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Peter Benedek, 62

Occupation: Semi-retired, living in Ottawa

Portfolio: Mainly exchange-traded funds (ETFs) including iShares Canadian Short-Term Bond Index Fund , iShares Canadian S&P/TSX 60 Index Fund , Vanguard Total Stock Market Fund , iShares MSCI Emerging Markets Index Fund N, iShares MSCI EAFE Index Fund and SPDR Gold Trust Fund .

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The investor In 2002, Peter Benedek retired from Nortel Networks Corp. after rising to the position of vice-president of research and development. These days, he is as busy as ever, as the author of (a website on retirement) and building a consulting firm catering to investment management firms.

Paid himself first
"Throughout my working career, I paid myself first using payroll deductions for savings," he says. "When permitted, I invested in the RRSP and savings plans offered by my employer and always made sure to get the employer's matching contribution."

"I always minimized my exposure to my employer's stock in order to diversify my human capital and financial capital."

Cost control Markets are efficient and it's hard to beat them over time. Control what you can, notably costs. "With very few exceptions, I only invest in low-cost, passive index vehicles like ETFs," he reports.


Asset allocation "I use asset allocation as the primary means of risk control. Any assets required to cover expenses in the next 10 years are invested in cash, bonds and GICs."

His strategic asset allocation is cash (8 per cent), bonds (33 per cent), equities (48 per cent) and alternative investments (11 per cent). "The portfolio is rebalanced periodically. … This not only provides risk control but forces one to sell high and buy low."

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Tactically, depending on market conditions, he will move his cash up as high as 18 per cent and equities as low as 40 per cent.

His equity investments are spread over Canada (about one-third) and developed and emerging markets (about two-thirds). On his foreign holdings, currency fluctuations are not hedged.

Living off his capital
In retirement, he withdraws a fixed percentage (3 to 4 per cent) of his assets each year for living expenses. Assuming an expected annual return of 6 to 7 per cent on a balanced portfolio, his withdrawal rate should allow his portfolio to grow by 2 to 3 per cent a year.

Best move
It was enrolling in the Chartered Financial Analyst (CFA) program. "What I learned gave me some level of insight and peace of mind that I could not have achieved by other means."

Worst move
It was investing in structured products, for example reverse convertibles. They are highly complex and hard to understand fully.

"Control what you can - saving, spending and cost. Get financially educated: Use asset allocation and rebalancing to manage market risk. Then figure out how to manage other key risks such as outliving your assets."

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Special to The Globe and Mail

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