a potential investment: Is the fund or business likely to be in business a year from now? What about in five years? Or 10 years? Will it continue to grow and pay a return annually? If you can answer yes to these questions, then you have a reasonable expectation of long-term success with that investment.
Interest Rate Risk
What will happen if interest rates increase or decrease? Rising interest rates tend to depress stock prices, thus making bonds and GICs more attractive. Declining interest rates have the opposite effect. When interest rates go down, clients see a reduction in their income from GICs and a loss of purchasing power. When the effect of taxation on income from GICs is combined with this loss of purchasing power, the effect on one’s retirement lifestyle can be devastating.
Our strategy is simple. We take a global approach and encourage investing in well-managed companies and funds that enable our clients to take advantage of some of the finest dividend-producing companies in the world today. It’s an excellent way to reduce the impact of low interest rates and market volatility. Owning quality dividend-paying companies or funds will provide you with:
The Economic Influence of Baby Boomers
Other Trends We Are Likely to See Over the Next 20 Years
- Increased political pressure on issues related to the environment, health care, and retirement living.
- Increased marginal tax rates for high-income individuals to support the necessary health care and government income programs for an aging population while keeping deficits under control, although we expect this to be a bigger concern in the US than in Canada. Higher taxes bring less consumption. Europeans did not experience the baby boomer effect and their markets should continue to do well with decreasing interest rates, stable consumption, and level taxation.
- As of 2019, the US accounted for about 25% of the global economy; this is expected to decrease to below 20% by 2040. The US has not gotten poorer; the rest of the world has gotten richer. This is good, as it will provide a market of rich foreigners to sell our stocks to.
- There will be increased philanthropic giving and community-based volunteering.
- Most boomers will need the equity in their homes to subsidize their retirement income. Expect to see them trade in their properties with lawns and acreage in favour of condo living. Condos will be the biggest growing class of real estate.
- Travel will increase significantly, particularly once the pandemic is behind us.
- The gap between rich and poor will continue to increase.
- The family will not provide as strong a social safety net as it did in previous generations.
- To accommodate their lack of financial preparedness for retirement and to pay for the education of their children and grandchildren, a portion of baby boomers will remain in accumulation mode into midlife and beyond as they continue to enjoy good health and wish to stay actively engaged in some form.
- The jobs of the future will focus on brainpower—not brawn. More jobs will be created in the health care sector and in government, professional, and advisory services.