Getting Started: Investment Plan
In the Investment Plan section, the most important information we're gathering is on your asset allocation and investment fees. These assumptions drive your future investment returns.
Investment Return and Asset Allocation
On the left we have investment return and asset allocation assumptions for each type of investment, Stocks/Equities, Bonds/Fixed-Income, and Cash.
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.
How to Change Rate of Return Assumptions:
Adviice uses the returns laid out in the FP Canada guidelines for all Canadian financial planners. It is possible to change them on the platform but we do not recommend deviating from the FP Canada guidelines. You can see how to customize returns in this article.
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. These fields are not required by the platform.
Savings Account Return
In the center column, we have Savings Account return and fees.
These values will generate the return for the balances entered in Savings and TFSA Savings fields in the Asset Section.
Type of Return and Portfolio Turnover
That information only applies to Non-Registered accounts. If you don’t have a non-registered account then you can safely ignore it.
The defaults, you'll see them in light grey in each field, represent a diversified ETF portfolio and are a good starting point if you are unsure of what to enter in these fields.
But if you have a non-registered portfolio that focuses on one type of income, you can represent that here. For example: if you have a concentration of Canadian dividend paying equities in your non-registered account then you may want to increase the % of return coming from Canadian Dividends and decrease the % coming from Foreign dividends.
Portfolio Turnover is a metric to help capture capital gains that may occur from annual re-balancing and/or capital gains distributions. This may trigger an amount of capital gains each year even if you are not actively withdrawing from your non-registered portfolio.