Living longer and longer is one thing — having the means to do so is another

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One of the hottest topics of the day globally, is “longevity.” Thanks to innovative technology and breakthroughs in aging science, we’re already seeing people living to 100 years old and beyond. Look no further than the legendary television producer, Norman Lear, who passed away this past December at 101 — or the 102-year old fashion icon, Iris Apfel, who was still going strong until she very recently passed away on March 1. And we’re just getting started.

Sergey Young, one of the most passionate believers and investors in the “longevity economy,” has actually put up a prize of $1 million USD for the first person who lives to 123. It is projected that in Canada alone “by 2036, the number of seniors would be more than double the number observed in 2009 and by 2061, their number would vary between 11.9 and 15 million. And, in fact, the number of those aged 65 and older would surpass the number of children aged less than 14 years or under.”

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When it comes to investing, understanding the relationship between risk and returns is the holy grail

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There’s an awful lot to successful investing — skill, knowledge, patience,  financial planning, having clear goals and objectives, knowing your risk tolerance and more. And working with a good advisor, needless to say. 

It also must be noted, that the very heart of successful investing is understanding the relationship between risk and returns. It’s fundamental.

Which is why I’m recommending you read this informative and insightful commentary —“Risk, Return, & The Essence of Adding Value” —written by Noah Solomon. 

Solomon, Chief Investment Officer at Outcome Metric Asset Management, has 20 years of experience in institutional investing. He’s worked at Citibank and Lehman Brothers, was a proprietary trader in the equities division of Goldman Sachs, and before joining Outcome, spent eight years at GenFund Management (formerly Genuity Fund Management), where he was CEO and CIO.

Would love to talk with you about your thoughts once you’ve read it. 

Make sure you don’t miss any of my posts. Follow the blog and you’ll receive email notifications every time a new post is published. See you soon.

Alan Friedman is an Investment Advisor with CIBC Wood Gundy in Toronto. The views of Alan Friedman do not necessarily reflect those of CIBC World Markets Inc. CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and ”CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc.  If you are currently a CIBC Wood Gundy client please contact your Investment Advisor. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

For years, investors looking for higher returns have turned to equities, but a significant shift is afoot

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Because share price values fluctuate, equities come with built-in volatility and their performance is unpredictable. That said, they’ve provided high rates of return for decades and they’ve long been a go-to for successful investors. 

But as Bob Dylan wrote way back in the sixties, “the times they are a-changin.” Significantly too.

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While it’s not surprising so many investors turned to GICs last year, they’re not the only option worthy of your consideration — especially right now …

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… when I say “so many,” I’m sharing data from Canada’s central bank —Canadians wanting to protect their savings invested nearly $152 billion in GICs from March to November 2022  — which we know was a reaction to the rising interest rates, economic uncertainty and volatility felt everywhere. And the fact that some GIC returns have exceeded 5% was nothing to sneeze at either.

But here’s the not insignificant difference between then and now: 

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Opportunities to earn outsized returns from bonds don’t come along often, but we think we’re looking at an opportunity now

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Last year the bond market and investors took a beating; but as is the case with most obstacles and challenges, they can also present an opportunity.

As for last year, because they are germane to the rest of this story, there are two points I want to make before we file 2022 away in the history books and concentrate on the here and now:

  • Interest rates affect the price you pay for government bonds. And you can see how that played out in 2022, on the chart below.
  • What happened last year was, in large part, the result of the U.S. Federal Reserve aggressively raising interest rates — by 5% —in an effort to fight inflation. And they were joined by other central banks around the world — including our own, Bank of Canada — which accounts for the significant repricing in Canadian Government long-term bonds as well.

So here we are, halfway through 2023. There’s a lot to talk about in regards to where the bond market’s at now, and what it means for investors

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If ever there was a time to sit back, take a breath, reflect, assess and reevaluate this is it …

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Why now? Because 2022 was a year like no other — at least unlike anything we’ve seen in a very, very long time. One “event” after another — some unprecedented — challenged us, surprised us and shocked us. And all investors, all over the world felt it and were taken aback, to put it mildly. 

On top of rising interest rates, inflation and the threat of a global recession, no major asset class went unscathed — stocks, bonds, real estate and crypto all underperformed. The last time both stocks and bonds performed this badly was 1969.

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Can any forecaster really predict what we can expect from the markets?

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I ask because we can usually expect a rush to do exactly that in a new year, even more so when the previous year was as unpredictable, unstable and unsettling as what we’ve just experienced.

Well, the answer is a resounding “no,” and that’s not just me talking. There are numerous successful investors, analysts, and economists who feel the same way — and have written countless articles, blogs, newsletters and books about it. 

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For this highly-acclaimed investor, successful investing can be summed up in just four words — “simple, but not easy”

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It was recently my privilege and pleasure to attend a private CIBC Wealth presentation for Investment Advisors given by Howard Marks, the much-admired author of more than 140 “memos” about his investment strategies and insights — knowledge and experience he has gained throughout his long and very successful career in the investment industry. 

Also the author of three highly-acclaimed books on investing — my personal favourite being “The Most Important Thing” — he is the co-founder and co-chairman of Oaktree Capital Management, the largest investor in distressed securities worldwide.

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It won’t be long before 105 is the new 75. Are you prepared?

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This is not silliness, neither is it far-fetched — it’s true. 

From the World Economic Forum comes this: “Two-thirds of the world’s population will be 65 years and above by 2050, according to the UN, and the projection for the global ageing economy is already estimated to reach $27 billion by 2025 — there will be more people ageing and living longer.” 

Too far in the future for you? Well, as of February 2021 there were already “more than half a million people aged 100 or older globally.”

Can you afford to live that long? 

Is “longevity” built into your financial plan and your portfolio? How long is your current “nest egg” projected to last? What happens if you live to 100 or more? Will you outlive your money?

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