I am a balance investor. This means that ideally I should have a 60/40 split of growth and income in my retirement portfolio. Currently this is exactly what I have although previously it was split the other way. In summer of 2007 I changed the focus of my portfolio to fixed income such as mortgage backed securities and corporate bonds. I invest in corporate bonds because they are relevantly secure with a potential higher rate of return than federal bonds. Just as any investment bonds have different levels of risk although they are all categorized as fixed income.

Federal bonds are viewed to be the most secure of the bond investments because the odds of a federal government defaulting on a debt investment is low. However, I am sure people in Greece and Portugal who invested in federal bonds would not agree. Corporate bonds are also considered to be low risk, but they are higher risk compared to federal bonds. This is because a corporation could go bankrupt more easily than a federal government. Finally for us in North America we can invest in bonds of foreign based companies or foreign governments. These are considered high risk bonds because of the exchange rate on foreign currency vs. the US dollar.

Generally the longer you want to invest the more risk you can take. This is because if you invest for 20 years you shouldn’t be very concerned with how your investment performs in the first 10 years since you have another 10 years to regain any losses. That is the mentality anyways. Therefore myself as a 29 year old who is investing for retirement in the next 26 years I should be taking a lot of risk right now to maximize potential gains over the long term. However, I am not into that. I prefer to have a steady rate of return over the long run.  I never think…Oh I could have made more, because I am happy with what I’ve got.

If you don’t know what type of investor you are then you should ask yourself am I willing to take risk? Don’t only think of the potential gains you could have in a high risk portfolio, think of the potential losses. I say this because in a bullish market when the market is gaining everyone is willing to take risk (because the risk is perceived to be low). But, it is those same people who come back and make complaints  later on when the market is bear and their investments are loosing.

If you are a client please think about what you are doing before you make a complaint about your investment portfolio performance.  Keep in mind that investment advisors give advice and options, you make the final choice. Also investment advisors cannot predict the market.  When you make a complaint about the advice given by your personal investment advisor you are jeopardizing their career as all complaints regarding investments are investigated and they go on record. I have seen 4 good and ethical investment advisors lose their jobs over the last year due to clients who wanted to make a point.

You can determine your investor type or your investment portfolio by answering a few simple questions with your investment advisor. Sometimes this questionnaire is referred to as your KYC…know your client. You should never take personal investment advice from a banker who does not ask you questions or complete this questionnaire. Happy Investing!


This entry was posted in Bonds, Investments by Kristina Tahnyak. Bookmark the permalink.

Avatar photo About Kristina Tahnyak

Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.

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