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Self Assessment

How well are you set up to handle whatever life throws at you? Take this in-depth quiz to rate your financial and investment knowledge!

 

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1. Most Canadian Equity mutual fund managers have the tools and knowledge necessary to allow them to consistently beat their benchmarks by 1-2% per year.
2. The average annual management expense ratio (MER) of a Canadian Equity mutual fund is just under 2%.
3. A good financial advisor should be able to help clients ‘beat the market’ by at least 2% per year.
4. Successful management of your retirement portfolio requires that you dedicate at least one hour each week.
5. If you own a mutual fund and you have a concern, you should delay making a decision until you have all of the facts.
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Financial Planning
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6.  Have you planned for where you want to live, what you want to do and how much you want to spend in retirement?
7.  Do you know how much you can safely spend each year (in today’s dollars) without ever running out of money?
8.  Do you know the rate of return you should aim for in order to achieve all of your financial goals?
9.  Have you relied on a risk tolerance questionnaire to determine your comfort level with risk and therefore the percentage of your portfolio you should have in equities?
10.  Are you using the required rate of return as shown by your financial plan to dictate the allocation of your investments between asset classes?
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Addressing All Risks
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11. For most retirees the safest portfolio (safe from all the risks you face) would be one invested entirely in Government of Canada bonds.
12. When investing, retirees should start to think shorter term because they need to convert their RRSPs to RRIFs by age 71.
13.  If you have an indexed pension that covers the essentials you can afford to take a bit more risk with your investments.
14. If retirees are living and spending entirely in Canada there is no need to invest outside of Canada.
15. Before you retire your investment portfolio should be balanced and diversified – but after retirement your portfolio should mostly have ‘income’ producing investments that generate regular cash flow.
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Diversification
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16. A common problem is over-diversification – having so many different investments that they overlap and can rarely if ever do better than the market as a whole.
17. When individuals invest in individual common stocks a frequent problem is over-concentration in a few industry sectors.
18.  When interest rates are very low (under 3%) it makes no sense to diversify into GICs or bond type investments because retirees need income and cash flow.
19. If one used Exchange Traded Funds (ETFs) a retiree with $500,000 could have a diversified investment portfolio by putting $100,000 in each of five different ETFs representing five different asset classes.
20. In a well diversified investment portfolio all the different asset classes should increase in value in a strong bull market.
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Simplicity
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21. Do you have more than one financial advisor?
22. Do you know your asset allocation?
23. Do you regularly see a summary statement that gives a combined view of all of your accounts?
24. In your view, is your investment portfolio simple and easy to understand?
25. Do you own more than 20 mutual funds?
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Income Taxes
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26. Individuals over 65 can now split their RRIF income with their spouse?
27. Pension income from your employer’s pension plan can now be split with your spouse.
28. Dividends from Canadian companies are the least taxed form of investment growth.
29. Management fees, for non RRSP accounts, are deductible in a ‘fee-based’ account.
30. Estate planning strategies – such as inter–vivos trusts - are an effective way to split income with children and grandchildren.
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Monitoring Your Portfolio
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31. If your financial advisor gives you bad advice do you think that he/she will suggest that they be fired and that you get a new advisor?
32. Do you know the rate of return that you have earned in the last year?
33.Do you know how the return you earned compares to an appropriate benchmark?
34. Is it necessary to monitor the performance of your portfolio if you have an investment advisor doing it?
35. Do you know if your portfolio has done as well as a passive ‘couch potato’ portfolio?
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Investment Process
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36. Do you have an investment strategy?
37. Do you understand your investment strategy?
38.Are changes to your investment portfolio always consistent with your investment strategy?
39. Do you have a target rate of return for your investments?
40. Do you have a system of when and how to rebalance your portfolio?
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Fees
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41. What is the average yearly management fee for exchange traded funds (ETFs)?
42. What is the average yearly management fee for equity mutual funds?
43. What is the average yearly management fee for balanced mutual funds?
44. What is the average yearly management fee for a full-service managed account?
45. Do you know the amount you are paying in annual management fees?
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Investment Industry
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46. The trailer fees on equity mutual funds are usually higher than the trailer fees on bond funds.
47. Commissions on ‘new issue’ products are usually about 5%.
48. One way or another, financial advisors expect to be compensated when they prepare a financial plan.
49. If you are concerned that your financial advisor is not doing a good job you can ask a financial advisor at another firm for an unbiased assessment as to whether or not the first advisor is doing a good job.
50. Warren Buffett says – don’t ask your barber if you need a haircut. This is good advice and it helps us to remember that there is an unavoidable potential for a conflict of interest.
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