Words on Wealth. Meridian. Pay yourself first in In this issue

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1 Meridian Newsletter Pay yourself first in 2014 Welcome to the edition of. With the busy holiday season behind us, now s the perfect time to think about you including your financial goals and finding what will work to help you meet your short- and long-term needs. In this issue we feature the idea of paying yourself first and investing to reflect your unique investor profile. Pay yourself first provides strategies that make it easier to save now while growing your savings, so you can have the retirement you want when the time comes. Find the solutions that are right for you features different investment solutions that should help you achieve your unique goals and reflect your investor profile. We have also included a Q&A with Meridian s Randy Janzen, Senior Manager, Wealth Solutions, who discusses the heightened interest in financial literacy. I hope you enjoy this issue of! If you d like to receive an electronic version of this newsletter or to read popular articles from previous issues, please visit meridiancu.ca/wordsonwealth. In this issue Hot Topics: Investing on your mind? It pays to think long term. Investment Solutions: Pay yourself first. Financial Planning: Find the solutions that are right for you. Expert s Corner: A Q&A with Randy Janzen, Senior Manager, Wealth Solutions.

2 HOT TOPICS Investing on your mind? It pays to think long term Investors were given a healthy dose of positive news at the end of The Canadian economy appeared to be growing and the employment situation continued to improve. In the U.S., the unemployment rate fell below 7 per cent (the lowest rate since November 2008), while the housing market continued to expand and drive that nation s economy. There has been more good news: financial markets were not nearly as volatile as they have been in recent memory. That said, there are still financial markets around the globe that are experiencing some pretty steep price swings. What s important for investors to recognize is that this type of volatility has historically been part of healthy financial markets. A long-term prescription to short-term volatility Financial markets respond positively and negatively to a number of factors, including company earnings reports, news headlines and political issues from all corners of the world. But volatility impacts different types of investments in different ways. For example, when equity markets are weaker, fixed-income investments like bond funds* often outperform. In a similar fashion, if Canadian stock markets are volatile, the global equity market may outperform. That s why taking a long-term view is so important: it helps you move beyond the shortterm ups and downs that tend to occur in financial markets, and maintain a focus on your long-term financial goals. At the same time, we all have short-term needs like saving for a wedding, vacation or a down payment on a house. Because of this, it s important to have a diversified portfolio that also includes shorter-term investments like cash, cash equivalents and guaranteed investment certificates (GICs). Please contact me today to discuss your (unique) short- and long-term goals. After a relatively long time trading at about the same value as the U.S. dollar, the Canadian dollar began to decline in value versus the U.S. dollar in Now, as a cross-border shopper or world traveler, that s not great news for your budget. On your next trip, your Canadian money just won t go as far as it did before. From an economic perspective, a lower loonie is good news for the Canadian exporters that help drive our economy and employ our family and friends. Given that the price of the loonie can fluctuate, this may have an impact on your investments. Talk to your Wealth Advisor about how you can take advantage of the opportunities that arise from these fluctuations. Price CAD/USD Exchange Rates (2013) Jan Dec Source: 2

3 FINANCIAL PLANNING Pay yourself first Investing regularly is a great way to save for retirement With all of life s expenses including your mortgage, groceries, transportation, clothing, gifts and entertainment it s easy to see how contributing to your Registered Retirement Savings Plan (RRSP) can be the lowest priority on your list. Retirement may seem too far off to even think about right now, or it could be just around the corner, but, either way, an RSP is one of the best ways to start building the retirement you want. The earlier you start saving, the more your RRSP can grow, and the more money you will have for retirement. Make saving automatic A great way to save for retirement is to make your saving automatic by paying yourself first. The easiest way to do this is to set up a regular contribution plan, and have your RRSP contributions automatically taken from your savings or chequing account, and put directly into your RRSP. Setting up regular contributions is simple through a preauthorized contribution plan (PAC). All you need to do is decide on the amount you wish to save and frequency of your 250 contributions 200 (i.e., weekly, bi-monthly, 150 monthly, etc.). 100 Many people find that 50 taking smaller 0 amounts of money directly from their savings or chequing account on a regular basis and on the day they get paid makes it easier to save without impacting their budget as much. Units Benefit from dollar-cost averaging By making regular contributions, you can benefit from dollarcost averaging. Dollar-cost averaging is a way to take advantage of fluctuations in the value of your investments. With dollar-cost averaging, you never have to worry about when to buy securities (or at what price). Here s why: When the price of your investment is relatively high, your PAC will buy fewer units of an investment, but when the price of your investment is relatively low, you will buy more units. An Example of a Dollar-Cost Averaging Plan Investment period (month) No. of units purchased with $1000/mth Unit Price ($) As you can see from the chart above, you continue to purchase units of your investment regardless of its price on any given day. When it comes to PACs, what s important is that you are saving your money on a regular basis over a long period of time, with the expectation that your average price will be lower than the price at which you sell the investment. For individuals with a retirement date that is still a relatively long way off, choosing a longer-term investment option with the potential for higher returns is often the right choice. I encourage you to contact me today to discuss the best approach for meeting all your unique short- and long-term financial needs Unit Price ($) 3

4 INVESTMENT SOLUTIONS Find the solutions that are right for you You are unique. Your portfolio should be too. Every Meridian Member has different short- and long-term financial needs. You may be saving for a house, starting a business, planning for your retirement or simply looking for the best-possible interest rates for your savings. You also have your own time horizon for when you ll need your money and a different risk tolerance than any other Meridian Member. That s why Meridian offers a variety of different investment solutions to help you meet all your unique financial needs. Laddered GICs Laddered guaranteed investment certificates (GICs) is an investment strategy designed to capitalize on fluctuating interest rates by ensuring one of your GICs matures every year. With a laddered GIC strategy, you invest five equal amounts into one-, two-, three-, four- and five-year GICs. This laddering allows you to invest when interest rates are rising to access those higher rates, while also limiting your exposure during periods of lower interest rates. With GICs, your principal investment amount is protected (meaning you will always get your initial investment back), and the interest payments on your GICs are guaranteed if you hold the GICs to maturity. Another benefit of a laddered GIC strategy is that you can always access a portion of your investments on their anniversary dates. A laddered GIC is an investment strategy that is well suited for individuals who have a lower risk tolerance and a relatively short investment horizon, but who are also interested in maximizing their returns. How a laddered GIC strategy works: Watch your investment grow in a laddered strategy: $5,000 divided by 5 = $1,000 into each GIC Invest $1,000 into Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 each term 1 Year at 1.50% $1, $1, Year at 1.60% $1, $1, Year at 1.90% $1, $1, Year at 2.05% $1, $1, Year at 2.35% $1, $1, Versus total investment of $5,000 into one term GIC Invest $5,000 into one term Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 2 Year at Renews Renews Renews Renews 1.60% $5, $5, $5, $5, $5, Portfolio Value at 10 Years $1, $1, $1, $1, $1, $6, Portfolio Value at 10 Years $5,

5 A laddered GIC strategy is one way to diversify your portfolio across different interest rates and maturity periods. Meridian also provides access to other solutions that allow you to diversify your investments even further, including: Managed solutions A managed portfolio solution is a combination of mutual funds* that can be made up of varying geographies, company size, and types of investments; all wrapped up into one investment. Managed solutions are professionally managed, offer flexibility and liquidity, and are quite affordable compared to purchasing individual securities and/or mutual funds. They are also a great way to diversify your overall investment portfolio. We can help you get there Successful financial planning requires the right solutions based on your needs. It also requires enough time to allow your savings to grow. Please contact me today to find out more about how we can build a diversified investment portfolio that reflects your specific needs. Direct your future Get on board and help shape the future of Meridian Meridian Credit Union is inviting nominations from our Membership for four (4) positions on our Board of Directors. TM Trademarks of Meridian Credit Union Limited. Member voting for the elections will take place from March 26 to April 14, Results will be announced at our Annual General Meeting on April 22, Nominations will be accepted for a period of 68 calendar days starting November 18, 2013 and ending January 24, Applications for Nominations are available at meridiancu.ca/agm and must be submitted in writing and received by Meridian s Returning Officer before 5 p.m. on January 24, 2014 as follows, Sheryl Wherry, Returning Officer c/o Meridian Credit Union 75 Corporate Park Drive St. Catharines, Ontario L2S 3W3 sheryl.wherry@meridiancu.ca 5

6 EXPERT S CORNER The shift toward better investor education A Q&A with Randy Janzen, Senior Manager, Wealth Solutions at Meridian Randy Janzen Randy has been in the financial services industry for over 30 years, with expertise in investment solutions, financial planning and life insurance. He leads Meridian s Wealth Management team with the overriding goal of helping Members find the right investment solution to meet their financial needs. Randy is a long-standing member of the Canadian Institute of Financial Planners. In this issue, Randy discusses some recent changes in the financial industry and the shift toward increased investor education. What significant changes have you seen in the financial industry over the last few years? Randy: For me, one of the biggest changes is the number of individuals making the strategic shift from the accumulation of assets (saving) to those looking at generating tax-efficient income in preparation for their retirement. For many, this has impacted their investment strategies in an effort to better align their portfolios with their changing goals, risk tolerances, income needs and time horizons. Another significant change is the heightened interest in investor education. Individuals are becoming more and more interested in learning about investing, and are having increasingly collaborative conversations with their advisors. Why do you think there is this shift toward investor education? Randy: I think it comes down to the availability of information. There are some great resources out there and, because of this, people are becoming more interested in learning about their investments and how they actually work. Our Members want as much information and knowledge as possible, so they feel educated to make better decisions. It s great if individuals have a grasp of investing and financial planning topics when speaking with their Meridian Wealth Advisor. However, this doesn t take away from the need for professional advice. 6

7 EXPERT S CORNER What topics do you think Meridian Members should focus on? Where would you direct Meridian Members who want to learn more? Randy: Many individuals used to simply focus on their investments. We're now seeing the need for a more holistic view of their financial situation, which includes not only their investments, but their cash flow and transactional banking, retirement planning, insurance and estate planning just to name a few. A Meridian Wealth Advisor can help bring this all together for Members using our Four Quadrant Planning strategy. Randy: The wealth management section of Meridian s website meridiancu.ca/wealthmanagement is a great place to start for a highlevel overview of financial planning and investing. Our newsletter is also a good resource because it covers various financial planning topics and strategies each month. It s a great way for Members to become familiar with concepts they can then discuss with their Meridian Wealth Advisor. 7

8 Why Meridian wealth? What does wealth management mean at Meridian? It means: Trust. Advice. Planning. As your trusted Meridian Wealth Advisor, I take the time to build a strong relationship for the long term, as well as to understand your unique needs. My goal is to translate where you want to go into an effective and achievable roadmap, and to find the right investment solutions to help you save, protect, and grow your financial assets. Words to Ponder Cessation of work is not accompanied by cessation of expenses. Cato the Elder, Roman statesman Here is how I look forward to building our relationship and your trust: I provide an unbiased, honest perspective, and my decisions are based only on your best interests. I have no bias toward any particular solution apart from the one that most effectively helps you meet your objectives. I ensure you clearly understand your wealth planning options and align your portfolio with the right solutions to help you reach your goals. We will review your finances together on a regular basis, and I will keep you well informed so you always feel knowledgeable and comfortable. As a Meridian Wealth Advisor and your neighbour, I am committed to working with you to create and build the right approach for your family s financial security that is tailored to your needs, your objectives, and your values. * Mutual funds and financial planning are offered through Credential Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments and the use of an asset allocation service. Please read the prospectus of the mutual funds in which investment may be made under the asset allocation service before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured or guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Their values change frequently and past performance may not be repeated. meridiancu.ca Trademarks of Meridian Credit Union Limited. 01/14