What is Goals-Based Investing?

The hands of women holding watering can sprinkle coins

Written by James Gauthier, Chief Investment Officer at Justwealth

Most individuals are aware of the importance of investing – not everybody does it, but they know that it can be beneficial for their future. For those that are able and engaged in investing, a good percentage will invest their savings through their financial institution, a financial advisor or some will do it on their own. Financial planning helps investors figure out questions such as “How much do I need to save?”, “How much can I spend?” or “What rate of return do I need to make?”.
Before you attempt to answer these questions, you should be asking yourself the question “What is the objective of my investment?” The responses to this question can vary greatly, but might fall into one of the following categories:
• Saving for the short term (such as a down payment for a home in a few years)
• Saving for the long term (such as a retirement nest egg)
• Generating income (either as a primary or secondary source)
• Preserving your capital (looking to keep up with inflation or just very risk averse)

In the absence of having an objective for your investment, it is quite possible that financial planning software could determine that your required rate of return is something like 4% per year. Any asset allocation expert will tell you that there are hundreds of ways to construct a portfolio that can be expected to make a rate of return of 4%: it could be 4% purely in the form of income, it could be 4% through a combination of dividends and capital appreciation across a variety of conservative equity markets or it could be a portfolio that has very limited risk of producing a negative return over short periods of time (i.e. strong downside protection). Until you identify the specific investment objective that you are trying to achieve, there can be a lot of uncertainty in how best to create a portfolio that will satisfy your financial needs.

What goals-based investing attempts to do is to put your investment objective as the starting point in constructing a portfolio that will accomplish what you want it to do. Once that is defined, the variable(s) that need to be optimized are known, and you can place other constraints, limits, or preferences into your quantitative models that collectively produce a portfolio that will be optimal for achieving the investment objective.

As an example, consider a new retiree who is single, has a company pension of $20,000 per year and is entitled to government benefits of $15,000 per year. It is determined that the pensioner will require an additional $10,000 per year from investments to live comfortably, and has a non-registered investment account worth $250,000. If the pensioner were to go to a typical institution or financial representative that does not use goals-based investing, it is most likely that the portfolio recommended would be something along the lines of a “Moderate Growth” portfolio or 40% equity, 60% fixed income. This portfolio would be expected to deliver a return of roughly 4% with the lowest volatility possible. The portfolio would rank as a 2 out of 5 in the risk/return spectrum of the five different portfolio options that the firm offers.

This recommendation is likely the result of using modern portfolio theory (MPT) or optimization to determine the portfolio. Companies who use this approach are quick to point out that a Nobel Prize was awarded for the work done in this area back in the 1950’s by Harry Markowitz. The biggest problem with MPT is that it is 2-dimensional – there is risk (defined as the volatility of investment returns), and there is return; there is nothing else. To many people, risk is not defined as some statistical measure, it is the probability of losing money, making one of the 2 variables used by MPT of questionable value!

Goals-based investing does not restrict the analysis to the same 2 variables. The variables could include theoretically anything: income yield, after-tax total returns, probability of loss in the short term or the long term, etc. Goals-based investing can also use the same principles of MPT, but also add in many other forms of quantitative analysis including simulation, scenario analysis or stress testing to name a few.

Going back to our example, the same pensioner who provides the financial scenario to a company that uses goals-based investing is likely to get a portfolio recommendation that will provide almost all of the 4% required return in the form of income, the income would likely receive more favourable tax treatment, there will be little or no need to regularly realize gains (i.e. sell securities to make up for the shortfall in income) and the probability of losing money should be lower. That would be a win-win-win-win situation!

If done properly, goals-based investing is a more customized approach to building portfolios, and it results in investors having greater choice available to them to have a portfolio that has a greater likelihood of meeting their financial objective. Not using goals-based investing reminds me of a Henry Ford quote: “A customer can have their car painted any colour as long as it’s black.” Don’t settle for a black car, find a company that offers goals-based investing and get any colour that you like!

 

Source: https://www.justwealth.com/wp-content/uploads/2018/04/What-is-Goals-Based-Investing.pdf?x42623

Stair Climbing as a Workout Routine

Young adult woman walking up the stairs with sun sport background.

Written by Komalpreet Kaur

If you are looking for a workout routine that does not involve a gym membership or equipment and also provides enormous health benefits, then stair climbing is perfect for you! It not only helps overcome most of the real and perceived barriers such as lack of time, money, nearby fitness facilities and poor weather that often result in inactivity but also boosts cardio, bone and brain health.

Stair climbing offers the benefits of aerobic and resistance exercise for enhancing cardiorespiratory fitness, (a vital health marker for longevity and cardiovascular health risks) and leg muscle strength without having to leave the house, workplace or pay a fee. It also saves you from the guilt of not doing anything for your physical wellness.

Benefits of Stair Climbing:

  • Reduces the risk of heart attacks by half 
  • Reduces the risk of diabetes
  • Reduces mortality rate by 33%
  • Protects against high blood pressure, atherosclerosis
  • Helps manage cholesterol levels in the blood
  • Prevents weight gain
  • Exercises our bones and muscles, improving bone density and muscle tone
  • Improves cardiorespiratory fitness, strength and agility 
  • Easy way to burn calories; Burns 500 calories in 30 minutes
  • Tones lower body

People with pre-existing medical conditions such as arthritis, cardiovascular conditions and balance issues must consult a physician before engaging in stair climbing workouts as it can be strenuous and might lead to more damage than benefit.

Beginners must start out the workout slowly and then gradually increase the intensity and number of flights. Consistency is an important element if a person wants to benefit from stair climbing.

Interval training on the stairs can be extremely beneficial in boosting health especially for people with a sedentary lifestyle, and vigorously climbing a few flights of stairs during the day with 3-4 hour intervals can promote physical and mental health. Burning a few calories through a simple workout routine can be extremely satisfactory to people who spend half their waking hours at work. In fact, a workplace on the third or fourth level from the ground can be considered an attractive arena for enhancing physical activity levels.

As per the information provided by the British Journal of Sports Medicine in 2005, a significant improvement in aerobic capacity, as well as an 8% reduction in LDL (bad) cholesterol was observed when healthy women with a sedentary lifestyle, briskly climbed eight flights of stairs five days a week for a period of eight weeks; starting with one ascent a day and working up to five.

Stair climbing workouts through the use of ellipticals or stair climbers are also very prevalent and stair Climbers can be used for cardiac training. 

Climbing Real Stairs vs Stair-Climbing Machines

  • Stair Climbing machines can be beneficial to people with conditions like arthritis and biomechanical problems as these machines tend to be easier on the joints; ankles, knees and hips than the actual stairs. The impact from the stair climbers is lower when compared to real stairs
  • Real stair climbing has greater benefits of bone health, as it allows a fuller range of motion through the joints
  • Leaning and gripping on the side rails of the stair climbers can reduce the quality of the workout
  • Stair climbers can not be used for interval training as these only go one way, that is up

Physical activity in any form has always been known to improve the overall health and well-being of an individual but for most people who spend large portions of their day at their workplaces, it is hard to engage in any type of physical activity. Stair Climbing is an efficient choice for the working population, and engaging in the behaviour of climbing stairs even for 30 minutes every day during lunch or coffee breaks can bring a positive change in their health status. Employers can actively initiate conversations about ‘Why is taking stairs over elevators beneficial for health?’. Apart from this, small stepping up the stairs reward-challenges for employees at the workplace can encourage and increase their participation in stair climbing.

Healthy employees = A better workplace

5 Concepts to Understand Before Taking a Big Loan

Post written by Emma Hughes

When borrowing money, it’s important that you understand some of the key concepts before you choose a lender or a loan. While there are many different loans, the concepts we will go over apply to any loan out there. For instance, loan interest rates are one of the factors to consider when getting a loan, and as Tasneem Panchbhaya discussed it’s also one of the factors to consider when repaying your loan. Interest and other concepts we will cover are important to understand before finalizing any loans and you should avoid the temptation to gloss over them. Here we’ll go over five of the concepts to give you a better idea before taking out a loan.

Annual Percentage Rate (APR)

When shopping for a business or personal loan, one concept to keep in mind is that the total annual cost of borrowing is called the APR. Many confuse this with interest rate; however, interest is just one aspect of APR, which includes other fees like origination fees and monthly maintenance charges. US News reveals that APR is generally a factor in business lines of credit loans, and term loans among others. Unsecured loans will also have higher APRs than secured ones, so do your research first to find the best type of loan suited to you. In their guide to loans, Marcus points out the importance of comparing loaning agents based on their APR. As such, from where and from whom you get a loan is a deciding factor. For instance, loans from online lenders generally cost more than a bank loan and may have other hidden fees.

Loan Repayments

Repaying your loan involves paying the amount you borrowed, as well as the interest rate. As you understand how loans work, you’ll see that each monthly payment is split into two parts, which CFP Justin Pritchard explains are your interest costs and the loan balance. You’ll also understand that through amortization your interest payments will decrease over time as long as you consistently pay the scheduled payment amount. As we mentioned, in the beginning, a good practice is to pay down the loans with the highest interest as in the long run, you’ll be saving on higher interest charges by prioritizing high interest revolving loans, like credit cards.

Non-Bank Loan Options

More and more Americans are turning to alternative options of borrowing, both online and through traditional brick and mortar institutions. Oracle’s Digital Demand in Retail Banking study on 5,200 consumers from 13 countries points out that over 40% of customers think that non-banks can better serve them with personal money management, and loans for their particular needs. These can include payday lenders and check cashing centers. Other non-bank alternatives offer a variety of loan options including mortgages loans and peer-to-peer loans. When compared to banks, however, these might have higher fees, costlier APRs and very high-interest rates.

Loan Collateral

When qualifying for a loan, lenders will look at your credit history. Good credit shows that in the past you’ve paid back loans, which means you’re a low-risk client who will most likely pay back their loan. However, if your credit isn’t good, if you qualify it might mean higher interest rates and you might also be asked for collateral. It can be anything from a vehicle to a house or anything else that is on par or exceeds the loan’s value. Whatever was agreed upon as collateral can be taken by the lender to be sold in the event you aren’t able to repay your loan.

Loan Default

If you fail to make your loan payments on time, your loan can go into default. The amount of time it takes for this to happen will depend on your loan terms, the lender as well as local and federal laws. With loan defaults not an uncommon occurrence in Canada, The Bank of Canada reported that defaults on Canadian consumer loans incur the highest loss rates. Defaulting on a loan can affect your credit score and in many cases, a default may be sent to the lender’s collections department or sold to a third-party debt collection agency. Worse, a default could result in potential garnishing of wages or tax refunds if a judgment is awarded against you.

Health and Wellness Application: Creating Engagement in the Individual Life Insurance Industry

(2 min read)

The Life Insurance industry has a problem with its policyholders. They don’t know them. They know their address so they can send the premium notice, but they don’t know anything about them. They know what their health was at the tie of application and that they needed life insurance, but they don’t know anything else about them. Why is that? 

The main reason why Life Insurance companies do not know their policyholders is that agents control the relationships and life insurance companies have always viewed themselves as product manufacturers supplying products to agents for them to sell. This has led to the agents being able to move clients at will to whatever carrier they like and the insurance carrier to have limited contact with their policyholders (at the time of application).

Insurance carriers recognize the need for engaging policyholders so that they can lower the risk of an agent moving the policy, increase the ability to sell more than one policy, and guard against a declining agent force by having a direct relationship. The difficulty has been in how to approach creating that engagement without jeopardizing the relationship with the agent and that agent’s relationship with the policyholder. Agents guard those relationships closely as they are the source of their livelihood.

Health and Wellness applications can create engagement with policyholders that meet the needs of both carrier and agent. First, the carrier builds engagement by providing an application that is a benefit reward for health behavior. Second, because policyholders using the application will provide data on their health, insurance coverages, investments and life events – the carrier can make offers on products or provide advice in real-time and in the context of the client’s needs. Third, when the client accepts the offer, an appointment is booked with the agent who can then have a contextual discussion with the client with accurate information which builds trust for the agent.

The Health and Wellness application is perceived by the clients as a value add from both the carrier and the agent which creates affinity for both. The process of information gathering allows for the right offers at the right times with an accurate understanding of the client and their needs for a contextual discussion between agent and client that builds lasting trust.

How to Remain Healthy at Your Workplace

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A 9-5 job can be very consuming. Additionally, the 8 hours long workday does not begin at 9 and end at 5; it starts from the time you wake up and prepare to go to work until the commute back home. With such a tight schedule it can be easy to prioritize work and chores over health. However, neglecting your diet and physical activity can have deleterious long-term effects. An unhealthy body can further have adverse effects on a person’s mental health as a good diet and regular exercise are essential to maintaining a positive mind. The following tips share how a person can be healthy throughout the day during a workday:

  • Never Skip a Meal: No matter how important a call/task or meeting it, it is crucial to find the time to eat a filling lunch. This will keep you powered up throughout the rest of the day and improve your work performance. Eating out regularly can be unhealthy. Conversely, meal prep in the morning can be time-consuming and you may have to sacrifice some precious sleep to pack your food.  We suggest preparing your meal the night before and refrigerating it. This way you get your daily intake of healthy food and catch some extra minutes of sleep!
  • Physical Exercises: Almost all corporate jobs are desk jobs. Toiling away at your desk all day long promises little productivity. To keep yourself fresh, move around your office every 1-2 hours and get the blood flowing. Furthermore, try to incorporate small exercises (also called deskercises!) while you are sitting at your desk such as shaking your legs and stretching. While the physical effort is minimal, the results can be substantial.
  • Limit Your Caffeine Intake: Caffeine is an essential item in a working adult’s lifestyle. While there is nothing more tempting than chugging cup after cup of coffee or tea, the caffeine can drastically affect sleep and even concentration. Limit your intake to one cup per day. Moreover, avoid coffee after 7 pm so it does not impact your sleep.
  • Make Healthy Choices: Offices often have free food items and snacks lying around in the kitchen. These can be enticing for their easy reach and value for money. But you should keep in mind the nutritional value of each snack. While they may be seemingly harmless, these snacks can pack on calories over-time. Combine this with an inactive work lifestyle and you have a recipe for disaster.

Optimity offers tons of activity packs that employees can make use of to lead a healthier and happier lifestyle. Whether you are a yoga aficionado or a gym beast, we promise we have something right up your alley!

Stress in the Workplace: Signs Your Employees are Burning Out

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Stress is one of the leading causes of death in the world; it fuels heart problems, cancer and much more. Not only does stress lead to physical manifestations of diseases but it can also lead to mental health problems. It is crucial for employers to regulate stress-levels in the workplace by introducing fun activities and promoting a work-life balance. Conversely, employees who are chronically stressed may underperform or even burnout. Some of the signs of burnout that employers should be on the lookout for are as follows:

  • Fatigue- Fatigue is one of the most common and early symptoms of burnout. Employee fatigue can range from decreased socialization to the inability to keep up with the work schedule due to tiredness. Sometimes, people experience both fatigue and insomnia leading to a vicious and perpetual cycle of exhaustion.
  • Difficulty Concentrating– If you find that your employees have a problem concentrating on their work and often forget their tasks, they might be burning out. Despite their best efforts, some employees cannot focus on their job due to feelings of low self-esteem, alienation, and loss of future goals, among others. It is important for the HR official to have an open and empathetic conversation with the employee; merely berating someone for low performance will do little to no good.
  • Mood Swings- If your employee displays patterns of erratic behavior and is constantly shifting between feelings of anger and sadness, they may be physically and/or emotionally exhausted. Sometimes employees find it difficult to have an honest conversation with their higher-ups, due to a fear of being looked upon in an unfavorable light. If employers can spot the danger signs and initiate conversation, it can make the job less intimidating for the workers.
  • Cynicism/ Hostility– When employees are good at hiding their emotions, it may be difficult to spot burnout symptoms. Instead, the company should look at more indirect signs such as pessimism about the future, newly developed hostility towards certain subjects, feelings of hopelessness etc. 

What are some steps that employees can take to prevent burnout?

  • Take regular breaks. It is scientifically impossible for anyone to concentrate for hours at a stretch. Thus, rather than wasting time by trying really hard to concentrate, employees should just take well-deserved breaks. Examples include going out for coffee, chatting with other employees and stretching.
  • Have intense bouts of productivity. While working, employees should aim to concentrate very intently on the work they are doing and not get distracted. This strategy works hand in hand with taking breaks, as having intense bouts of productivity will give employees more chances to take breaks.

What are some steps employers can take to prevent burnout?

  • Provide positive workspaces. Including napping pods, music/disco rooms, reading spaces etc. provides a lot of incentive for employees to work hard. Additionally, painting the workspace in positive bright colors or having a greenroom can be great mental boosters as well.
  • Receptively listen to employees: Employers should openly listen to the concerns of employees. If an employee is worried about their health and wellness, it is imperative that the employer do whatever is needed to make them feel better.
  • Invest in corporate wellness programs. This is where Optimity comes in handy! Optimity aims to foster productivity and reduce burnout in the workplace by promoting health and fitness activities. Workplaces that use this platform have reported an 84 percent increase in health score. The benefits of Optimity transcend the simple prevention of burnout: the company feels well-integrated, employees cultivate great relationships with their colleagues and they get monetary rewards for being healthy!

 

How you can lead a blissful life

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The vast majority of us go on to lead a normal middle-class lifestyle, bogged down on a daily basis with our nine to five office job and family responsibilities. Sure, people can go to nightclubs and other entertainment events to socialize and have fun, but is that really the definition of true happiness?  I’m sure that we’ve all heard of the saying “follow your bliss”, yet we tend to mistakenly brush it off as another one of those “empty” motivational phrases.

Well, you may ask, what could that possibly even mean and why should I do it? First and foremost, bliss can be characterized as that internal, fulfilling drive to satisfy your personal needs. To put it simply, following your bliss is the only pathway to true, long-lasting happiness. Ignoring materialistic needs, individuals on their deathbeds will often take the time to reflect and voice any regrets on certain fundamental life choices they made. Obviously, we’re not saying that you should prepare to meet your demise soon! Instead, making immediate blissful adjustments to your daily lifestyle will allow you to reap priceless benefits and live your best and happiest life possible.

As stated before, achieving an ever-lasting state of happiness requires you to follow your bliss and therefore take the necessary actions. We have listed four of our favourite activities below so you can kickstart your blissful journey on the right foot!

Make amends with hardships in your past

We know that it is never easy to forgive individuals who have hurt you deeply in the past, but keeping that hatred all your life will never make things better. If you carry that love and forgiveness attitude wherever you can expect to break down emotional walls and spread positivity. Never forget, but always forgive!

Treat your body right

You’ve only got one body so make the right choices. The Centre for Addiction and Mental Health is one of the many institutions bringing light to the link between food and mental health. Make sure you eat a balanced diet that is dominated by fresh, colourful vegetables. Try your best to buy organic and avoid highly-processed foods with ingredients you have never even heard of. The healthier the food, the better you can expect of your mental and physical health. Of course, make sure to indulge in your favourite, unhealthy foods once in a while too! Just make sure you maintain that balance of your body’s wants and needs.

Spend more time with loved ones

This one is hands down the most popular regret among those who are on their deathbeds. This may seem like a no-brainer, but millennials nowadays are so dominated by their jobs and social media that they often forget about their family. Make sure to spend more time with your parents as they get older, and surround yourself with positive friends who will support you all the way, no matter what. By valuing relationships, you will be able to effortlessly expand your social circle while retaining the old ones.

Mind your own business

Especially with the integration of social media into our daily lifestyle, we seem to care more about what our friends are up to rather than ourselves. The truth is that our own lives are so difficult to manage, let alone the weight of keeping up with a loved one. We’re not telling you to only care for yourself and be selfish. Instead, we just want you to put your personal affairs at the top of the priority list. Get rid of any forms of negativity in your life and boost your self-confidence. Eventually, you’ll start to see firsthand the freedom that comes with these boundaries.

Here at Optimity, we recognize that your personal wellness should come before anything else! That is why we have incorporated hundreds of micro-activities into our wellness app, ranging from in-seat stretches to meditation sessions, so you can easily integrate them into your daily schedule! If you would like to learn more about us, feel free to visit: www.myoptimity.com/our-solution