Our Statement of Investment Philosophy
The following are the fundamentals of investing which we believe and observe, and form the basis for our
investment advice to our clients:
Financial Planning And Goals
- Generally, the following order of priorities should be followed:
- Pay off all credit card and other high interest debt
- Maximize annual RSP contributions
- Save for children's education (RESPs)
- Pay down the mortgage or car loan
- Begin a non registered savings plan (or lastly, consider borrowing to invest)
- After helping set goals, developing, implementing and sticking with a financial plan is a key service we
provide. A client experience is outlined in our Managed Money Reporter newsletter (formerly the Mutual Fund Reporter newsletter), Issue #203. It points out that while we cannot control the markets, we can
help clients by identifying good professional investment managers, and then helping the clients stick to their
plan
- We use a sophisticated planning program called "Naviplan" and have documented plans for several
hundred clients
Capitalism Works
 Equities (stock)
ownership presents the greatest long-term growth opportunities and ability to beat inflation (periods of five years
or more)- It is fundamentally logical that owning a company (e.g. a bank) entitles you to higher returns than the company
pays to its clients. (e.g. bank shareholders get paid more than the bank's GIC holders)
- International equities generally outperform Canadian investments (a market somewhere
in the world will outperform Canada this year) but adds currency risk in the short term
- Due to individual company risk however, buying one or two individual stocks should only be done with money
you are willing to risk - holdings of fewer than 10 stocks are not a diversified investment portfolio
- Investing equal amounts over a regular period of time (dollar
cost averaging) is a sound strategy as it helps to "buy low" when the markets go on sale
Asset Allocation And Diversification
- Returns generally increase with risk - the key is to get the best rate of return for a given (acceptable)
level of risk
- Diversification of investments lowers risk
- Overall risk tolerance decreases with age (the very best rule of thumb is that 100 minus your age
equals the percentage recommended for equity investments), with your age as a percentage in
guaranteed investments (bonds)
- Investments of under two years should only be in low risk treasury bills, GICs, term deposits or bonds
- We will always err on the side of being too conservative rather than too risky - we tend to recommend higher
weightings in bonds for risk adverse investors
- Bond investments are best made by directly purchasing bonds or stripped
bonds, as there is no need to diversify or pay an annual management fee to simply buy and hold bonds (the
exception is in monthly contribution plans where bond funds can handle small periodic investments)
- Bond maturities should be staggered (laddered) to match the time
when the funds will be required to minimize risk - we can provide a detailed graph of your bond
"ladder"
- We utilize a program called "Bestmix" to asses a client's risk tolerance and provide data on
optimal historical risk and return ratios
Professional Money Managers
- We use a disciplined process to select investment
managers (.pdf 30k).
- Mutual funds present a convenient method of purchasing equity investments with good diversification and
professional managers, they are the original managed account programs
- We recommend mutual funds based on an analysis of:
- Historical performance vs. risk
- Investment manager history and personal interviews with the managers
- Market positioning and outlook
- Management fees
- Membership in a larger fund family
- Minimizing duplication with existing funds in your portfolio
- Tax efficiency and low turnover of portfolios
- Enhancing returns through market timing (switching investments) is virtually impossible for individuals - look
at asset allocation (balanced funds) to have a professional pursue this rebalancing without transaction fees
- Individual manager selection is important in the short term, but not as critical as simply holding on to the
investments in the long term
- Returns need to be measured relative to other similar investments (equity funds against the TSX) and against
inflation
- Technology now allows us to monitor fund managers more closely,
and continues to provide added value for our clients
Active Vs. Passive Investing
- Professional investment managers will outperform the majority of individuals, and generally outperform their
benchmark index on a risk adjusted basis. Even after fees,
most Canadian equity money mangers have outperformed their benchmarks
- Index funds and ETFs may have a place in a portfolio, but risk and
convenience should be examined.
- Active investing means that your manager is trying to be better than average, even though by definition half
will always be below average. Indexing means striving to be average. We find that to be a difficult proposition
to accept.
Mutual Fund Fees
- Lower Management Expense Ratios (MERs) do not necessarily mean higher returns especially on
Canadian equity funds - in life you often get what you
pay for. But as stated above, on bond funds there is often no need to pay for management.
- There are often more top performing load funds than no-load funds (the best managers tend to be attracted
to the big name funds - with a few exceptions)
- Rear end load funds are preferable to paying front end loads (except in a few cases where rear end management
fees are higher or where purchase amounts are high and the front end load low) since funds should be held for
five or more years. For valued clients and larger investment amounts, we can often buy load funds with no front
end load (contact us for details)
- Investing in no load funds (and load funds with no loads) allows us to be fee based advisors. We only earn more on
your account when your funds go up, we prefer not to be motivated by individual transactions
- While we generally don't like the management fees on bond funds, there are some reasons to consider funds over
direct bond ownership under certain circumstances, and AIC has consolidated those reasons into one document
(see "Bonds vs. bond funds").
Tax Efficiency
- RSP accounts should focus on stripped
bonds and equities up to the client's tolerance for risk
- Non RSP accounts will focus on stocks for capital gains and the dividend tax
credit for better after tax returns
- Very few clients require sophisticated strategies
such as limited partnerships and leverage, but where appropriate, we
are completely able to provide such services
Take Advantage of Us
- You get what you pay for - we are not a discount
broker so you can expect, and will receive, more from us. We are
pleased to be used as a resource for all your financial questions
- In many cases, (e.g. rear end load funds) our fees are actually the same as
discounters, in the case of large (0%) front end load purchases, we may be
even less expensive
- Clients deserve to be protected from sensationalized
media coverage, unproven "investments of the month" and
poorly trained and inexperienced advisors
- We will manage your account in the same way we manage
our own and our families' accounts: We are consistent in our
philosophy
- A well-informed investor is our best client so we
provide regular newsletters,
seminars and encourage you to use us as
an information resource
History of the Managed Money Reporter
Back in 1982, John Zufelt
began as an advisor at what was then McLeod Young Weir. After four
successful years he began to realize that he could provide better
investment advice and service to clients by turning over the day to day
management of stock portfolios to professional investment managers who
could watch the markets minute by minute, every day. In 1986, to monitor the
performance of the mutual funds, a monthly computer program was written by
Carl Spiess, a Systems Engineering co-op
student, to rank all the funds in Canada.
 Between John and
Carl, the Mutual Fund Reporter
was created. John was the sole editor from 1986 until 1990 when Carl
became co-editor.
With the growing interest in mutual funds in the 1990s and an increasing subscriber
base to the Mutual Fund Reporter, John and Carl together
become one of the largest advisory teams at ScotiaMcLeod. In
January 2001, John transferred daily client contact responsibilities to Carl Spiess
and The Spiess McGlade Team.
Since the Mutual Fund Reporter's inception, the number of mutual funds in Canada has grown, and so has
interest in funds. Investment Funds Institute of Canada
statistics show that, as of 2005, over $570 billion had been invested in funds. However, the number of other
investments available to our clients has also increased making The Spiess McGlade Team a one-stop shop for
investment and financial planning advice. In January of 2008, the Mutual Fund Reporter became the Managed Money Reporter,
reflecting the reality of our business and the full gamut of services we offer our clients. We will continue to research the best
money managers and advise on the best investment alternatives for our clients for years to come.
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