Canada has officially grown up. Findings released by Statistics Canada earlier this week reveal that the number of Canadian seniors now exceeds the number of children under the age of 15.
The current data, as of July 1, 2015, indicates seniors now make up 16.1 percent of Canada’s population, while children between the ages of 0 and 14 comprise 16.0 percent of our national community. Although the percentage is small, experts believe this is indicative of a growing change in the average age of our population.
With an ever growing number of Canadians shifting towards retirement; financial stability, retirement savings, and healthcare infrastructure are an increasing concern. RRSPs, TFSAs and pension plans have been the traditional methods to save for the golden years. However, retirement specialists are increasingly advising those who are looking to broaden their retirement portfolio invest in Exchange Traded Funds (ETF).
ETFs are designed to track an index, like the S&P 500, this is known as passive investing. Passive investing tends to cost the consumer less than the more competitive high stakes active investing. While there are advantages to active strategies, passive investing often outperforms active strategies based on cost savings alone.
One of the many advantages ETFs offer, is a structure that allows the investor to diversify with a variety of asset classes. ETFs, are similar to mutual funds in that they hold a basket of stocks, bonds or other investments. However, they differ, because, ETFs are bought and sold on an exchange, like stocks.
The ETF market has grown exponentially in the last two decades and is now believed to be worth more than $1.3 trillion dollars globally. Because of the reduced risk ETFs posses more investors are adding them to their retirement portfolios. “Not all investors are interested in riding the volatile ebbs and flows of the market just to fund their need for a modest income stream,”
wrote David Fabian of FDM Capital on Investopedia. ETF investors intend to stick with an ETF for the long haul which reduces worry over daily market fluctuations.
By customizing your investment portfolio to balance growth and income, ETFs offer investors long term growth that often fits their retirement needs better than active investing portfolios.
Lisa Overholt is a
business professional living in Toronto, she took the advice of her financial planner years ago and invested in ETFs to bolster her retirement plan. “The diversity of ETFs was what was really appealing to me,” Overholt said. “I don’t like the idea of putting all my eggs in one basket, so being able to have variety in my portfolio was important to me.”
Lisa Overholt also appreciates the low maintenance and cost associated with ETFs. “I’m not a financial expert, I work long days, I don’t want to watch the stock market every second to monitor my stocks,” said Lisa Overholt. “I only pay commissions when I am ready to sell my ETFs, so there are no constant trading costs, which I also like.”
ETF transparency is also another appealing incentive. Because most ETFs publish their holdings every day it easy to find out what investments a particular ETF holds. You can also establish, their relative weight in the fund and if the fund has changed its position regarding an investment. This transparency can help you tell if an ETF is right for you.