2008 Budget Analysis

As you probably know by now, the proposed budget for 2009 was announced last night at 4:00pm, and it contained a number of very interested points and initiatives to consider. There were three initiatives that apply to us today including the ”Tax Free Savings Account (TFSA)“, changes to your RESP’s, and changes to Dividend Tax Credits.

Your Take-Away: Although we don’t have the time to discuss every detail of these updates, I do want to focus on the Tax Free Savings Account as this is a tremendous opportunity for 2009 and one that the Government definitely hit a homerun with. Below is a summary of the major benefits and details of this new Tax Free Savings Account:

As you can see, this new Tax Free Savings Account will provide substantial benefits for any Canadian, regardless of income bracket or age. I personally have to say that I am very impressed with this initiative and congratulate the policy holders for coming up with a very creative, effective and generous strategy to help ease Canadians tax burden.

If you have any questions or thoughts regarding this new account, or any other part of the budget announcement, please do not hesitate to contact us directly. Feel free to to post your comments as we’d love to hear them.

Until next time, have a Wonderful Wednesday!

Chris & Elisseos

Life Insurance Explained: Term Insurance Insurance (Part 2 of 5)

Today marks the second installment of our “Life Insurance Explained” series.

 Let’s take a look at how Term Life Insurance works and what situations it is most suitable for.

The basic concept you need to know when it comes to owning Term Life Insurance is that you are in effect “renting” insurance the same way you would rent an apartment or a home. The reason I say this is that your costs are much lower in comparison to other life insurance options, and your primary benefit is the protection and coverage you applied for. There is no cash value or way to “get back” your premiums, but it will be paid out on death assuming it is still in force.

Your Take-Away: Term Life Insurance is most commonly used for short term needs, such as a mortgage or debt requirement, and is also used when monthly cash flow is an issue. In most cases, this is a product that is made for the masses as it is affordable for almost anyone and will provide the protection and coverage needed which is the entire purpose of life insurance.

If you are looking for Mortgage Insurance, this is unqestionably your best option and in some cases it can save you hundreds of dollars a year over the banks offer. Term Life Insurance is a true life insurance policy and will provide exactly what you need when you buy life insurance, protection from an unexpected death.

Until next time, have a Magnifcent Monday!

Chris & Elisseos
 

Life Insurance Explained: Intro (Part 1 of 5)

It seems as though the only thing everyone knows, or at least thinks, is that life insurance is a necessary evil.

It never ceases to amaze me how many Canadians are constantly looking for anwers in respect to Life Insurance, yet struggle to find what they are looking for in an easy to understand manner. Because we want to help our readers learn and grow in respect to their financial IQ, we will attempt to make Life Insurance something that makes sense to Canadians, and thus provide a Life Insurance 101 class of sorts.

Your Take-Away: Throughout the next week or so, I will focus on four specific topics surrounding this very “necessary evil”. I will address both the “how does it work” question and the “what makes the most sense for me” question in respect to the following four topics:

  1. What is Term Life insurance all about?
  2. What is Whole Life insurance all about?
  3. What is Universal Life insurance all about?
  4. How do I know how much Life Insurance I need?

If you have ever asked the above questions or tried to figure out what your various options are, this series is just for you. I am more then willing to answer additional questions in respect to life insurance and would be happy to discuss other topics regarding life insurance if you’re interested. Just let me know.

Until next time, have a Terrific Tuesday!

Chris & Elisseos

Stay Put in our Volatile Market

A recent comment by Fred Pynn, CIO at Bisset Investment Management, couldn’t be more poignant.

“It’s time to sit back and ride out the storm,” he said. He went on to say “The biggest mistake that investors make is overreacting to short-term market volatility. That has probably the biggest negative impact on long-term wealth to investors.” His counterpart, Brent Smith, who is the CIO at Fiduciary Trust Company also commented by saying “The worst is likely behind us, and the majority of the downturn is in the past.”

Your Take-Away: Whether you believe what either Pynn or Smith say to be truth, market volatility is a guarantee in life. It is essential to go back to your original invesment plan, often provided in the form of an “Investor Policy Statement”, that clarifies your risk factor, comfort level and long term plan. If what you chose at the time of making your investment decisions worked then, why should it be any different now considering you probably knew the markets were going to move up and down?

Seeing your portfolio go down in value is never fun, and I’d never pretend that it is. What I will say however is that it is part of being an investor and the good news is that the markets always come back, at least according to history which is our best indicator of the future.

Until next time, have a Terrific Thursday and a very Happy Valentine’s Day with your significant other!

Chris & Elisseos

Debt Outpacing Family Incomes

A recent report stated that hourly earnings have risen yet family debt in Canada has outpaced these upward changes.

The report entitled Curent State of Family Finances stated that “Despite rising household incomes, debt has risen seven times faster since 1990. Average total debt is at $80,000 per household, equal to a record 131% of household incomes”. In addition, “A record 32% of workers aged 55 continue to work.”

Your Take-Away: It is easy to look at this report and either identify with the findings, or possibly look at them with disgust thinking that there is no way you could ever end up there. Regardless of your feelings, the answer is having a plan to either get out of debt or stay out of debt, depending on your situation of course. It is not difficult to get yourself into a position of being debt riddled, but if you have a plan in place to save for such days, it’s amazing how much of a difference that can have.

If you happen to find yourself strapped with debt and cash flow poor, a great place to start would be to check out www.daveramsey.com for further information. Feel free to contact us directly as well as we’d love to try and help you get your foundation back in place.

An old proverb says “No one plans to fail, they simply fail to plan”. I can’t help but think that in this case there is no better mantra to buy into then this one.

Until next time, have  Terrific Tuesday.

Chris

CEO’s Are Buying Their Own Shares

A recent article was published by Bloomberg saying that many of Corporate America’s CEO’s, Director’s  and Senior Execs are buying more of their company’s shares then they are selling them.

That hasn’t happened since 1995 and the last time this situation happened between 1988 and 1995 the Standard & Poor’s 500 rallied an average of 21% in the following 12 months. These purchases show executives believe the worst may be over after stocks suffered the biggest January drop in 18 years on signs the economy is in a recession. In addition, the S&P 500 which is the benchmark for American equities, hasn’t fallen in the 12 months after insiders bought more than they sold, according to Washington Service data that go back 20 years.

Your Take-Away: The information above does not necessarily mean we are in the clear at all. It does however provide further insight into the fact that we may at least be better off then we’ve been hearing of late. After all, these “insiders” know more about the strenth of the large institutions they lead and thus play a tremendous role in the economy as a whole.

Although I can’t say that this news will drastically change the direction of our economy, I can say that I tend to listen to those who are most intimately involved. I made reference in a past post that if I were trying to build a house, I’d listen to the guy who has already done so rather then the guy who simply plans to in the future. I think that analogy still works in this case.

Until next time, have a Magnificent Monday!

Chris

Death, Taxes and Market Volatility

We have all heard that the only guarantees in life are death and taxes. That’s nothing new. I would like to suggest however that you can add one more “guarantee” to the list.

What is it you ask? Market volatility in all its glory and frustrations. There is no question that one who has looked at history will agree with the unfortunate reality that to make money, we need to ride the waves of the market. It may not be ideal, but it’s no different then realizing that the snow we have experienced further enhances our enjoyment of the upcoming summer and sun. Silly analogy? Maybe, but it is absolutely true.

Your Take-Away: Positive posts like this are fun to write, but many are thinking I’m just a naive writer so let me back up my thoughts. On Black Monday in 1987, the Dow dropped a whopping 21% in one day. That’s more then quadruple our greatest one day drop this year. Needless to say, the markets had returned to the original value of the day before the vicious drop within two years. In fact, five years later you would have made 41% on your money, and 10 years later you would have made 253% on your money by simply staying the course.

This is not always the case and not every drop has a positive ending. By looking at an Andex chart however, you will notice that most do and market volatility is just a part of being an investor.

Until next time, have a Fantastic Friday!

Chris

Words from Steve Forbes

I had the privilege of attending a live presentation by Steve Forbes last week, and it was definitely time well invested.

Mr. Forbes had much to say on the economy in both Canada and the US, and he also had some comments for the Canadian investor. One comment that stuck out to me was “It is the action of panic that is often worse then the illness itself”. I think that was very timely considering what we have seen over the course of the last few months. He went on to add that “The key thing is discipline and a long term approach” followed by “Dollar cost averaging will bail you out”.

 Your Take-Away: It is very clear that many Canadians have become very timid with the current market, and there is good reason for that. I can’t help but agree with Mr. Forbes however, and I would encourage all Canadians to take his message to heart. After all, we know the markets will eventually bounce back if they could do so after the great depression, Black Monday and even the tech boom, so why would now be in different?

Stay the course, take advantage of dollar cost averaging, and take a big picture, long term perspective and not just a daily or monthly view on where the markets stand. Make sense?

 If you have any thoughts on my post or what Mr. Forbes had to say, we’d love to hear them.

Until next time, have a Terrific Tuesday.

Chris