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A Tale of Two Brothers, Part 2 Thumbnail

A Tale of Two Brothers, Part 2

JUNE 23, 2020

Jack and Robert each inherited some money from their parents and are trying to determine the right investment path to take.

They aim for the same destination, but choose different routes. Jack is a ‘do it yourself investor’ and decides to purchase a basket of passive index funds through a large national bank. Once invested, Jack will hike the path on his own, and he’s comfortable with that.

Robert has some concerns about the investment path ahead, so looks to LGK Wealth Management to be his guide. LGK takes a more active approach to investment management. They regularly research and review thousands of investment products and they maintain an inventory of the best strategies that can be designed and tailored for the specific trail that Robert is hiking.

 

Passive vs. Active Investing

In general, there are two approaches to investing that people will consider; a passive approach or an active one. When an investor utilizes a passive approach, they will typically do so by purchasing funds that track the performance of various indexes such as the S&P/TSX (Canada) or the S&P500 (US). They tend to have cheaper fees because they make no attempt to do anything other than imitate index performance.

An active approach, on the other hand, typically involves hiring an investment team to oversee your finances. An active approach is concerned with strategies that offer protection when the market goes down, reduces the magnitude of the bumps in the portfolio, and have the potential to do better than a passive approach. An active manager also looks for underpriced investments (i.e. so they can “buy low”) while taking profits on ones that have become expensive (i.e. “selling high”).

So while Jack has opted to take the passive approach, with no thought given to what lies around the next bend, Robert’s active approach seeks to smooth out and anticipate future opportunities and challenges.

Consider recent events. Who would have guessed the impact COVID-19 would have on all of our lives several months back? The impact on the investment markets back in February and March were significant. Passive investors like Jack, who were invested in indexes found their portfolios bearing the full brunt of those declines (-33.58% for the S&P/TSX1).

An active investor like Robert was able to remain calm through the storm, knowing that:

  1. His portfolio was in high quality, well researched investments,
  2. The portfolio managers managing those investments were finding new inexpensive investment opportunities to purchase as a result of the decline, and
  3. His guides at LGK Wealth Management remained in regular contact with him throughout, to help explain and provide reassurance about what was happening.

https://ca.finance.yahoo.com/quote/%5EGSPTSE/history?p=%5EGSPTSE): Time Frame for Calculation: February 21,2020 to Friday March 20, 2020)

 

Changing Paths

Consider another aspect to long term investing for both Jack and Robert; life changes. In keeping with our hiking trail analogy, sometimes our way becomes blocked and we need to change the path we’re on and forge a new one.

In circumstances such as these, Jack, our passive investor remains on his own to figure out what the best course of action is for him. Robert, on the other hand has LGK Wealth Management to guide and advise him on strategies that can and should be changed. Those fallen rocks, felled trees, and forks in the road are an inevitable part of life’s experiences. So as the path changes an active manager can help to find the best route through the brush.

One final thought; this active guide that Robert has hired is also much more than an individual or team that selects an actively managed portfolio.

 

The Advantages of an Advisor

In addition to the active management approach to portfolio management that LGK offers, there are so many other aspects of guidance they provide. Services include building strategies that take into consideration an individual’s:

  • Retirement goals
  • Current and future cash flows
  • Risk tolerance and investment beliefs
  • Life changes that effect previously designed strategies and goals
  • Taxes and estate issues (from a high level)

When it comes to all of these factors, Jack walks the path alone. Robert on the other hand walks with a guide, and with that guide he can be as active as he likes, while at the same time, also has the opportunity to look around and enjoy the scenery.

If you’d like to discuss this topic further or if you’d like us to perform a review of your portfolio in addition to your goals and objectives, please call us at (780) 426-2400, or e-mail us at gary.koss@manulifesecurities.ca to schedule an appointment.


Your LGK Wealth Management Team,

Gary M. Koss

Senior Mutual Funds Advisor
Manulife Securities Investment Services Inc. Life Insurance Agent
LGK Wealth Management Manulife Securities Investment Services Inc.

Email: gary.koss@manulifesecurities.ca
Phone: 780-426-2400 | Fax: 780-423-0311

www.lgkwealth.ca

  

This message is only to be read by the addressee and is not for public distribution. The sender is not responsible for distribution of this message beyond the addressee intended. All information in this message is confidential to the addressee and should be treated as such. A Tale of Two Brothers, Part 2 June 2020.pdf

LGK Wealth Management is a trade name used to carry on business related to life insurance and mutual fund products. Mutual Fund products are sold through Manulife Securities Investment Services Inc.Please confirm with your advisor which company you are dealing with for each of your products and services.

 


Appendix A

Index Return Tables

 

 

 

 

Weekly

 

Total Return

Total Return

since Friday

S&P/TSX (Canada)

Market Close

Return

Since Peak

March 20th

 

 

 

 

 

Market Peak - February 21, 2020

17843.50

 

 

 

Friday, February 28, 2020

16263.10

-8.86%

-8.86%

 

Friday, March 6, 2020

16175.00

-0.54%

-9.35%

 

Friday March 13, 2020

13716.30

-15.20%

-23.13%

 

Friday March 20, 2020

11851.80

-13.59%

-33.58%

 

Friday March 27, 2020

12687.70

7.05%

-28.89%

7.05%

Friday April 3, 2020

12938.30

1.98%

-27.49%

9.17%

Thursday April 9, 2020

14166.60

9.49%

-20.61%

19.53%

Friday April 17, 2020

14359.90

1.36%

-19.52%

21.16%

Friday April 24, 2020

14420.40

0.42%

-19.18%

21.67%

 

 

 

 

 

 

Market Peak - Wed February 19, 2020

3386.15

1.3254

4488.00

 

Friday, February 21, 2020

3337.75

1.3260

4425.86

-1.38%

-1.38%

 

Friday, February 28, 2020

2954.22

1.3386

3954.52

-10.65%

-11.89%

 

Friday, March 6, 2020

2972.37

1.3394

3981.19

0.67%

-11.29%

 

Friday March 13, 2020

2711.02

1.3943

3779.98

-5.05%

-15.78%

 

Friday March 20, 2020

2304.92

1.4498

3341.67

-11.60%

-25.54%

 

Friday March 27, 2020

2541.47

1.4037

3567.46

6.76%

-20.51%

6.76%

Friday April 3, 2020

2488.65

1.4129

3516.21

-1.44%

-21.65%

5.22%

Thursday April 9, 2020

2789.82

1.4004

3906.86

11.11%

-12.95%

16.91%

Friday April 17, 2020

2874.56

1.4039

4035.59

3.29%

-10.08%

20.77%

Friday April 24, 2020

2836.74

1.4065

3989.87

-1.13%

-11.10%

19.40%

 

 

 

 

 

 

Market Peak - Wed February 12, 2020

29551.42

1.3290

39273.84

 

Friday, February 14, 2020

29398.08

1.3264

38993.61

-0.71%

-0.71%

 

 

 

Friday, February 21, 2020

28992.41

1.3260

38443.94

-1.41%

-2.11%

 

 

 

Friday, February 28, 2020

25409.36

1.3386

34012.97

-11.53%

-13.40%

 

 

 

Friday, March 6, 2020

25864.78

1.3394

34643.29

1.85%

-11.79%

 

 

 

Friday March 13, 2020

23185.62

1.3943

32327.71

-6.68%

-17.69%

 

 

 

Friday March 20, 2020

19173.98

1.4498

27798.44

-14.01%

-29.22%

 

 

 

Friday March 27, 2020

21636.78

1.4037

30371.55

9.26%

-22.67%

 

9.26%

 

Friday April 3, 2020

21052.53

1.4129

29745.12

-2.06%

-24.26%

 

7.00%

 

Thursday April 9, 2020

23719.37

1.4004

33216.61

11.67%

-15.42%

 

19.49%

 

Friday April 17, 2020

24242.49

1.4039

34034.03

2.46%

-13.34%

 

22.43%

 

Friday April 24, 2020

23775.27

1.4065

33439.92

-1.75%

-14.85%

 

20.29%

 

 












 

 

 

 

 

 

 

Market Peak - Friday, January 17, 2020

2057.74

 

Friday, January 24, 2020

2044.92

-0.62%

-0.62%

 

Friday, January 31, 2020

1993.72

-2.50%

-3.11%

 

Friday, February 7, 2020

2030.29

1.83%

-1.33%

 

Friday, February 14, 2020

2028.92

-0.07%

-1.40%

 

Friday, February 21, 2020

2002.86

-1.28%

-2.67%

 

Friday, February 28, 2020

1809.71

-9.64%

-12.05%

 

Friday, March 6, 2020

1813.63

0.22%

-11.86%

 

Friday March 13, 2020

1480.26

-18.38%

-28.06%

 

Friday March 20, 2020

1393.92

-5.83%

-32.26%

 

Friday March 27, 2020

1549.49

11.16%

-24.70%

11.16%

Friday April 3, 2020

1487.08

-4.03%

-27.73%

6.68%

Thursday April 9, 2020

1606.93

8.06%

-21.91%

15.28%

Friday April 17, 2020

1622.30

0.96%

-21.16%

16.38%

Friday April 24, 2020

1588.69

-2.07%

-22.79%

13.97%

 

 

 

 

 

 

Market Peak - Wed, Feb 12, 2020

2434.95

 

Friday, February 14, 2020

2431.37

-0.15%

-0.15%

 

 

Friday, February 21, 2020

2402.80

-1.18%

-1.32%

 

 

Friday, February 28, 2020

2141.12

-10.89%

-12.07%

 

 

Friday, March 6, 2020

2149.29

0.38%

-11.73%

 

 

Friday March 13, 2020

1881.64

-12.45%

-22.72%

 

 

Friday March 20, 2020

1650.94

-12.26%

-32.20%

 

 

Friday March 27, 2020

1827.17

10.67%

-24.96%

 

10.67%

Friday April 3, 2020

1776.86

-2.75%

-27.03%

 

7.63%

Thursday April 9, 2020

1970.67

10.91%

-19.07%

 

19.37%

Friday April 17, 2020

2017.51

2.38%

-17.14%

 

22.20%

Friday April 24, 2020

1987.65

-1.48%

-18.37%

 

20.40%