/xmlrpc.php" /> /xmlrpc.php?rsd" /> /wp-content/plugins/email/email-css.css" type="text/css" media="screen" /> /wp-content/plugins/social_bookmarks/social_bookmarks.css" />

RRSP Season is Over…Now What?

As many Canadians have become used too, the March 1st deadline is officially come and gone.

The primary question many of our clients are asking us is “What’s the best way to use my available cash flow now that my RRSP is maxed out for the year?” One of the most obvious and natural answers is to take full advantage of the Tax Free Savings Account that the Government “gifted” us on January 1st, 2009.

If you haven’t used up your room entirely (you have contribution room of $5,000 from 2009 and $5,000 for 2010), then we suggest a simple yet effective monthly investment. If you break down the $5,000 available per year, that works out to approximately $416 per month.

The real beauty of the TFSA is the fact that your money is always 100% liquid and accessible at any point, and you never pay taxes on withdrawal, regardless of how much you’ve grown your account.

You’re Take Away: Simply put, you won’t lose if you take whatever cash flow you have available and begin to invest that in a TFSA every month. However, it amazes us how many of us don’t realize that you can invest in stocks, mutual funds, high interest savings accounts and many other investment vehicles much like your RRSP. Depending on your risk profile, time line and realistic expectations, it is highly possible that you should and will want to look at investment choices that have the potential to earn you a larger return then your basic bank is promoting.

After all, if you do happen to hold on to this investment without accessing it for a few years, your growth could be substantial and be withdrawn completely tax free. That, and you can always use your TFSA account to transfer money to your RRSP during next year’s RRSP season if you’re running low on cash at the time.

Until next week, have a wonderful Wednesday!

Chris and Elisseos

Canadian Fund Managers Outperform

Does it really pay to invest in mutual funds? Apparently, it does.

According to a recent report, Canadian Fund Managers outperformed the S&P/TSX in the final quarter of 2008. That is especially important considering it was one of the worst three month periods in market history. Although the difference was small, specifically a -22.71% return for the index versus a -21.67% return for active Managers, the news is still quite positive. In fact, over 50% of active Managers were in this category of “outperformers”, while in previous periods that number was as low as 11.2% to 22.0%.

Your Take-Away: There is no question that you are probably thinking that this news is not overwhelmingly positive considering that the markets still fell quite steeply and that it is the first time in a long time that so many Managers beat the index. I agree.

That said, what I do think is important is that although the majority of Fund Managers may not have beaten the index in the past, there are still many that do. What that says to me is that the Managers you choose to invest with need to be well researched and have some form of proven track record. If in fact you happen to find one of these great Manager’s, you can unquestionably justify that there are times when Mutual Fund’s are worth their price tag.

One great place to start in terms of researching both the fund you are being recommended as well as the Manager who is responsible for it is www.morningstar.ca. I have used that many times myself and I’m confident that you will find this resource quite useful for your own due diligence.

Until next time, have a Wonderful Wednesday!

Chris

Maybe, Just Maybe, We Have Actually Hit the Bottom

In the article entitled “Is the Tide Turning? Managers Think So”, Mark Noble provides some very interesting reasons as to why many Managers seem to think that 2009 may just in fact be better then previously expected.

According to the Russell Investment Manager Outlook poll for the fourth quarter, “more than 70% of Canadian managers expect positive returns for the S&P/TSX in 2009. Further, 90% of managers surveyed believe the TSX is either fairly valued or undervalued.” In other words, these beliefs are not a direct result of any specific event that has occured in the Canadian market recently, but more because of a belief that the gloom and doom of 2008 and looking into the first half of 2009 has already been “built into” the current pricing of the Canadian index known as the S&P/TSX Composite.

Does this positive news, something we haven’t heard for quite some time, mean that we can expect to recoup our losses from 2008. According to the same poll, that is likely not the case. The article goes on to say “Managers seem to be leaning toward a slow and methodical recovery over the next year. More than 40% of respondents expect the Canadian market to bounce back more than 10% — an impressive comeback — but this is against a backdrop of near 40% losses for 2008.

Your Take-Away: As I mentioned in my last post, you can take just about any quote out of context and generally speaking, even shape it how you want it to sound. That said, this article and poll simply proves to me that it is time to consider getting back into the market or at least sticking with your existing plan. If you have taken a large chunk of your portfolio out of the market and are too afraid to jump back in full force, consider moving back in with smaller amounts spaced over the next couple of weeks and months. If you never did take your money out in the first place, make sure you don’t start now.

No one really knows what the future holds, and I’m certainly not arrogant enough to say that I do. I just can’t help but think that if some of the smartest minds and Money Managers in our Country believe that we most likely will not see much more of a decline in our economy and that we may have actually hit rock bottom, maybe it’s time we start to listen. 

Until next time, have a Terrific Tuesday!

Chris

Active Managers Beat the Index in Q3

There has been a lot of talk surrounding whether to buy into mutual funds or simply invest in the equivalent index.

Recent data was released by the Standard & Poors Indices Versus Active Funds Scorecard (SPIVA) specific to Quarter 3 results in a down market. This report said that over 60% of active Manager’s beat the S&P/TSX index which is a substantial increase over past results. S&P’s Jasmit Bahndal responded by saying “The important thing for investors to take away is not that there are active managers who can beat the benchmark, but that it’s hard to find them”.

Your Take-Away: Finding a great Money Manager can be tough. Never hesitate to ask your Advisor why he or she recommends that specific Manager and always do your own due diligence to ensure you understand as much as possible about the Manager you may be investing with. Issues such as experience, track record, core philosophy and primary holdings are all key to helping you make the right decision.

This is not a black or white issue at all and many beliefs and theories surround this very controversial topic. My thought is that I’m more then happy to leave the big buying and selling decisions to the people who do this every day, all day, then to try and do it myself. However, that’s just my opinion and it’s up to you to decide for yourself.

Until next time, have a Magnificent Monday!

Chris

The Truth about MER’s

I’m not going to write a post to simply try and justify the benefits of MER’s, however I do want to try and expose why they exist and why they can make sense.

The term “MER” stands for Management Expense Ratio and is the fee that many Fund Managers and Companies will take from the fund return of those who invest with them. After all, their objective is generally to make you more money then you could make on your own and for that, they deserve to be paid. This is no different then any of us collecting  a pay cheque for what we do day in and day out.

There is no question that MER’s are a cost to you as an Investor, but I do believe that they can be worth it depending on the fund and Manager of choice. For example, if you are diligent in searching the market for strong funds that have consistently outperformed their benchmark and which have almost removed the need to constantly watch your portfolio on a daily basis, wouldn’t you agree that it can make sense to pay someone else to do the work for you? The flip side however is that you may end up in a fund that rarely if ever out performs the benchmark in which case you would be far better off to simply put your money in Exchange Traded Funds.

Your Take-Away: If you choose to create and manage your own stock portfolio and are consistently making wise decisions that result in postive returns above and beyond the bench mark, then good on you. There is absolutely nothing wrong with managing your own money assuming you have the time and expertise to do so, and I would never suggest anything different. For the majority of people however, this is not the case which makes choosing a strong Manager and fund or series of funds of the utmost importance.

When you are looking at funds that you could purchase, consider the following as a starting point:

  1. What is the total MER compared to its peer group?
  2. Is there a performance fee in addition to the MER?
  3. Is the expense component fixed or variable from year to year?
  4. Who is the Fund Manager and what is his track record over a decade or more?

Although this is not an exhaustive list of questions to ask, it is definitely a great place to start. CI Investments was the first Mutual Fund Company in Canada to fix their MER and many are now following suit. That is definitely a positive for those of us who don’t want to have to worry about our MER going up every year.

Until next time, have a Terrific Thursday!

Chris

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

CI Investments Announces NEW T-Class Funds

On Monday October 15th, CI Investments announced the launch of their new T-Class Mutual Funds.

CI has recently thrown themselves into the ring of mutual fund providers who have created a solution primarily focusing on the Senior and Baby Boomer market, or those looking for tax efficient income producing vehicles. This type of fund structure is currently available through most mutual fund firms such as Franklin Templeton, AIM Trimark and Mackenzie, and has been often been referred to as Return of Capital (ROC) funds, T-SWP funds or T- Series Funds. 

CI’s Chief Executive Office, Peter W. Anderson stated on Monday that “After-tax income is the critical issue for investors since many traditional interest-paying investments offer both low yields and high tax rates. As one of the most tax-efficient investments available, T-Class is an important option for retirees and other Canadians planning for their retirement.”

Your Take-Away: This type of non-registered investment vehicle is almost a no brainer for anyone who is looking to:

  1. Create steady, predictable, tax efficient income
  2. Minimize their annual tax bill on the income they earn
  3. Protect their Old Age Security (OAS) from being “clawed back”
  4. Have liquid access to your investment in the case of emergency

There are all kinds of investment products available to Canadians, and it can sometimes be a bit overwhelming when trying to decide what product or strategy makes the most sense for your specific situation.  In my opinion, this truly is a concept and product that can make a lot of sense to a lot of investors. 

Enjoy your day!

Chris