Last Week was Rough on the Canadian Market

It is no longer news that last week was a rough one for the S&P/TSX.

In fact, the Canadian Market fell over 900 points within the four trading days that the market was open which just happens to be one of the worst single weeks in Canadian history. Although we avoided a recession in the second quarter of this year by only 0.3%, it is clear that we are definitely still hurting in terms of our market strength.

Your Take-Away: The results of last week are not easy to swallow, especially if you were like many others and saw your investments take a pretty steep fall. Despite the fact that I work within the financial world, it’s still not fun or easy to see my portfolio fall the way it has over the last few months. That said, I also believe that although we are probably not at  the bottom of this fall, we have the chance to buy stocks and funds while they are on sale and God willing, just before they rebound. I’m not telling you to invest everything you have in the market, but it may not be a bad idea to take advantage of “Dollar Cost Averaging” and start getting back into the market in smaller amounts over the next few months.

Keep this in mind. Warren Buffet once said that he “sells when others are buying, and buys when others are selling”. I know that’s a paraphrase, but the concept is crystal clear. It’s up to you what you do, but I’m definitely taking advantage of this market as opposed to running from it.

Until next time, have a Magnificent Monday!

Chris

What is Happening to our Economy?

No doubt you have read or heard that the TSX tumbled 500 points last week and started this week off tumbling yet another 300 points as of the end of day today.

There is no doubt that these times can be a little scary or overwhelming for anyone with money in the market, regardless of their knowledge or experience. According to Eric Bushell, Senior Vice President at Signature Global Advisors, “The implications of the U.S. credit shock migrating to the world are beginning to be understood.” What’s interesting however is that he goes on to say “Our expectation of a global growth scare remains intact, only now it will be accompanied by a global inflation scare. This double whammy is not to be feared, it will be a time to buy.”

Your Take-Away: You have every right to be weary of what is happening both in Canada around the world. After all, consumer spending is down which impacts manufacturing, shipping and multiple other industries. As well, with inflation on the rise, it poses yet another concern for investors. The econonmy is definitley hurting, and will most likely continue to do so for some time now.

That said, we have been here before. Depending on your age, we have all seen the rise and fall of the markets and the incredible fear that creates. As Bushell himself says, we cannot argue that we are heading into some very rocky times, but as opposed to running and hiding until the markets recover, he is planning on using this opportunity to buy and add to his position in the market rather then sell and create more cash.

In other words, things will get tough for a while, but don’t be afraid to look at ways to take advantge of the current status of the market, rather then just thrown your hands up and hope for the best.

Until next time, have a Magnificent Monday.

Chris

Being Thrifty is Cool Again, or Is It

Many of us think of our “thrifty friends” as cheap or self pleasing. Maybe they are the smart ones though.

I know that I used to have a very negative view of those people I would call thrifty, but I’m starting to think they knew something I didn’t. Of course it is possible to go to far to one extreme and make thriftiness a characteristic that hinders relationships, but I don’t think that is the case for everyone. If you look up the word “Thrift”, the Canadian Oxford dictionary defines it as “prudent financial management.” I can’t help but think that I would have no problem with my friends using that definition to characterize me.

An article was recently wrtten in the Financial Post and stated that many of us are “just two paycheques away from bankruptcy”. If that’s the case, what’s wrong with being thrifty if for many the alternative is bankruptcy in the case of an unexpected illness, injury or loss of job?

Your Take-Away: I know for myself that learning to be more thrify is something I will take very seriously. After all, I don’t believe that means never having any fun, staying locked up with the lights off to save energy, or even giving up on creating memories for the purpose of saving for the future. Instead, I take that as a challenge to simply save first, and spend second without using credit to do so. After all, almost every one of us could afford to put a small percentage of our income aside, if we really wanted too and if we created the right habit.

So, my suggestion is to seriously take a look at where you are, where you want to be, and how your spending habits match your goals. More often then not, you will probably find that your spending habits say something entirely different then your “assumed spendind habits”. Maybe now is the time for you to consider answering the question “What does thrift mean to me?”

Until next time, have a Magnificent Monday.

Chris & Elisseos 

What is “The Latte Factor”?

You have heard me reference David Bach many times, and this post is no exception.

Bach is the author of “The Automatic Millionaire” which is a National Best Seller. His primary premise is to make everything automatic from your retirement savings to your dream savings. Before doing that however, he recommends that you walk through his process that he calls “The Latte Factor”. Simply put, Bach encourages you to track every penny you spend in a day from coffees to periodic lunches to groceries and then evaluate the amount of money that was not necessarily urgent. In other words, determine what your latte factor is by defining how much of your daily and/or weekly spending you can start saving instead of spending on non-essential items.

Your Take-Away: I’ve included a link directly to the “Latte Factor” because I believe this is an extremely useful exercise for anyone to walk through. In fact, both my wife and I have used it before and will be using it once again in the very near future. There is no question in my mind that if you follow the instructions, track everything you spend and then simply sit down and review what you could have lived without, you will be shocked at the money you could be saving if you truly wanted too. 

If and when you take advantage of this very useful tool, please do let me know what it works out for you and what you thought of the exercise.

Until next time, have  a Wonderful Wednesday!

Chris

Become a Millionaire!

An article was recently published at www.cnnmoney.com sharing the story of two US Army Captains.

Although this story is US based, it is amazing to see how relatively simple it can be to become a Millionaire. In the article we learn about two Captains who have decided to live off one of their salaries and invest the other so that they can retire as Millionaires. It may sound tough to do, but as you read you will notice that it really isn’t all that complicated. In fact, they spend $800 a month on entertainment and “going out” and even own a small plane that they are restoring. Doesn’t sound too bad does it?

Your Take-Away: You CAN have your cake and eat it too. After all, their family income is not necessarily huge, but they have chosen to make the right decisions with what they have to work with. If we can learn anything from this article, start wtih this:

  1. Define your goals clearly
  2. Make your savings plan automatic
  3. Find a balance and enjoy life as much as possible

As one of my closest friends says, “it’s all about the memories”. After all, what’s the point of having money if you aren’t enjoying it, and I would venture to say that this young couple has found a balance that works perfectly for the two of them. What is the perfect balance between saving and spending for you?

Until next time, have a Magnificent Monday!

Chris & Elisseos

RRSP’s Can Create a HUGE Tax Burden

It is commonly accepted that RRSP’s are the single greatest investment vehicle for Canadians saving for their retirement.

A recent article was just written talking about the substantial tax burden that RSP’s can create during your retirement years. In the article, Frank Witington states “Many people approaching retirement have been savers all their life. When they go into retirement, they don’t increase their spending, they just reduce their lifestyle.” The real problem with this situation is that the tax burden on your heirs can be significant considering the majority of your RRSP account, and some times the entire amount, will be taxed at the highest level leaving your recipients with a substantial tax bill. 

Your Take-Away: There are a number of strategies that one can take advantage of such as withdrawing larger amounts during your retirement years or even purchasing a life insurance policy to pay the tax bill on your death and thus leave your entire account to your heirs tax free. Additional tax planning can play a big role as you accumulate this asset because there may be other ways for you to actually create a tax deduction similar to your RRSP, and also ensure your investment account is transferred a little more tax effectively to those you care about.

No matter how you cut it, an RRSP can be a tremendous investment vehicle in the immediate future, but don’t forget that with the pro definitely comes a con. Proper planning could potentially save you thousands if not tens of thousands of dollars!

Until next time, have a Magnificent Monday.

Chris & Elisseos

Our Thoughts on the Recent Volatility in the Canadian Market

With the very real losses the Canadian market saw on Monday, many investors are looking for answers.

Rob Carrick wrote an amazing article on the volatility of the Canadian market, and I truly believe it is a “must read”. He comments on the response that most investors are taking and how that could severly effect the value of their future portfolio.

Your Take-Away: Although it is impossible to know the outcome and length of this current downward slide, it is possible to look at the history of the market to help us determine what our response should be. In fact, when writing this post alone, the TSX has already bounced back by 351 points over yesterday’s losses.

Below are seven points that will help you further undertand both the market, and our current perspective of what is and has been happening.

1. Corrections are a normal part of a healthy market and they present opportunities for long-term Investors.

2. A lot of Portfolio Managers are using market weakness to add to their portfolio holdings. After all, stocks are clearly on sale.

3. The Global Economy is still in pretty decent shape. This is going to be good for the earnings of Large Cap, Global Multi National Companies.

4. Bear Markets start with excessive equity valuations, with Central Banks increasing Interest Rates and investor sentiment being unrealistically optimistic. We are in the opposite scenario currently. Central Banks are cutting rates, investor sentiment is bearish and valuations are compelling.

5. This is not the time to be buying Government Bonds. The Asset Class is likely to under perform over the coming years relative to other Asset Classes. It also offers no inflation protection.

6. Currency has been a major issue. The move in the CDN dollar against the Euro and the US Greenback is unprecedented. That is rear view however and C$ movements are unlikely to have such a big impact going forward.

7. Every single time an index has hit its peak and fallen back, investors who stuck with their knitting experienced a breakthrough beyond that peak down the road.

The long and short, read Carrick’s article and don’t forget about the retirement plan you put in place. After all, that alone is a long term plan and moving your money from equities to cash is probably not what you originally decided on.

Until next time, have a Terrific Tuesday.

Chris

Middle Class with Struggle the Most in Retirement

Canadians with a household income of less then the $58,000 median income level will replace approximately 89% of their income during retirement through Government programming. This is not necessarily the case for the middle class Canadian family.

According to Sherry Cooper, a Global Economic Strategist with BMO, “The transition will be relatively painless for low-income earners due to the health care system and the implicit value of social benefits in general, including mandatory retirement.” Further to that, Cooper goes on to say “those earning six-figure salaries can only expect to see about 30% replacement.”

 Your Take-Away: It is hard to imagine that those who make less money throughout their lifetime will find it easier to transition from their income earning years to their retirement years.  The reality however is that the more we make, the more we tend to spend.  At least that’s what we’ve seen with our clients.  In my opinion, there is no better reason to start seriously looking and planning for your retirement today, despite your current age. 

If you don’t know how much you will earn annually during your retirement years, how will you be sure that your transition will be as smooth as those earning less then $58,000?

Until next time, have a Terrific Tuesday!

Chris

It’s RRSP Time Again!

We at SAFEBRIDGE hope you all had a very Merry Christmas and an amazing start to the New Year!

The beginning of January marks the end of yet another year and the potential of another great year.  It also marks the beginning of what is affectionately called RRSP Season.  Many Canadians take advantage of the first two months of a new year to add too or top up their existing RRSP.  This year’s deadline is February 29th due to the leap year, and the maximum contribution amount is the lessor of $19,000 or 18%.

Your Take-Away: Why wait until the last week, or even the last day, to make your annual RRSP deposit?  This is a great time to take a serious look at your overall financial situation and determine for yourself if you are track to achieving your desired retirment and financial goals.  By beginning the process of determining where you are, where you want to be, and how much you have to contribute now, you will be better prepared to make the right decision for you and your family.

Until next time, have yourself a Magnificent Monday!

Chris

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

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