BUILDING RELATIONSHIPS FOR LIFE
BELTRAME WEALTH MANAGEMENT WITH OVER 35 YEARS COMBINED INVESTMENT EXPERIENCE, WE DESIGN INNOVATIVE FINANCIAL SOLUTIONS UNIQUELY TAILORED TO MEET YOUR NEEDS. THROUGH INTEGRITY, EXPERIENCE AND KNOWLEDGE, WE GROW AND PROTECT YOUR WEALTH, WHILE PROVIDING UNPARALLELED SERVICE. TOGETHER WITH OUR GROUP OF EXPERTS, WE HELP YOU ACHIEVE FINANCIAL SECURITY THROUGH ONGOING ADVICE AND PERSONALIZED SOLUTIONS.
HOW DO YOU MANAGE THE UPS AND DOWNS OF THE STOCK MARKET? THINK OF A TEETER TOTTER. THE IMPORTANCE OF DIVERSIFYING AMONG DIFFERENT ASSET CLASSES The most widely accepted way to minimize the risk of investing is through diversification-spreading money over a variety of investments. Alone, individual asset classes could be more volatile, but as part of a mix, they can give you potentially higher returns. Asset allocation simply seeks to pinpoint the most efficient way to diversify. The objective of asset allocation is to create an optimal portfolio for any given level of risk. Each asset class – stocks, bonds, cash, etc., has its own level of risk and return. THE VALUE OF AN INVESTMENT POLICY STATEMENT (IPS) An IPS outlines the investment management philosophy for your portfolio and serves as the foundation for each investment decision. The IPS sets out your investment objectives, risk tolerance and unique circumstances. Its purpose is twofold. First, it recommends a prudent investment strategy based on your stated goals. Second, it summarizes your personal situation in financial terms. The value of the investment policy statement is that it allows you to verify that I have clearly understood your needs before implementing your investment program. It also allows you to monitor progress towards achieving your financial goals. It is a dynamic document that is subject to regular review and change as new or different information comes to light. The benefits of working with a Portfolio Manager • A Disciplined Process – time tested and proven approach • Proactive Portfolio Management – taking advantage of opportunities in the market as they arise • Convenience and Peace of Mind – we take care of your money so you can take care of other things important to you. As Portfolio Manager, I will work with you to create your personalized IPS and then carry out the on-going management and monitoring of your investments, within your parameters. This type of program offers our clients the chance to spend time on family, career and other important pursuits while they leave investment management in capable hands. STOCKS VS BONDS It’s helpful to understand how interest rates fluctuate and the resulting effect on different types of investments. As the economy grows, interest rates rise along with corporate profits and, thus, stock prices. Eventually, the economy reaches a peak at which time it begins to shrink. Often, this shrinkage reaches a level where it is called a recession. To counter the effects of the recession, the Bank of Canada lowers interest rates to increase the availability of credit and the flow of money. One of the best areas in which to invest during periods of declining interest rates is the bond market. As interest rates decline, bond prices rise, and conversely, as interest rates rise, bond prices fall. Essentially, when interest rates are declining, investors are willing to pay more for bonds issued earlier with higher coupon rates. So, by investing in the bond market, you will achieve capital gains as interest rates decline resulting in higher priced bonds.
INVESTING IS LIKE BAKING, NOT COOKING Let’s talk about cooking a pot of spaghetti sauce. It calls for meat, tomatoes, spices, celery, onions and green peppers. The recipe also asks for an onion. But should it be small or large? You use what you have on hand. While you’re cooking, you’re enjoying a glass or two of red wine. Bottle is almost done so you empty what’s left into the sauce. The wine was not part of the recipe, however there are three outcomes: (1) it makes the sauce outstanding, (2) it makes no change or (3) the sauce tastes bad. If the wine makes it worse, you can boil it off and add cream to neutralize the effect, perhaps. You can keep adding other ingredients in hopes that you can make it taste better. After supper, you’re asked about the recipe and admit to not keeping track of what was added. And unfortunately, you’ll likely not be able to replicate that outcome again. BUT IF WE THINK ABOUT BAKING… Baking bread calls for specific, accurately measured ingredients, such as water, flour, yeast, salt. While in the refrigerator you spot two eggs that should be consumed soon. You decide to add those into the bread mix so as not to waste them. What is the outcome? Do you get bread? No. Do you get anything close to bread? No. Can you fix it by adding some other ingredients? No. Now what do you do? You decide to put it in the oven and wait an hour before realizing that it’s ruined, then dump it into the trash bin and start again. Investing is like Baking… a specific recipe for a specific outcome. The addition of adhoc ingredients will not give you the result you intend to have. In the portfolios we build, there are seven basic ingredients for investing: 1. Cash 2. Canadian fixed income 3. Global fixed income 4. Canadian equities
5. US equities 6. International equities 7. Real Estate
Depending on your goals for return and your risk appetite, your investment recipe may contain all or some of these ingredients above. The measure of each ingredient is totally dependent on your goals. An investment recipe is called asset allocation. The portfolio manager is the baker, keeping watch on the details, ensures key ingredients are measured accurately, and regularly monitors the mix to adjust for taste. Professional bakers use professional cookware. Using a pie plate that costs $500 while you can buy one that looks the same at the big box store for $45 will not necessarily give you the same results. Professional equipment makes the process consistent and can help to ensure the best results. The baking is even and controlled, every time. As with baking, a knowledgeable, professional portfolio manager utilizes specific tools, such as market analysis, corporate data, political and economic views, and more, to help smooth out the investment experience and help provide stable, total returns. Professional bakers begin work at 3am, while the rest of us are in bed enjoying a great night’s sleep. By the time we arrive at our favourite pastry shop for a morning treat, the bakers have wonderful creations made for us, each one to perfection. A professional portfolio manager works diligently to ensure your objectives and goals are being met. With dedication to excellence, a professional portfolio manager focuses on: your goals and objectives, working with analysts and advisory teams in order to select the best securities, monitoring markets for opportunities, adjusting asset allocation strategies and most of all, providing peace of mind that all is being taken care of while you’re free to enjoy life.
THE MANAGED PORTFOLIO PROGRAM Free yourself from the burden of managing your personal investments. Rely on the expertise of an Associate Portfolio Manager (APM) or Portfolio Manager (PM) who will look after your portfolio for you. ACTIVE MANAGEMENT It is expected there will be approximately 30-40% turnover in the portfolio annually without any direct client involvement. FREEDOM FROM DAY-TO-DAY INVESTMENT DECISIONS ScotiaMcLeod advisors that have qualified for the APM or PM designation have extensive investment experience and have undergone years of continuing education. • Their vast experience and knowledge helps to manage your custom-designed portfolio to meet your individual goals • Contact with your APM or PM can be as little or as much as you wish • Your portfolio will continue to be managed in a highly personalized manner • Experience freedom from the day to day investment decisions ACCESS TO A HIGHLY DISCIPLINED INVESTMENT PROCESS Through your Investment Policy Statement (IPS), you, with the help of your APM or PM will develop and agree on a written investment strategy. The document can be considered your financial roadmap as it outlines the long-term policy and management guidelines for your ScotiaMcLeod Managed Portfolio Program account. • Your IPS is specifically designed for you • It reflects your individual goals and objectives • It establishes the guidelines and expectations of the management of your portfolio • Adherence to this written plan adds a crucial disciplined element, which is a fundamental component of the commitment to you • Your APM or PM can react to market conditions quickly and take advantage of opportunities as they arise FINANCIAL PEACE OF MIND You can rest assured that your portfolio will be actively monitored and rebalanced, factoring in variables such as your risk tolerance and personal situation, the financial markets and the economic environment. This will be done to ensure that your portfolio will continue to work toward meeting your unique needs and goals, whatever the situation. Moreover, it is important to note that APMs and PMs are subject to ScotiaMcLeod Managed Portfolio Program policies and procedures, which are specifically related to their investment management role. In addition, Portfolio Managers are governed by some of the most comprehensive rules and regulations in the securities industry. OUTSTANDING SERVICE For us, your investment needs are just the beginning. We look at the entire financial picture including your banking and borrowing needs, Will and estate planning as part of a full financial plan. • The ScotiaMcLeod Managed Portfolio Program is available for an all-inclusive management fee • The fee covers portfolio management services, custody, administration and trading costs • It also includes access to the research analysts and strategists of ScotiaMcLeod
STRATEGIC RECOMMENDATIONS In constructing your proposed portfolio, we have allocated your assets between different asset classes. Each asset class has its own risk return characteristics and each will move up and down at different times and at different rates. By spreading your assets over more than one asset class, the unsystematic risk or the risk of a particular investment in your portfolio is reduced by diversification. Each asset class has varying degrees of correlation to each other. As the chart below demonstrates returns cannot be reliably predicted and investing in any one asset class has historically led to greater volatility and risk than investing in a diversified portfolio. BUILDING YOUR PORTFOLIO ON A SOLID FOUNDATION Each Guided Portfolio is scrutinized regularly by the Portfolio Advisory Group to ensure it offers the best combination of growth and value. Relying on leading research, they monitor each position in the Portfolios against fundamental, quantitative, and technical criteria. To provide optimal diversification they invest across a wide range of sectors and industry classes. And if underlying fundamentals shift the Portfolios are adjusted accordingly in a strategic and disciplined fashion. You have the confidence of knowing your portfolio is built on a solid foundation given the flexibility and discipline inherent in the Guided Portfolios. Regular evaluation and our team of experts approach helps increase the likelihood of you achieving your financial goals. SOLUTIONS CONSISTENT WITH YOUR ESTABLISHED GOALS As a key component of your overall financial solution, the Guided Portfolios can provide an effective diversification strategy to help reduce risk and maximize returns. Our disciplined philosophy adds structure to the investment process, helping to ensure your portfolio remains on track consistent with your established goals. In this way you remain focused on your objectives even as your circumstances or the markets change. PORTFOLIO ADVISORY GROUP: SELECTION AND REVIEW PROCESS 1. Reviewing Securities – A wide selection of companies in Canada and the U.S. are assessed using broadly defined investment criteria to develop a list of potential opportunities. 2. Choosing the Securities – Sectors and companies are selected based on a range of fundamental, quantitative, and technical considerations. 3. Ongoing Review – Thorough and regular monitoring of the Portfolios is undertaken. Changes are made when valuation parameters or changing investment conditions warrant. 4. Ongoing Communications – Our process is entirely transparent with any changes and reasoning fully disclosed. Regular updates are provided on the portfolios, components, and performance.
Portfolio Diversification PORTFOLIO DIVERSIFICATION In constructing your proposed portfolio, we your assets between and risk tolerance, your Based on a detailed understanding ofhave yourallocated goals, return requirements different asset classes. Each asset class has include its own risk return characteristics recommended asset allocation may one or more Guided and Portfolios. As your Advisor, I work directly each upexperienced/ and down at different and at different rates. By spreading with will themove highly leadingtimes investment professionals in the ScotiaMcLeod Portfolio Advisory your assets over more than one asset class the rely unsystematic or the risk of a Group. The Advisory Group specialists on their risk extensive practical experience and knowledge of the particular investment in your portfolio is reduced by diversification.
capital markets to construct the Guided Portfolios – actively managed model portfolios comprised of some of the leading companies in major North American industries. Each asset class has varying degrees of correlation to each other. As the chart below demonstrates returns cannot be reliably predicted and investing in any Each asset has varying degrees of correlation each other.inAs one asset classclass has historically led to greater volatility and riskto than investing a the chart below demonstrates returns cannot beportfolio. reliably predicted and investing in any one asset class has historically led to greater volatility and diversified
risk than investing in a diversified portfolio. Year
Canadian 91 Day T-Bills
Canadian Bonds
Canadian Stocks
US Stocks
International Stocks
1990
12.95%
7.55%
-14.80%
-2.93%
-23.06%
1991
9.07%
22.14%
12.02%
29.97%
12.07%
1992
6.57%
9.85%
-1.43%
18.25%
-3.14%
1993
5.01%
18.14%
32.56%
14.78%
38.62%
1994
5.17%
-4.30%
-0.18%
7.34%
14.48%
1995
6.87%
20.65%
14.53%
33.77%
8.46%
1996
4.35%
12.27%
28.31%
23.57%
6.89%
1997
3.12%
9.65%
14.32%
39.24%
6.56%
1998
4.68%
9.20%
-1.41%
38.01%
29.16%
1999
4.60%
-1.14%
31.76%
14.36%
20.28%
2000
5.31%
10.25%
7.41%
-5.93%
-10.95%
2001
4.16%
8.09%
-12.57%
-6.35%
-16.26%
2002
2.49%
8.72%
-12.44%
-22.90%
-16.53%
2003
2.88%
6.70%
26.72%
5.26%
13.84%
2004
2.23%
7.13%
14.48%
2.81%
11.91%
2005
2.65%
6.46%
24.13%
2.29%
11.16%
2006
3.99%
4.03%
17.26%
15.35%
26.37%
2007
4.14%
3.67%
9.83%
-10.53%
-5.32%
2008
2.51%
6.40%
-33.00%
-21.20%
-28.78%
2009
0.38%
5.42%
35.05%
7.39%
12.49%
2010
0.51%
6.74%
17.61%
9.06%
2.56%
[Source: Zepher Style ADVISOR Note: All returns are in Canadian dollars. Canadian bonds are represented by the Scotia Bond Universe, Canadian Stocks by the S&P TSX Composite, US Stocks by the S&P500 & International Stocks by the MSCI EAFE Index] [Source: Zepher Style ADVISOR Note: All returns are in Canadian dollars. Canadian bonds are represented by the Scotia Bond
Universe, Canadian Stocks by the S&P TSX Composite, US Stocks by the S&P500 & International Stocks by the MSCI EAFE Index]
3COTIA-C,EOD s Customizable Report Title
Date Diversification will not remove the risk presented by interest rates, political risk, or recession, which impact the market more broadly, but it will reduce the risk presented by investing in a very specific group of securities.
As part of a disciplined portfolio, diversification also helps to avoid the common tendency of trying to chase the next hot return. In building a properly diversified portfolio we can potentially reduce risk and increase returns over the long term.
PORTFOLIO REBALANCING With a diversified portfolio, your portfolio may drift away from your original mix over time. This is because some of your investments will change in value faster than others, causing some of your asset classes to become out of alignment with your investment goals. This may change the risk profile of your portfolio making it either more or less risky than the target allocation. Rebalancing will ensure that your portfolio does not overemphasize one or more asset categories and that it is returned to a comfortable level of risk. The rebalancing of your portfolio involves selling assets that have appreciated in value and buying assets that are temporarily out of favour. This type of investment discipline ensures that your portfolio adheres to the principle of buying low and selling high. Rebalancing back to your asset allocation allows you to stick to your plan and provides your portfolio with a valuable risk management tool, especially in times of market uncertainty or with changes in world events. Implementing a rebalancing strategy can be regarded as adopting a “sell discipline.� For many investors, the rebalancing process can feel unnatural as emotions often dictate holding successful investments for too long, while, at the same time, selling weaker investments before they have the opportunity to recover. Even in trending markets where the benefits of rebalancing may be less evident, following a disciplined rebalancing process helps control emotions by ensuring that a portfolio remains aligned to its intended asset allocation. Rebalancing also serves to reduce overall portfolio risk. It makes portfolio performance more consistent and less prone to spikes and extremes. Additionally, it reduces volatility and keeps the risk profile of your portfolio consistent.
NORMAN D BELTRAME, CIM, CFP, FMA Associate Portfolio Manager Senior Wealth Advisor norm@beltramewealthmanagement.com office +1 204 946 9263 / cell +1 204 227 2100
LORI BLACK, PFPC Investment Associate
MARK CASSIDY, CFP Investment Associate
lori@beltramewealthmanagement.com office +1 204 946 9252
mark.cassidy@scotiamcleod.com office +1 204 946 9241
DAVID MARUCA B.A. Associate Advisor, Insurance, Financial Services Inc. david.maruca@scotiamcleod.com office +1 204 946 9202
L. JEAN SIKOMAS Senior Will & Estate Planner, Scotiatrust, STI PFP TEP jean.sikomas@scotiabank.com office +1 204 985 3123
BUILDING RELATIONSHIPS FOR LIFE We can be reached at the following coordinates: THE BELTRAME WEALTH MANAGEMENT GROUP | SCOTIAMCLEOD 501-200 Portage Avenue, Winnipeg Manitoba R3C 3X2 office +1 204 946 9263 cell +1 204 227 2100 fax +1 204 946 9236 toll-free +1 800 324 0266 norm@beltramewealthmanagement.com beltramewealthmanagement.com ® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod. ScotiaMcLeod is a division of Scotia Capital Inc. (“SCI”). SCI is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.