Twenty-Five Years of Financial Insights(Part 1: Saving vs. Investing)


Let the Evidence Be Your Guide

Twenty-five years ago, when I founded The McClelland Financial Group of Assante Capital Management Ltd., it may not have been the most obvious choice for the son of an independent book publisher. Like my father, I loved to read; I enjoyed sharing what I learned with others; and I knew I wanted to run my own business. Looking back, I have never regretted reading, learning and educating others as a financial planner.

Reflecting on 25 years of serving families’ financial interests, I’d like to take this summer to share several important insights I’ve learned over time. There are countless points I could cover, but these are the ones that I believe matter the most to your family’s well-being. Take them to heart and you’re well on your way to making the most of your money.

Insight #1: Saving Is Not the Same as Investing.

If there is one lesson to help you find your way in ever-changing markets, it is this: To achieve your financial goals, you must save a portion of your wealth. Then you must invest it.

In other words, over time and in proper measure, the wise investor should understand and engage in saving and investing. Instead, families often struggle to find balance between them.

The most common mishaps occur when investors flee global markets, shifting the bulk of their assets into GICs, money markets or similar cash equivalent accounts. In their mental accounting, they tend to think of these sorts of cash holdings as a “safe haven” for their wealth.

There’s usually nothing wrong with taking sensible steps to avoid losing hard-won gains in your life. Unfortunately, moving too many investable assets into cash savings is not the best way to establish a safe haven for your wealth. The math simply doesn’t support the intent.

For example, let’s say you shift $1 million of your $2 million portfolio into cash or cash equivalents. Maybe you’re nearing or in retirement. With half of your portfolio on the sidelines in today’s low-rate environment, you can expect to earn around 2 percent if you lock into a typical two-year GIC. That’s $20,000/year. You figure you’re all set if the markets head south.

The problem is, market risks aren’t your only risks or sources of potential loss. First, there are taxes at, conservatively, 40 percent of the income. There goes at least $8,000/year. Then there’s inflation, currently eating away at the purchasing power of your $1 million in cash at about 1.5 percent or $15,000 per year. Here are the net results:

$20,000 gross interest – $8,000 tax – $15,000 inflation effect = <$3,000 net loss>

That’s the math using current figures. But we’ve seen this movie before. With 25 years of hindsight, I’ve found that the math tends to pencil out roughly the same whether it’s 1991, 2001 or 2016. After taxes and inflation, the only near-certain “guarantee” you can expect if you overweight your cash account is that you’ll lose more money than you could preserve by applying thoughtful investment strategies.

And, by the way, all of this is before we even consider the costs incurred if you jump in and out of the markets with your cash, usually at precisely the wrong times (selling in a panic near market bottom, and buying when markets are exuberantly overpriced).

Let the Evidence Be Your Guide

So what do I recommend instead? Let decades of understanding be your guide in understanding the overarching roles for which each portion of your portfolio is best suited.

Expected Long-Term Returns

Highest Purpose

Stocks (Equity)


Building wealth

Bonds (Fixed Income)


Preserving wealth

Cash (Savings)

Negative (after inflation)

Spending wealth

Stocks – Stocks are the most effective tool for accumulating new wealth over time. But along with higher expected returns, they also expose you to market risks: a much bumpier ride, and increased uncertainty that you may not ultimately achieve your goals.

Bonds – High-quality, low-risk bonds are a good tool for dampening that bumpier ride and serving as a safety net for when market risks are realized. They can also contribute modestly to your portfolio’s overall expected returns, but we don’t consider this to be their primary role.

Cash – Cash and cash equivalents are great to have on hand for near-term spending needs. But in the face of taxes and inflation, they are expected to actually lose buying power over time.

Thus, in performance and predictability, bonds are meant to be “cooler” than stocks, but “warmer” than cold, hard cash. That’s why I typically recommend building – and maintaining – a sensible mix of stocks and high-quality bonds in a durable investment portfolio, optimized for the levels of wealth preservation and accumulation that are right for you.

Finding Your Financial Balance

By keeping your attention focused on these larger principles, it becomes easier to recognize the difference between saving versus investing. It’s why most investors need a reasonable portion of both to achieve their whole wealth goals.

In my next piece, I’ll cover the next logical step, learned during my 25 years of financial service. In determining your own best mix of stock investments, bond investments and cash savings, how do you find the right balance for you and your spending needs?

Related articles

Episode 259: How To Beat The Stock Market

In this episode of ‘Think Smart with TMFG,’ your hosts, Rob McClelland and Mike Connon, explore the intriguing concept of ‘beating the stock market.’ Sharing profound insights from their years of experience in finance, they discuss how the quest to o…

Read More →

The Power Of Clearly Defined Goals

The Power Of Clearly Defined Goals   The significance of setting strict and attainable goals in financial planning cannot be overstated. They are the foundation …

Read More →

Capital Gains Inclusion Rate Increase

Capital Gains Inclusion Rate Increase   The Federal Government announced that the capital gains inclusion rate will increase from 50% to 66.7% for trusts, corporations, …

Read More →

Financial Planning Advice from Canada's Top Financial Advisors

Sign Up To Receive Email Updates On The Financial Industry And Complimentary Workshops.

By providing your e-mail address you provide The McClelland Financial Group of Assante Capital Management Ltd. with your express consent to send you electronic communications. If you choose to discontinue receiving e-mails, you may withdraw consent by contacting [email protected].


Get actionable financial insights from the Top financial planners in Toronto.

Toronto's Top Financial Advisors
Copyright Assante Wealth Management. © 2022

Disclaimer | Assante advisory services are offered through Assante Capital Management Ltd. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. The services described may not be applicable or available with respect to all clients. Services and products may be provided by an Assante advisor or through affiliated or non-affiliated third parties. Some services and products may not be available through all Assante advisors. Services may change without notice. Insurance products and services are provided through Assante Estate and Insurance Services Inc.

We have a team of advisors each specializing in varying portfolio sizes. Please let us know the approx. amount of your investable assets to help us to direct you to the advisor that is best suited to you.