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My advice • October 31, 2019
modified on February 26, 2020

Investment Series

Your investor profile can help you invest better. Do you know yours?

Pierre-Raphaël Comeau
Expert Advisor, Wealth Management
and Financial Planner LBCFS

The reasons to invest are as varied as life itself. They can be linked to major milestones like an upcoming birth, children about to enter university or when retirement is right around the corner. They could also stem from specific goals, such as buying a car or home. If you have a lot of projects, you'll have a lot of options. This article is the first in a series on investing, intended to help you get a better picture and make the right choices.

The inevitability of inflation and how to deal with it

Why should you invest? First and foremost, to ensure your good financial health and help you achieve your goals. To allow you to fight inflation as well, which is the increase in the average prices of goods and services. In simple terms, this means the amount you’ve set aside won’t enable you to buy later what you could buy now. For example, a coffee that costs you $5 today will most likely be more expensive a few years down the road. A good way to clear this hurdle is to diversify your investment portfolio and take advantage of market fluctuations to generate value.

Equities: An option to consider

Equities are among the many types of investments available to you. In fact, adding an equity portion to your investment portfolio could prove effective in curbing inflation. Typically, the recommended proportion of equities for your portfolio when considering a long-term goal is tied to your age and subtracting your age from 100 is a good starting point.

If you are 40 years old, up to 60% of your investments could be in equities. If you are 20, you can take on more risk, and have up to 80% in equities. However, if you are 60, you should cap your equity investments at 40% of your portfolio to manage risk. That said, it's important to gauge your specific risk tolerance before undertaking this type of investment, meaning you should tailor your investments to your risk profile.

Investments that suit you thanks to your investor profile

How can you determine your risk profile? By taking into account your age, income, responsibilities, when you want to achieve your objective, as well as your tolerance or aversion to risk. You need to choose what's right for you. If the risk you take on is keeping you up at night, then it's too much for you, so you should rethink your investment.

Choosing an investment vehicle is like choosing transportation for a trip. You should base your choice on your means (risk tolerance, personal situation) and destination (objectives). If you want to go to Italy, driving is not an option, but you could take a plane or a boat.

Your advisor will help you determine your investor profile and find the right investments for you. The first step is discovery, with a financial health assessment, then your advisor will make tailored recommendations, so you can achieve your goals. He or she will take all of your investments into account to get an overall picture, as well as ensure your holdings are well diversified to strike a balance between security and performance.

Start things off on the right foot: know yourself better to invest better.

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