Essential financial lessons from 2024

Tax planning should be an essential part of your financial plan

When the 2024 Canadian federal budget adjusted the capital gains inclusion rate, many Canadians began wondering how the change would impact their finances. While the government aimed to ensure a fairer tax system, the changes also affected some Canadians who might not see themselves as high-net-worth investors. For a more detailed explanation, check out this short explainer video on the UpSide Plus.

Although the majority of Canadians may not feel the effects of this adjustment directly, it highlights the importance of understanding how taxes influence your overall financial strategy. With so many questions about this year’s tax changes, having access to professional guidance can make all the difference. A financial advisor can help clarify the impact of these updates and identify strategies to better manage your tax bill. For instance, they can ensure you’re optimizing the use of registered accounts like Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), First Home Savings Accounts (FHSAs), and more—placing investments subject to higher tax rates into tax-advantaged accounts to help you keep more of your returns.

Keep your portfolio focused on financial goals, not political headlines

The U.S. election prompted endless speculation on both sides of the border about how the outcome might affect global markets. Yet for all the competing narratives that grabbed headlines, concrete variables such as company earnings, valuations and interest rates are still arguably far more important to investors.

Some investors find it helpful to ignore the short-term volatility that can arise in the wake of differing market narratives and to focus on long-term growth instead. Diversifying your portfolio through the use of a mutual fund or ETF can provide peace of mind, no matter what the future holds.

Cryptocurrencies can’t be ignored

Cryptocurrency’s place in the world of finance has long been a subject of debate. It has, at times, been promoted as a currency (given its decentralized nature), a commodity (due to its relative scarcity) and a safe haven (with a gold-like ability to hedge against economic uncertainty). However, you see them, it’s clear that cryptocurrencies like bitcoin are increasingly considered legitimate assets that are finding their way into mutual funds and ETFs.

Still, the complexity of buying cryptocurrencies directly – and their volatile nature – means you need to be mindful about how they fit into your portfolio. The size of your allocation depends on your tolerance for risk. Investing in Fidelity’s Advantage Bitcoin ETFs, or holding one of Fidelity’s All-in-One ETFs that also offers exposure to cryptocurrencies, not only makes it easier to gain exposure to this asset, it also means there’s a professional managing the investment.

Being too conservative can limit your growth potential

At the start of 2024, many investors were content to sit out the market volatility by parking a good chunk of their money in investments like guaranteed investment certificates (GICs) or high-interest savings accounts (HISAs). Given the market uncertainty and attractive interest rates, these low-risk investments made sense.

While it made sense initially, being overly conservative led many to miss out when the Bank of Canada cut interest rates. As a result, the yields on these safe investments took a dive, even as stocks went on to have a strong year. While it’s fine to rein in asset allocation a little, it’s important to stay invested.

Advisors can boost financial confidence

There’s compelling evidence that Canadians who work with a financial advisor feel more prepared to meet their retirement goals than those who do not. According to the 2024 Fidelity Retirement Report, 78% of investors with a financial plan in place ahead of retirement felt financially prepared to leave the workforce, compared with 41% who did not have a plan. That confidence carried over into retirement itself, with 95% of Canadians who had planned felt confident about their decisions, compared with 72% of those who made the leap without a similar level of preparation.

When preparing for some of the biggest decisions of your life, consider working with an advisor.

Financial advisors act as practical partners, considering your unique risk tolerance and time horizon to help guide you toward a retirement that aligns with your goals.