Investment Risk and Zooming Out

Greater Perspective, More Confidence

Watch our October 2022 Money Minute, a new Vlog from Connect Wealth. In this video, Dallas Clemyck and Andrew Gordon discuss our October blog post and the importance of zooming out to gain perspective on your investments. 

I started my investment journey at age 24 with the first $10,000 I’d saved after paying off my student loans. I didn’t know anything about investing other than what the classic board game “Stock Ticker” had taught (buying low + selling high = good). I made an appointment with a representative from my bank to put my money to work.

Considering that I’m simply a number to my bank, it is logical that my meeting was short and why I felt like they didn’t care about me and my preferences or opinions about investing. What I did not understand was why the advisor didn’t take the time to educate me on investment risk in a meeting dedicated to set up investment accounts.

Fast-forward to now where providing sound financial advice, planning, and education is my mandate, and where conversations about values, goals, preferences, and risk take place before new clients complete their risk surveys.

In the case of Sally Sampleton

In my observation, the more perspective a potential investor has, the more growth-minded they often end up after completing their risk surveys. Take the case of Sally Sampleton, who wants to put her money to work but is uneasy about investing because she watched her parents make some poor investment choices growing up. She’s heard great things about the stable nature of GIC’s but after an educational conversation with her advisor, she was concerned about the effects that inflation could have on her retirement nest egg. Consequently, Sally wanted more information about investments with a long track-record of increased growth, dividend income, and stability. Her request for more information came about because a simple conversation led to her gaining greater perspective.

This is not to say that a prospective investor should feel like they need to take on more risk than they are comfortable with, nor is Sally Sampleton’s example to be considered financial advice – I am only putting forth an observation.

It’s all about perspective

Let’s unpack the concept of investment perspective by using pictures and questions to help it hit home.

Visual 1: If the performance of your retirement nest egg was demonstrated by the visual above, how would that make you feel about risk and investing? The combination of poor performance and red means we’re losing money, and that is a terrible feeling for most investors. Rightly so, too!

Visual 2: What about the one above? If your investment service or professional presented you with an investment option that performed like this, how quickly would you discount it or, more likely, walk out?

Visual 3: The picture above…well, NOW we’re talking. Aside from a couple dips, this probably instills more confidence and optimism than the previous two instances. We like green, too – it means we’re making money.

You may be able to guess where this is leading. Let’s zoom out.

Visual 4: Visuals 1, 2, and 3 are the exact same investment. The only difference is that we’ve zoomed out and have a greater perspective. The poor-performing red visuals are part of a bigger, better, and more optimistic story that shows the long-term performance of this common ETF (Exchange-Traded Fund).

  • Red visual 1 shows the performance during 1-month: March of 2020 (The COVID correction)
  • Red visual 2 shows the performance of 1-year: 2011, which was a rocky year for investors, but still part of the longest market bull-run in history
  • Green visual 3 shows the long-term performance since it’s birthdate in 2001

Four Takeaways

What can we take away from this? Regardless of if you are thinking of becoming an investor but feel uneasy about it now, or if you’ve already experienced a few peaks and valleys, here are four things to keep in mind:

  1. Zoom out by seeking more education and knowledge about investment risk and what long-term performance is needed to achieve your financial goals. This will give you a much greater investing perspective.
  2. Choose good, quality investments with a long track-record and history. Seeing long-term “green” will give you the confidence to fall back on when you see temporary periods of “red”.
  3. Put several types of eggs in your investment baskets and use the best combination of baskets to hit your goals and minimize tax. The CRA is very talented in obtaining tax dollars but you don’t have to give them a tip.
  4. Your financial advisor or investment brokerage has the tools to help you understand your own tolerance for risk, which is different from your capacity for risk. Tolerance for risk is subjective and based on your attitudes, preferences, emotions and past experiences, while the capacity for risk is objective and based on life stage, time horizon, income, assets and debt. Both are equally important to your financial planner as they update your financial roadmap through life’s stages.

Connect Wealth is an independent financial planning firm that offers holistic advice to clients based on their current goals and future aspirations. We use well-established workflows and cutting-edge technology to maximize planning efficiencies while simplifying the process for clients. Learn how you can maximize your financial opportunities at