The Pension Strategy: The Ultimate Guide to Personal Investing

192 Pages·2005·7.85 MB·English

by  Andrew Springett

The PENSION
STRATEGY
THE ULTIMATE GUIDE TO PERSONAL INVESTING
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The PENSION
STRATEGY
THE ULTIMATE GUIDE TO PERSONAL INVESTING
ANDREW SPRINGETT, CFP
INSOMNIAC PRESS
Copyright © 2004 by Andrew Springett
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted, in any form or by any means, without the prior
written permission of the publisher or, in. case of photocopying or other repro-
graphic copying, a license from Access Copyright, 1 Yonge Street, Suite 1900,
Toronto, Ontario, Canada, M5E 1E5.
The information contained herein is considered accurate at the time of printing.
CIBC and CIBC World Markets Inc. reserve the right to change any of it without
prior notice. It is for general information purposes only. Clients are advised to
seek advice regarding their particular circumstances from their personal tax
advisor. The comments and opinions expressed herein are the result of work
done by Andrew Springett. They may differ from the opinions of CIBC World
Markets Research Department and should not be considered representative of
CIBC World Markets Inc/s beliefs, opinions or recommendations.
Interior design by Marijke Friesen
Library and Archives Canada Cataloguing in Publication
Springett, Andrew, 1973-
The pension strategy : the ultimate guide to personal investing /
Andrew Springett.
Previously published under title: The pension strategy for Canadians.
Includes index.
ISBN 1-894663-89-6
1. Retirement income—Canada—Planning. 2. Investments. I. Springett,
Andrew, 1973- . Pension strategy for Canadians. II. Title.
HG179.S5325 2005 332.024'014'0971 C2004-906910-1
Printed and bound in Canada
Insomniac Press
192 Spadina Avenue, Suite 403
Toronto, Ontario, Canada, M5T 2C2
www.insomniacpress.com
In memory of Gordon Springett.
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TABLE OF CONTENTS
CHAPTER ONE
My Quest for a Solution 1
CHAPTER Two
What Is a Pension Plan? 19
CHAPTER THREE
Modern Portfolio Theory 27
• The Efficient Frontier
• A Note About Possibilities
CHAPTER FOUR
Risk 39
« Currency Risk
• Interest Rate Risk
• Inflation Risk
• Manager (Specific) Risk
• Market (Systematic) Risk
• Measuring and Eliminating Risk
• How Do the Great Pension Plans Measure Risk?
CHAPTER FIVE
Diversification 59
CHAPTER Six
Aset Alocation 71
• Cash and Asset Allocation
• Asset Allocation and Fixed-Income
The Owner and the Leaner
Government Bonds
Certificates of Deposit
Corporate Bonds
Preferred Shares
Foreign Bonds
• Asset Allocation and Equities
Inflation-Proofing Equities
Why Do Equities Work?
The Real Value of Companies
• Asset Allocation and Real Estate
• Absolute Return Investments and Asset Allocation
CHAPTER SEVEN
What Does the Ideal Pension Plan Look Like? 121
• Adjusting Asset Allocation to Your Risk Tolerance (Comfort
Level)
CHAPTER EIGHT
Portfolio Rebalancing:
The Art of Dynamic Asset Alocation 145
CHAPTER NINE
Bringing Professional Help to Your Retirement Plan 155
• Working with an Investment Advisor
CHAPTER TEN
Geting Started 169
Appendix: A Note on Standard Deviation 179
Glosary 182
Index 18
Acknowledgements
Thanks to my wife, Jessica, for her love and support during this
project—it wouldn't have happened without you.
A large number of people have contributed to my financial educa-
tion over the years—thanks for taking the time. I'd like to thank
Lome for taking a chance and giving a young guy his first job on
Bay Street. My friends certainly deserve my thanks for all the
years they've put up with listening to my ramblings and my
parents Gordon and Judith deserve the greatest thanks for doing
a great job. Special thanks to Michelle Bullard for sharing her
writing expertise, and Mike O'Connor for bringing the project to
fruition.