In a lively talk peppered with tales from her personal life and pearls of wisdom from her family and friends, Lovett-Reid left her audience with 10 tips to invest by:
1. Take control. The past year or two may have left many of us feeling powerless and wanting to hide from our financial futures. But bruised as we may feel, if we bury our heads in the sand we’ll miss opportunities to learn important lessons and make profitable choices going forward. This message is particularly important for women, given that 90% of them will become entirely responsible for their finances at some point in their lifetime.
2. Open a TFSA. When Lovett-Reid’s college-aged son asked what he should do with $7,000 he’d saved, she e-mailed 20 fund managers to see what they would recommend. Consistent themes arose: “open a TFSA (Tax-Free Savings Account),” they said. “Invest 50% in dividend income, and 50% in dividend growth. Leave it alone, and he’ll be fine.”
3. Buy what the world needs. Have you noticed the proliferation of commercials positioning products as “good value?” That’s because in downturns, the market is generally oriented toward needs, rather than wants. Stay away from consumer discretionary stocks and focus instead on staples, pharmaceuticals, utilities, and low-price retailers.
4. Buy the government’s priorities. Where the government’s investment dollars go, there will be growth: think about green energy and infrastructure as growth areas to invest in.
5. Keep cash on-hand. Cash protects you from downturns by letting you decide when to sell – you won’t be forced to sell when conditions are unfavorable (and remember, you haven’t lost a dime until you sell).
6. Have a “Plan B.” Don’t just plan for the best-case scenario, because it may not pan out. Life is full of surprises, as Lovett-Reid was painfully reminded at her nephew’s recent funeral. Have a Plan B, and structure your finances for Plan B, not Plan A.
7. Know and plan according to your financial age. Where you need to be financially is not just dictated by your chronological age, but also by your “financial age.” How close are you to your target retirement date? How long will you need to support dependents? A 50-year-old with kids in their late 20s has a very different financial age than a 50-year-old with kids in grade school.
8. Worry about living too long. It may seem ironic, but financially speaking, your longevity could be the death of you. Given increasing life spans (there are expected to be 2.2 million centenarians living worldwide by 2050), if you plan to live only to age 85, you could very well outlive your money. Plan for at least 90 or 95.
9. Structure finances well in advance of need. Start structuring finances for retirement in your mid-40s. An investor closing in on retirement shouldn’t have a risky portfolio – if the market takes a dive at that point, she won’t have time to wait for the market to bounce back.
10. Avoid over-exposure in any one area. Review your portfolio for risky patterns. Over-consolidation in any one currency, one sector, one country or one company means too much risk. That includes gold, which, despite its recent meteoric rise as a safe alternative, is in fact subject to price volatility – “don’t bet the farm on it.”
Lovett-Reid ended with a tale to remind us all why we need to consider the long-term view when making decisions about investments. Anne Scheiber was a former IRS auditor who invested a very ordinary sum -- $5,000 – when she retired in the 1940s. Scheiber self-managed her investment through the decades that followed, buying and holding leading brands and re-investing her dividends into tax-exempt bonds. She held her investment through the ups and downs of the 1950s, 60s, 70s, and 80s, until her death in 1995. By that time, her $5,000 investment had grown to a value of $22 million, providing a shining example of the adage that it’s “time in the market, not timing the market” that’s the key to long-term success. Now, that’s a lesson worth its weight in gold (or perhaps something a little less volatile).
About the Author
Rachel McCready is Creative Director at CPC Healthcare Communications. She can be reached at rmccready@cpchealthcare.com
