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Rai, 50, joined TD as a management trainee in 1986 and began applying more analytical discipline to the bank's investment decisions. He is now in charge of investments at TD's $217-billion asset management division and runs the bank's own pension plan.

What would you do with a $100,000 windfall?

The same thing today as I did five or 10 years ago: Buy shares in great companies, Canadian or foreign, with strong balance sheets. Some people say those companies should pay dividends. I don't necessarily agree, so long as they are allocating capital properly—the ones that are consistently growing their businesses. Think about two questions: "Will a company find this or discover that, and therefore make a lot of money?" and "Is this company going to grow at 5% or 10% a year?" There's a big difference between the two.

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What was your best investment?

My 25 years of investing in TD Bank shares.

What was your worst investment?

Early in my career, with my personal portfolio, I bought speculative stocks with a short-term time horizon. I don't have a name, but it was always a company that was rolling the dice on finding a product. I perceived those speculative stocks as a 50/50 bet that they would go up. In fact, it's more like a 99% probability that they will go down.

What's the biggest risk that investors face today?

People haven't figured out that they need to take on a different risk profile. They believe that, as you get closer to retirement, you should shift money from equities to fixed income. That's all based on the 30-year bull market in bonds we've been through, not looking forward. In this environment—in which interest rates are low—fixed income is going to give you 0% capital appreciation.

What about corporate bonds? Isn't the market strong for them?

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Spreads between the rates on government bonds and the traditionally higher rates on corporate bonds are thin, and they are going to stay thin. That's why our team thinks that 2014 is going to be a strong year for mergers and acquisitions, because if you're a good corporation, you can borrow large amounts at rates virtually flat to inflation. There will be a point in the cycle soon where people have confidence in economic activity. Once that happens, you will see an enormous amount of corporate development. The first stage will be for companies to acquire business using their easy access to capital.

So, should individuals invest in those bonds?

No. They should be buying equities in strong companies.

Will interest rates go up any time soon?

Our view is that it will be surprising how long rates stay low—short-term rates controlled by central banks, that is. The reason is not what people think: slow economic activity. It's that governments can't afford to pay higher interest costs on their debt. The U.S. has $12 trillion in debt. If rates go up 1%, that's $120 billion a year in added interest.

Won't those low rates prolong the crisis in traditional defined-benefit pension plans?

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Pension plans can't get higher returns without taking on more risk, and most are not willing or not allowed to do that. So the individual or the corporation, or other plan sponsor, has to make higher contributions—that's it. But if you're living paycheque to paycheque, what right do I have to tell you that you need to save 12%, 13%, 14% of your income? Society needs to find tools.

What can a boomer approaching retirement do?

I have a simple piece of advice for boomers: Live off the dividend income, not capital gains from stocks or bonds. If you need the capital gains, you have to try to time the market when you buy and sell. But if you're able to sustain your lifestyle with dividend income—plus OAS, CPP and your pension plan—you won't have to worry about fluctuations in the value of your portfolio. You'll have a very good retirement, because there's enormous opportunity around this.

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