"Someone's sitting in the shade today because someone planted a tree a long time ago." Warren Buffett

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What Portfolio Suits You?

At Heffernan Capital Management we see a lot of portfolios and people, and over the years we have come to understand that the most important part of creating the perfect portfolio is understanding yourself as an investor.

Firstly you must determine what the portfolio is for, are you aiming to build retirement assets, long term wealth, do you need a portfolio that produces you income or perhaps it is a legacy investment for your children or grand children.

Next comes the question are you a conservative or an aggressive investor and more importantly take your time, it is important that this self-assessment is accurate.

Profiles range from extremely conservative to very aggressive. With our experience we have the expertise to recognize where you fit within that range and develop a portfolio to match your unique profile.

Their is as always a consideration of real returns that accounts for taxation, and proper investment structure.

Security

Conservative investors are focused on protecting capital and avoiding inflationary portfolio erosion. Principal protection is important for many reasons.

Perhaps you are saving for a goal, you need to be certain that the funds will be available at that time.

Emotions are also a factor. Many people are extremely uncomfortable holding investments that fluctuate in value. Conservative investments are by definition low-risk, but not without risk.

These include cash deposits, select Guaranteed Investment Certificates (GICs), principal protected notes, and money market funds.

On a long-term basis, the returns of investments like these will not match the returns available in growth-oriented assets, but the security they provide is an important component of a diversified portfolio provided they have some protection from inflation.

Balance

True balance in a portfolio will always include a mixture of cash assets, dividend and growth equities or equity funds. At Heffernan Capital Management we also recommend a portfolio has some international diversification.

The precise proportion of those assets will depend on the individual investor, but is likely to be somewhere around 50% growth, 25% cash assets and 25% income producing.

A balanced approach may be appropriate if you are investing for a medium-term goal — for example, paying for your child’s post-secondary education 10 years from now.

You are willing to take on some risk in order to achieve higher returns than guaranteed assets can offer, but at the same time you want a healthy weighting of consistent returns to protect your capital.

Risk

Risk is hard to avoid, we face risks of various types on a daily basis, but how much risk depends on our personal preferences. Lifestyle choices in relation to risk are decisions we take on a daily basis.

Aggressive profiles are not different, they are for investors who want to see capital increases over the long term and are prepared for short term losses. Generally, this means investing in equities or equity mutual funds.

Over the long term, these assets have historically provided returns that are higher than those available in cash or cash equivalents or fixed-income investments.

In the short term, however, growth investments, including those that make up the growth component of a balanced portfolio, are subject to volatility, that is not for everyone.

In other words, their value fluctuates, as does your net worth. At times, they might even be worth less than what you paid for them. The most successful growth investors are those who are comfortable with volatility.

They are willing to ride out temporary fluctuations because they believe that, over the longer term, their portfolio will increase in value.

If you are a sophisticated investor with a portfolio over $500,000 and would like to order a portfolio review, contact Heffernan Capital Management