Lower Cost Of Living For Canadians (Apparently)
April consumer price index rose 1.6% (over the last 12 months) vs. 1.7% in March.
It depends on what you consume:
But it also depends upon where you live:
If you purchased men's clothing in Ontario in April, they experienced the largest decline in 12 months. Nova Scotia had the biggest decline in fresh vegetable prices in the last 12 months.
If you know what you spend and what you spend it on, it becomes material in working out the increase and / or decrease in your cost of living (year over year) which impacts the "real" return on the growth of your net worth.
If you can get an average annual return of 6% (after fees) on your assets (over multiple years) and your average annual cost of living is 2%, then your real return is 4% and you should be able to compound that growth nicely over time.
Those kind of returns won't happen without taking some risk. The "risk free" rate of return (90 day Government of Canada T-bills) yields about 1/2%.
How you take that risk becomes extremely important.
Even balanced portfolios (depending on the balance and diversification) were sideswiped on Wednesday of this week: The benchmark indexes that we use, the All Country World Index (ACWI) ETF gave up a little over 1.5%, while the Canadian Bond Index (XBB) ETF added about .85%. Which means that a ( fully invested) 60% equity / 40% fixed income portfolio gave up about 0.56%. That is a pretty big swing considering that the same 60/40 combination only garnered a 3.35% (before fees) return over the 2 years ending March 31st, 2017 (see table below).
Everybody can make their own comparisons, but even that kind of volatility can become unnerving. That is why we (at High Rock) focus so much on risk.
We can tell each of our clients what their return per unit of risk is.
Can your advisor tell you that?
Ask him / her.
If you have to take risk to beat the cost of living, best to understand what risk you are taking:
There is an alternative to banks, investment dealers and robo-advisors and at High Rock we are leading the way forward with low cost, transparent and client-friendly planning and investment strategy.
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