Today's article is a guest submission from Janine Guenther CFA, CMT, a Portfolio Manager and Senior Wealth Family Advisor with over 30 years of industry experience. The views presented here do not necessarily represent those of Bellwether Investment Management.

I'm in my 50s and embarking on my Third Chapter. What does that mean? Well, I grew up, got a job, raised two children with my husband, and our youngest starts post-secondary education in the fall. That lands me squarely in the Third Chapter of life, which is when empty nesters have the most opportunity to save for their retirement. They're typically still employed and closing in on their top earning potential and ability to accumulate savings.

But people are books, not chapters. Advisor, leader, former bank employee, volunteer, sister, daughter, mother... I have a collection of titles, but ultimately, I'm someone who helps inform, empower, and inspire others to make financial decisions confidently.

How did I get here? My 35 years of industry experience span across the financial services industry, from banking, stints in special credit, auto finance, and consumer credit departments to investment management with roles in institutional investment management and leadership. I finally (thankfully) found my home in family wealth management. Having seen companies and people at their best and worst, I've learned that the fine line between the two comes down to education, experience, and perspective.

This blog is a conversation, not a sales pitch. By sharing my personal experiences, my only goal is to help you avoid making the same missteps that others, including myself, have already made. They say a mistake is only a mistake if you don't learn from it, but why not cut out the middleman?

The What & Why of Your Portfolio Structure

We'll start with timelines, goals, and variable risk. Understanding the what (your objective) is important, but it's even more valuable to have a grasp on the why (your underlying motivations) in order to structure a portfolio that can meet your needs today, tomorrow, next year, and so on.

  • Near-term goals typically have a 1- to 2-year horizon

    • Bridging the last portion of a down payment.

    • Supplementing the final years of a child's university education

    • Planning a serene wedding and realizing how shockingly expensive tends can be,

  • Long-term goals tend to have a 15-year or longer outlook.

    • Saving and budgeting for your retirement.

    • Planning to buy a cottage once you have grandkids.

    • Exiting and monetizing a company you founded.

Short-term money prefers low risk because of its immediacy; if you have a year to make something happen, you want to be certain that the capital will be there and not exposed to extreme volatility. On the other end of the continuum, long-term money can afford to take on more risk—if you have 15 years or more on your side, you can withstand market fluctuations and, if necessary, adjust accordingly. Remember when we said a portfolio should meet today's and tomorrow's needs? Different allocations or asset classes serve different purposes.

Building a Resilient Portfolio

Proper risk management can come in many forms, but portfolio resilience is a crucial concept to understand. Your neighbour telling you about their spectacular returns is, well, spectacular in the moment, but building a long-term portfolio capable of enduring market volatility, protecting your capital, meeting your needs, and giving you peace of mind takes time and discipline. Today's shiny objects might be an opportunity, but if they put your long-term success at risk, consider leaving them on the playground.

Resilient portfolios tend to include disciplined rebalancing and thorough diversification.

  1. Stick to a plan and exercise the discipline of rebalancing. From October 2023 to March 2024, U.S. equity markets delivered 25% returns, which is significantly above the trend line for the last several years. Taking profits from assets that have performed better than others and reallocating capital to undervalued securities can help weather volatility.

  2. Diversification is your friend. Owning a hot stock can be exciting on the way up or demoralizing on the way down, and the realized gain/loss depends on what side of the peak you're on. A portfolio of boring, steady performers with competitive positions in strong businesses isn't exactly riveting, but once it funds your retirement, you'll realize it was exciting in its own way. How can you tell if your portfolio is diversified? If everything in your portfolio goes up one day and everything goes down the next, you most likely have an overconcentrated allocation.

Don't Wait for Spring

Here is an example of an error I made early in my investing career. Upon graduating from university, my parents gave me $1,000 as a gift—or maybe it was a thinly veiled financial literacy test, who knows—to invest. In 1989, if I had just put that into an index and walked away, I would have been much better off. Instead, I tried to buy and sell my way to the top, eventually quitting when I was down to $500. Despite my finance major and understanding of valuations, I became emotionally caught up in the price swings and failed to grasp the nuances of transaction costs, broker commissions, and, in hindsight, how poor price information was for mere mortals like me at that point in history. We didn’t have the internet or access to the information that is now common. Eventually, I invested that $500 in my RRSP and bought a mutual fund from the bank. A couple of years later, I enrolled in the CFA (Chartered Financial Analyst) program, which proved to be a game changer for my career and the beginning of the development of my investment discipline.

Diversification can help you mitigate risk across your portfolios and give you more resilience over time.

Next time, I'll discuss setting investment goals as well as some of my successes, failures, and lessons I wish I had known back then.

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© Bellwether Investment Management Inc. 2024. This communication is intended for residents of the provinces in which we are registered and is not meant to be a solicitation to any persons not resident in those provinces. Any opinions expressed in this article are just that, and are not guarantees of any future performance or returns. Some of the information contained in this article has been drawn from sources believed to be reliable but due to the fact that it is provided by a third party, it cannot be guaranteed to be accurate or complete. Bellwether Investment Management Inc., Bellwether Estate and Insurance Services Inc. and Bellwether Family Wealth cannot provide tax advice and therefore we recommend that you consult your tax advisor for further assistance with your tax planning and the preparation of your tax return. The report is prepared for general informational purposes only and the securities mentioned in this report should not be construed as a recommendation for any specific securities.

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