Getting Started: Investment Plan

In the Investment Plan section, we want to think about the four important factors in an investment plan, investment fees, asset allocation, diversification, and rebalancing.

It will be important to create a clear and concise investment plan that you can follow each year. Savings and investments will help support spending during retirement, so we want to ensure there is a stable investment portfolio that is able to grow each year, is highly diversified, and isn’t impacted by high investment fees.

The investment fees can be entered for each type of investment, this is typically called the MER or Management Expense Ratio, and it may require you to look up the detailed of your investments to find the MER.

The asset allocation can also be entered for each type of investment, this is the percentage of the portfolio that is allocated to that type of investment, this is typically based on the Risk and Investor Profile from the Discovery phase.

The rate of return is the standard long-term rate of return assumption from the Financial Planning Standards Council and may change slightly from year-to-year. There is still an opportunity to adjust the rate of return assumption in the Final Plan phase, but we do not recommend making these changes unless in very specific circumstances.

This information allows us to calculate the total net return after investment fees which we will use within the plan.

Finally, we want to choose how often the portfolio will be rebalanced. Rebalancing is necessary when one type of investment outperforms the other, this causes the asset allocation to be off target and require a rebalancing to get back on target. We recommend that rebalancing should happen at least once per year or be done automatically using an investment option that allows for automatic rebalancing.

Then, in the center, we have Savings Account return and fees.

Then on the right we have Diversification. To ensure proper diversification we recommend investments be split between different geographies and between many individual investments. To achieve a minimum level of diversification we recommend that investments be split between Canada, US and International, the default assumption within the platform is that this is split evenly. To achieve a minimum level of diversification we also recommend that no individual investment represent more than 3%-5% of the total portfolio, this can be done using low-cost investment options that hold hundreds or thousands of individual investments.