In search of the | younger Melissa Edwards Contributing Writer THE Royal Bank has dubbed them the “Nexus Generation” — those in their carly 20s — and they are entering the world of investing in greater numbers than ever before. After years of chasing the well-off, many mutual fund providers are waking up to this marker. The Royal Bank is loosening its banker’s tic in hip, catchy ads that play to youthful dreams, while Credit . Suisse in the U.S. has teamed . with Glamor magazine to add flash to its image. _ The focus in these market- ing campaigns is often on indi- viduality — the special strate- gies young investors need to reach their unique goals. But how far beyond a fresh image have these dusty institutions gone? There’s a time-worn investing principal that sets young eyes to rolling ever as their older counterparts slap ‘their foreheads at opportuni- ‘1. ties missed — the earlier, the ‘. better. A 25-year-old who invests $1,006 once at 11% interest will have earned $65,000 by the age of 65. A - 40-year-old could put away $1,000 per year at the same interest rate and only have made $38,190 by retirement age. ‘Uf that 25-year-old were to . put away $1,002 year at 11%, ¢ or she would have almost $646,500 by age 65. The trick for sellers of mutual funds is to sell that argument to enough 25-year-olds. A strong bull market pulls many to the investing game, while others come out of fear that govern- ment-run retirement plans will not be there for them. >)”. But mutual fund compa- - nies still encounter resistance from the young. People in’ > their 20s face low incomes, student loan payments, the first taste of credit-card debt, and the simple costs of just starting out — like furnishing ‘a first apartment. Those can make retirement seem incon- Suisse Asset one of the cof which Warburg Pincus ‘con: trols3.512 billige US. To add - SaveMy Moncey, a flashy <-fund program aimed’ at debt-heavy ounger Americans, We, worked with Glamor oni a study of debt and invest- ment’ issues,” said Leslie Mayock, a representative for Warburg Pincus, adding that “thezétudy led to a well-read advertorial in Glarzor. Mayock ©’ «says the SaveMyMoncey plan is unique for -the 18-29 age group investor Four of Warburg Pincus funds are offered at a $250 ini- tial investinent. These funds used to have a minimum com- mitment of up to $2,500 — very restrictive fo a new investor, However, investors must agree to an automatic payment plan of at feast $50 per month. Other than a debt calcula- tor aimed at showing new investors how to overcome credit card debt, however, the SaveMyMoncy program does not tailor Warburg Pincus investing strategies for younger people. Royal Mutual Funds, a division of the Royal Bank, has also aimed a marketing cam- paign at those they call the Nexus Generation. The ads feature the serious faces of young, hip men and women with their geals written on their foreheads — “my first movie,” for example, or “Nepal.” Like Warburg Pincus, Royal Mutual Funds has developed a section of their Web site specifically for younger peopic. The program, called Investigate, has a series of calculators that break investors’ goals down to the specific dollar and time com- mitments needed to achieve them. Also like the Warburg Pincus program, the Royal Bank has not created riew investment vehicles for the Nexus Generation. “The site is about educa- tion and having the confi- dence to get your investments working for you,” said Brenda Vince, vice-president of mar- keting for Royal Mutual Funds in a press release. “We hope users of the site find it helpful and interesting and that they will tell us more about what they need as the new generation of investors.” Aside from the lower initial investments, the youth pro- rams that these firms are launching do not go fer beyond the realm of the mar- Keting strategy. As they age, the Nexus Generation will need mort- gages, car loans and more sopnist/cated investing options —- and banks that woo them early are iikely to gain their business later. It’s a kind of long term investing strategy for the banks themselves. Melissa Edwards is a staff reporter at Investment.com. Tuesday February 15 A one million dollar return would be nice — but be careful how much you risk no matter how much you want to yield. IF your financial adviser asks you how much risk you can handle, what do you say? If you're tike most of us, you probably don’: really understand the question. “That's because most investors confuse risk with volatility or believe that it’s directly tied to returns — with the result tat they use- ally short change themselves in the process,” says Allen B. Clarke, chairman and CEO of Opus 2 Direct. com, a sell-direct portfolio solutions company that addresses this problem. it has a lot to do with the stock market and the way it operates — up one day and down the next, sometimes wildly but always unpre- dictably. “That’s volatility. Not risk,” adds Clarke. “The biggest risk comes when the investor tries to exploit marker volatility by trying to time the market. Getting out of the marker is clearly the greatest risk & the investor’s portfolio perfor- mance. “History shows that the best time to invest is simpiy when you have money.” ° The Tax Ad There are other risks that are far greater, including many that are unknown to the investor, says Clarke. These include the risk of outliving your money -— a real possibility, he adds, if you follow an investment strategy dominated by GICs. “There's more to risk than the dager of losing your money. “It’s that, of course, and more, including the risk of not reaching your goals, of aot getting returns that are reasonably attainable — a whole range of issues that are not often clearly articuiat- ed.” The solution, says Clarke, is proper asset class selection and a properly diversified portfolio — one designed to preserve your capital, reduce volatility and maximize returns. “Irs the missing link in the investment programs of thousands of Canadians who run after erformance, chasing this fund or that manager and unknowingly risking their investment capi- tal. Clarke prefers to think of risk in terms of probabilities and how they apply to the physical parameters of each individual’s concerns. Not, as most investing manuals suggest, on your risk toler- ance. There are very real para- meters, he believes, that determine what kind of port- folio you should have, how much you should save, now long you will have to work and above all, how mucz, money you'll have when you retire. Once you punch these numbers into the computer, you'll have a pretty good idea of your probability of successfully reaching your financial objectives and what changes you may have i. make to your portfolio and financial pisn: to improve that probability. “If they would like to improve the odds, we teil them they will either seed a different portfolio designed to improve performance or chat they will have to work longer, save more or spend less.” “We have to stop think- ing funds and fund managers and start thinking as profes- sional investors do and stop behaving = ‘like ~—_—sttraders. Professional investors don’t think funds and find man- agers and chase perfor- marce.” “They think esset class tirement Savings Plan denzars ry, Thursdey February 17 vantages * The Investments « Limited Seating ® Please Cali to Reserve selection and proper portfo- lio construction.” The secret is not just in the selection of the right asset classes but in the way the asset classes are com- bined to create the lezst volatile and highest-yielding investment portfolio possi- ble. “Patience,” he adds, “is tie real asset to building wealth. You can’t overest- . mate the positive effects of capital preservation, time and compounding.” For sore information see . ; ‘Auditax Plus’ Tax Review Jo 1985 No Recovery No Charge ($35 reg.fee applies) E-File & Tax Preparation Estate & . Corporate Tax Returns Contact: Cam McNaughton Auditax Inc 308 East 18th Si. North ¥Yancouver BC V7L 2XxS Tel: (604) 984 S535 Edwardjones Serving Individual Investors Niember CIPF www.edwardjones.com Wednesda Febsuai 16 “7:60 pm ” Fax: (604) 984 6506 e-mail: cam @ auditax.com “because ir has a much tower minimum investment require- “nent. It-was often a problem for new ifivestors to meer the old minimum.” 7:00 pm Aiex Webster Investment Representative #111433 1 North Vancony 280-9366. 7:00 pm Nick Marchi inveronent Representative Jnit 8, 903 West 1th St. North Vancouver 380-5991 __dnvesemens Representative #1 42-223 Lower Min. Hwy. North Vaneonver 2280-7433