More Canadians Investing in RRSP’s

A recent poll has confirmed that a record 3 in 4 adults own an RRSP and that number is up 64% over last year!

The investment industry is expecting a banner year considering that 75% of those who own an RRSP are looking to make a deposit of some amount in 2007.  In fact, of those aged 45 to 54 a whopping 84% plan to make a contribution.  What’s even more exciting is that of those aged 25 to 34, 60% of them have an investment portfolio.  Sounds like the need for retirement planning has made its way down to the younger generations as well which is great news for all of us!

Your Take-Away: Whenever the Canadian Government offers a tax break like they do with RRSP’s, it would be almost crazy to not take advantage of it. After all, no one likes paying tax regardless of their income, job status or net worth. Do not be afraid of taking advantage of dollar cost averaging and investing a small amount each month rather then trying to come up with a large amount at the end of the year.  Setting up a monthly savings program is an easy way to ensure your money is working for you each and every month, without having to feel the pressure of coming up with larger sums at the end of each year.

Congratulations to all of you have an investment portfolio, and especially to those of you who have taken advantage of your RRSP.  Don’t forget that it’s always better to save a dollar in tax then to increase your income by a dollar!

Until next time, have a Wonderful Wednesday.

Chris

Value Investors are Winning

An article was published at www.reportonbusiness.com stating that long term, value based thinking is the way to go in our current market conditions.

Justin Hill is a Senior Investment Manager at Pictet International Management and his fund has returned an average of 11.1% over the past 10 years investing in global, value based companies. He says that they look for “a price-to-earnings ratio less than that of the market, and growth more than that of the market.” This fund is just one great example of the long term perspective that many fund managers hold to be true, and in this time in the market, it is now more important then ever.

Your Take-Away: You may have been told in the past to “do whatever everyone else isn’t doing”, and now is a great opportunity to take that advice to heart.  Black Friday in the US is the largest shopping day of the year, primarily because of the massive savings provided by many, if not all retailers.  Continuing to buy in this market and by taking advantage of Dollar Cost Averaging could provide significent savings to you knowing that over time, the market will turn around.  If you buy your funds or stocks at a discount and you know the price will come back up, doesn’t that sound like a good “value”?

Before making any investment decisions, it is essential that you take a look at your current situation and and ensure that any investment you make works well within your current porfolio and matches your risk profile appropriately. 

Until next time, have a Terrific Tuesday.

Female Investors are Generally “Unengaged”

TD Waterhouse recently polled a group of Canadian women and have found that most are disengaged from investing, are conservative, and are risk averse.

The findings in this poll were broken down into four categories that almost every Canadian woman falls into.  The first is “Panicked Paula” who is considered disengaged from her investments and is worried about her future.  The second is “Blissful Betty” who is also disengaged as well, but in this case is not worried about her financial future at all.  The third type of investor is “Sleepless Sally” who is engaged in her investment portfolio but is worried about the markets and her future.  Finally, the fourth investor type is “Confident Kate” who has taken action with her portfolio and is happy and confident with both her current and future status.

Your Take-Away: The key difference in all four types of female investors is not their knowledge as much as their involvement and awareness of where they are and where they are going.  Being engaged is not about having all the answers, but rather taking the necessary steps to determine where you are, where you want to be, and how you will get there.  This does not have to be a daily responsibility, but with minimal effort, you too can become “Confident Kate”, if you choose too.

David Bach wrote a book called “Smart Women Finish Rich” and it is definitely one that I would recommend to any woman looking to take control of her finances.  Definitely a great first step for any woman interested in becoming more involved with her money.

Until next time, have a Magnificent Monday.

Chris

Beware of Banks Offering to Pay Land Transfer Tax

Both BMO and TD Canada Trust have announced that they will pay the land transfer tax for their new clients, within specific criteria.

On the surface, this offer sounds like a great deal to a Canadian consumer, but as you’ve undoubtedly heard “If it’s too good to be true, it probably is”.  In most cases, but not necessarilly all, the banks will in fact pay for your land transfer tax up to a maximum amount, but they will also generally charge you a higher interest rate to do so.  If you don’t want to pay that interest rate, then you won’t have your taxes paid for you.

Your Take-Away: This is an appealing offer to anyone, especially those of us in the midst of a move with the potential of a new tax taking a large portion of our planned down payment. That said, if you are entertaining this offer, make sure you read the fine print and don’t simply just opt for the apparent “freebie”.  You may end up having your land transfer taxes paid on your behalf, but if you run the numbers, you are probably actually paying for them yourself over the course of the next five years based on the additional interest you will be responsible for.  After all, when have you ever known the major banks in Canada to just “give money away”?

Although this offer is very appealing, don’t stop shopping the market to look at what is available to you at this time, and don’t just assume it’s a great deal.  It very well may be, but in most cases, you may be getting hosed over the course of next five years.

Until next time, have a Fantastic Friday.

Chris

Bond Rates and Their Effect on Mortgage Rates

Today’s bond rates demonstrate the mortgage rates should be on the decline.

My reasoning stems from current Canadian bond markets as this is where mortgage lenders borrow money to lend to their clients. If we look at the last number of years leading up to the U.S. credit crunch, we will consistently see a premium of anywhere between .90% and 1.25% above the bond market yield. If we take a look back at the 5 year bond in the middle of April in 2007, we notice that it was trading around 4.15%. The accompanying 5 year fixed rate at most lending institutions was 5.25%; a difference of 1.10%.

Your Take-Away: If we closely look at today’s 5 year bond we will notice that it’s yield has dropped to 3.781% and the accompanying best rate on a 5 year closed mortgage has increased to 5.94%. A difference of 2.159%. That is almost double what we are accustomed to. If we were to take out the temporary risk premium due to the credit crunch issues in the U.S. we would expect that the 5 year rate should be in a range of 4.681% to 5.031%. Does it make sense to be locking into a 5 year fixed term or for that matter any fixed term at this time? In our opinion, no chance.

The decision is ultimately yours and depends on more variables then simply trying to time the market.  That said, now is as good a time as any to seriously consider a variable rate mortgage.

Until next time, have a Terrific Thurday.

Elisseos

How Much Life Insurance is Enough?

One of the most popular statements we hear from clients is “I don’t want to be over insured”.

For years, many Advisor’s have used a variety of tools to help their clients determine just how much life insurance is actually enough.  At the end of the day, the decision is entirely yours but it is definitely worth your time to explore these numbers and use a variety of different formulas and scenarios to determine if you do in fact have enough coverage.  I can’t help but think that at the time the life insurance is needed, a recently widowed spouse wouldn’t want as much as possible.

Your Take-Away: There are multiple tools you can find online that will assist you in looking at these scenarios.  If you check out yahoo.com, msn.com, google.com and of course our own site, you can play around with the life insurance calculators available and determone how much is enough. There are many needs that most people don’t naturally think of such as day care to enable the survivor to continue to work and earn an income, education and even lifestyle changes.  After all, would you want your spouse to be able to pop over to Dairy Queen for an ice cream cone with your kids, just because?

Much like the retirement number we’ve talked about a number of times, there is no perfect number or solution.  This is a very personal decision, but you owe it to yourself and your family to at least do the home work.

Until next time, have a Wonderful Wednesday!

Chris

Incorporate and Save Tax

Canadians are always looking for ways to save tax on their income, and incorporating may just be a perfect solution.

The highest tax bracket for a Canadian paying personal tax is 46% however business income in a Canadian controlled corporation is only in and around 18% up to the first $400,000 and then 36% there after.  That is a substantial savings for an individual earning a large income who may be a small or medium sized business owner and is in a position to take advantage of his own Canadian controlled corporation.

Your Take-Away: This strategy is by no means for everyone.  Depending on your Profession, you may be able to incorporate even if you don’t own and operate a small or medium sized business.  For example, Doctor’s are now able to incorporate but only as of this year. Whether it be paying yourself a dividend as opposed to pure earned income, investing back in your business, or simply leaving money inside your corporation and investing it from there, the benefits can be substantial.

Take the time to learn for yourself if this is something that you and your family can benefit from.

Until next time, have a Magnificent Monday!

Chris

Interest Rates On Their Way Down?

An article at reportonbusiness.com states that many analysts are calling for a reduction in the Bank of Canada rates.

Ted Carmichael, Chief Economist at JP Morgan Securities in Canada says “We now expect that the Bank of Canada will need to cut its policy rate by 25 basis points on each of its next four decision dates through April.” Amazingly enough, that would bring the rate all the way back to 3.5% from its current status of 4.5%.

Your Take-Away: It is a near impossibility to predict with 100% certainty that the Bank of Canada will in fact drop rates four consecutive meetings in a row, but if you look at the current dollar and our weaker then normal economy over the past two quarters, it is at least believable.  If you are looking to set up a new mortgage or refinance your existing mortgae, this may be your best opportunity to go with a variable rate.  History says that variable rates provide a lower overall interest cost then fixed rates, and the next six months or so could prove that point even more clearly.

Again, talk to a Professional to determine if a fixed or variable rate is best for you and your specific situation.

Have a great weekend!

Chris & Elisseos

Illness Protection Insurance

Many have heard the term “Illness Protection” or “Critical Illness Insurance”, but I’m not sure how many of us actually understand what it is and the benefits it provides.

Critical Illness Insurance (CII) provides a lump sum, tax free benefit to the insured in the event that they are diagnosed with a terminal illness.  The illnesses covered range from between 4 in a basic policy to upwards of 25 depending on the company of choice, and include illnesses such as cancer, heart attack, and stroke to name a few.  This benefit is paid out after a 30 day waiting period and can be used for alternative health care measures, replacing an income, or even making modifications to your home to help adapt to the change in your health.

Your Take-Away: Just think, if you were lucky enough to own a machine that you ran in your basement 24 hours a day and all it did was print money, wouldn’t you insure that machine in the case that it broke down?  After all, if it did broke down but with the right money you could get it running again, I don’t know a single person who wouldn’t get it fixed.  Protecting yourself and your family with Critical Illness Insurance is the exact same thing. In fact, if you are the only or primary income earner in your family, you owe it to yourself to ensure that both you and the rest of your family would be able to sustain a life changing event such as cancer, heart attack or any other number of illnesses that seem so prevolent today.

Statistics say that 1 in 4 Canadians will be diagnosed with Cancer prior to their 65th birthday.  Personally, that alone is enough to make me seriously consider the benefits of protecting myself and my family’s well being. 

Until next time, have a Wonderful Wednesday.

Chris

Canadians Lack Personal Finance and Credit Knowledge

This week has officially been named “Credit Education Week” for Canadians, and for good reason.

To start the week off, a survey was released that interviewed 4000 Canadians on issues related to personal finance and credit.  According to an article by Investment Executive “The survey clearly showed that the majority of Canadians do not have a sufficient understanding of basic personal finance and credit.” The fact that “90% of Canadians feel that they have more debt today than they did five years ago is an obvious indication that Canadians need to learn how to manage their money better,” says Valentine Lovekin, president and chairman of the Board for Credit Canada.

Your Take-Away: Education seems to be the key here.  Thanks to a number of organizations such as Capital One, Credit Canada, and Equifax to name a few, a new website has been created that provides basic education specific to Canadians and their personal finance and credit questions.  This site provides some very key information and tools that can be used in a variety of ways, and I truly believe that this is the kind of site that many Canadians should be adding to their “Favorites” list.

With the number of articles I’ve been reading specific to Canadians and their needs, it continues to become clear that talking to a Professional is a necessary step for most.  Talk to your friends, your Accountant, or anyone else you can think of to find someone you trust and if nothing else, give them a chance to help you put your money on the right path to achieving your financial goals and managing your money appropriately.

Until next time, have a Terrific Tuesday!

Chris

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