investment planning | Page 5 | Compass Wealth Partners

investment planning

Market Highs vs Your Goals

As stock market indexes in Canada and the U.S. make new highs on an almost daily basis, as of late June and early July, many investors have expressed increasing anxiety about a possible 'correction'.

Media headlines and commentary on BNN speculating about a possible correction from these recent highs, following a strong run over the past year or more has added to this investor anxiety.

Improving Investment Returns

One Saturday, famed investment manager Peter Lynch was working at the office when he decided to answer the phone. The caller was a holder of his mutual fund who was calling to cash in the investment. Peter explained how he was excited about the growth prospects for the economy and his fund and asked him why. As Peter tells the story the caller said: 'Because I am breaking even!'

Building Wealth

There are many definitions and meanings for the term 'wealth'. It is often said that it is easier to build wealth over time than it is to keep it! Some confuse high incomes with wealth while others point to assets owned as an indicator of wealth. And, many people use the terms 'assets' and 'wealth' interchangeably assuming they mean the same thing.

The distinction between these two concepts may have an impact on your actions and strategies as you work to build your pot of money or savings during your lifetime.

TFSA Time Bomb !

The Tax-Free Savings Account (TFSA) was introduced in 2009 as a new way for Canadians to build assets and wealth on a tax-advantaged basis. Any capital gains, dividends or interest income are tax-free upon redemption from the account. The initial contribution amount was $5,000 with annual increases of $5,000. This has been increased to $5,500 in 2013 to offset inflation. This brings the maximum contribution amount for a new subscriber, in 2013, to $25,500.

Investing vs. Trading

In the last article we defined investing as buying an ownership stake in companies who are profitable today and whose profits are expected to rise over time. Trading is any other form of managing your money which may or may not take into account corporate profits as part of the decision-making process.

Business Adaptation Mechanism

There is a concept in biology about the ability of organisms to adapt to changes in the environment. This adaptation process increases the odds of survival for organisms under stress due to environmental changes. A similar mechanism exists in finance that allows economic organizations, otherwise known as companies, to survive and thrive in changing or shifting economic landscapes.

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