“Investing your money wisely by selecting the right asset mix,
selecting quality income oriented investments, sheltering income from taxation,
and controlling risk.” – Steve Nyvik
Steve builds, from blue-chip dividend paying stocks and bonds, a tax efficient ‘pension’ designed to meet your needs through time without taking unnecessary risk. Your portfolio is put together so that it is well diversified with an emphasis of controlling risk as a poorly designed portfolio can wipe out a lifetime of savings (we manage company risk, industry risk and your level of equities).
While you are in your working years, you are adding to your portfolio to grow the annual amount of pension income that the portfolio can generate. You add to your portfolio each year until the income is sufficient to meet your retirement living needs. Once it is enough to meet your needs, it can pay as long as you live with the capital available as a legacy for your children. Also, this stable income from businesses you know helps you to sleep soundly at night.
1. Building you a pension from Quality Income Oriented Investments
Steve focuses on high quality income-generating businesses that:
- produce goods and services needed for our economy in good or bad times (like banking, insurance, pipelines, energy, electricity, telephone and television (telecom), food, etc.),
- are dominant where they operate,
- are profitable, and
- produce a good dividend yield where the company income is more than sufficient to cover the dividends.
These types of businesses help you to sleep soundly at night as they are unlikely to disappear no matter how bad things get. Steve believes through holding primarily good dividend yielding stocks and high quality corporate bonds:
- the cost advantage through time (versus expensive mutual funds) translates to additional return;
- the dividends and interest income is a return that’s “baked-in” without having to rely on (or hope for) capital gains;
- the dividend tax credit for Canadian stocks held in a taxable account provides a tax effective return;
- the earnings on stocks retained may make the business more valuable which can result in capital growth.
2. Low Cost
Steve believes in value for money by providing portfolio management at a very competitive cost. He does not like expensive mutual funds as he feels that you can cut your cost by 50% or more through direct ownership of quality stocks and bonds. And he doesn’t normally like ETFs as he feels you can do better by constructing a quality dividend income oriented stock portfolio at good prices and avoid the expensive businesses and crappy ones included in the ETF.
3. Controlling Risk
Your portfolio is put together to get the right asset mix so that you get the growth you need without taking unnecessary risk. Your investments are well diversified to control risk as a poorly designed portfolio can wipe out a lifetime of savings (we manage company risk, industry risk and your level of equities).
Having a lower volatility portfolio matters; especially in your retirement years if you have to eat capital to meet your needs. Higher volatile portfolios in retirement means eating assets when they are down which makes it tough to impossible to recover to previous levels. That can lead to early depletion of your portfolio and outliving your money.
Through time, the cost advantage, more certain returns (from dividends and capital gains from earnings that were retained) and lower volatility translates to much better returns. Financial planning advice and service are provided to Steve’s clients, and included in the cost, to make sure that if ‘life happens to you’, your goals aren’t derailed in the process.
Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.