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HomeMy WebLinkAboutThe Citizen, 2009-02-12, Page 13THE CITIZEN, THURSDAY, FEBRUARY 12, 2009. PAGE 13. By David Stevenson President, Braeheid Management ETFs (Exchange Traded Funds) are not subject to those nasty embedded tax liabilities, they deliver diversification and exposure to endless global sectors, asset classes and money market opportunities around the globe. They are significantly less expensive than mutual funds (many can be purchased for 0.20 per cent). These products deliver and reflect the market’s returns (which is better than most mutual funds) but that alone is not the answer. It is now widely accepted that asset allocation portfolios have delivered the majority of the wealth, this requires a mix of these exchange traded funds designed and managed by a seasoned professional both with global experience, and the knowledge of which ETFs offer the best value. Many think that buying bonds is now the way to go. However that is the irony of bonds – the bond trap - or the safe haven fallacy. As the market looks to a “safe haven”, the cost of these bonds becomes very expensive relative to their value, and in fact, can be just as volatile as equities when for example, everyone wants to sell their bonds and get back into equities. Active managers anticipated this rush to “cash” and have benefited from being one step ahead of the market. ICPMs have a fiduciary responsibility to invest on behalf of the investors’ best interests however, access to them has been limited. Today, we have seen some incredible advances that allows professional investment managers to take on more separately managed clients, who have lower total assets (>$250,000), while maintaining or increasing their superior levels of service and personal investment advice. TIP:Find yourself a good ICPM (Investment Counsel, Portfolio Manager) or a trusted financial planner/advisor, which has an existing relationship with one. ICPMs have been using global diversification, ETFs and active management for many years to manage money on behalf of large institutions, pension funds and the ultra-wealthy. You should be able to easily review their documented activities and associated effectiveness (over the past five years) and thus fairly compare their value to your individual needs. Why you paid capital gains taxes, when your portfolio went down. The wealthy consistently build wealth through effective tax management and avoiding taxes where possible. Unfortunately, many investors had a loss this past year and yet, if they examine their statements and tax returns, many will have a tax bill for capital gains in 2008. This tax liability is a key reason why the wealthy have been advised to seek different investment products, that offer similar diversification while removing this type of tax risk. There is an inherent tax “risk” to participating in a mutual fund – whether you personally realized a net gain or not. When you buy a mutual fund you are buying a unit within an existing fund that holds a stock that may have a potential “gain” when sold. Buying and selling within the fund will trigger these gains. These taxable gains are then shared among the unit holders…even if you held this fund for a month, or even if your fund lost value. TIP:Stop being a unit holder, and take control of your hard earned assets. Look into whether your advisor can offer you a Separately Managed Account (SMA). An SMA platform for your diversified portfolio is in your name, and thus, any gains or losses are directly attributed to your own portfolio activity. Ensure the investment vehicles/products used are tax efficient (who needs a capital gains tax bill, when your funds are down). Cash is king, isn’t it? Why “Cashing-Out” is NOT the answer. Current market has everyone on one side of the “ship”. When the general sentiment changes, there is going to be a rush to the other side – noting that the market will respond in advance of the economy’s recovery. No one can predict the day, likewise, one cannot benefit after the fact. GICs can offer a short term level of comfort, but with very low interest rates. Any modest gains from GICs will be eroded by the looming threat of inflation due to current government deficit spending and intentional inflationary programs. The risk of not participating in the markets at all, means you risk not participating in the market rebound, crystallizing any current losses, then watching as inflation erodes what little you have left. The key for a professional investment manager is to preserve your wealth, while preparing and positioning for what is coming next to participate in growth, with less risk. It is important to know that your current portfolio which experienced dramatic a decline, is probably not the same mix that is expected to participate in this global market correction. TIP:If needed, seek a second opinion from an advisor who understands and can communicate global investment options that can be executed within your comfort level and with less risk. If you are near or in retirement especially, you need to be invested appropriately, with diversity and with less risk. Your investment strategy must be diligent to minimize taxes and associated value for fees. How some investments GREW in 2008, with LESS RISK. We have seen income funds (most conservative/retired) that did not lose money in 2008, as well as global income balanced portfolios that delivered very attractive positive returns and have a consistent track record. This is a good example of how conservative investors have benefited from tactical, active management within a globally diversified portfolio in a separately managed account (not a pooled fund or mutual fund). It is appalling, and unnecessary. Access to global markets has never been greater and is equally more important than ever. Having your options clearly explained to you will help you to understand the importance of revamping your current portfolio delivering global diversification, asset allocation, tactical management and reviewing the associated fees. Placing your retirement in the hands of an expensive fund, or low-paying guaranteed investment or your mattress are not your only options. Seek better advice. TIP:If you thought you were in the most conservative, low risk portfolio and still lost money in 2008, look for better service that will address your needs or call us for a referral. What an investor needs to do today. If you are uncomfortable with your portfolio as it stands, get a second option today. Take the required action today. Ensure your portfolio is properly repositioned and diversified so you can benefit from the expected market correction to occur in 2009. Avoid the temptation to liquidate or lock-in to interest rates at historic lows. Review and reduce your fees and taxes where possible relative to value received. Investors should also have a realistic expectation from the markets, when meeting with your financial planner - this will help define realistic goals for you and your family. TIP:For maximum benefit, you should consider private investment services where the assets remain in the client’s name and where fees are associated to service and value. Assets should never be in the manager’s name. Ideally, you want to avoid a pooled fund or mutual fund. Ensure you are not paying for management fees on top of mutual fund fees. TIP:Seek a referral from someone who has demonstrated capital preservation in 2008 in addition to showing risk protected growth for the past 5 years. Ensure that they explain how they delivered performance and how they did it with less risk…if not, stay clear! Braeheid Management provides investor, advisor and pension services including education, administration, and client service development across Canada. Materials or content provided is commentary and shall not be construed as investment advice from Braeheid Management. Contact your local investment consultant or certified financial planner. (NC) Whether you’re saving for retirement or a down payment on a home, making regular contributions to your RRSP makes a lot of sense. The price of mutual fund units fluctuate throughout the year and by taking advantage of dollar-cost averaging, otherwise known as investing the same amount at regular intervals regardless of share price, you will be able to maximize your annual contribution to your RRSP. Consider setting up a monthly pre- authorized purchase plan which allows you to make direct contributions to your RRSP from your bank account each month. Even a contribution of $100 a month will make a big difference. Concerned that you do not have an extra $100 a month to invest? Here are a few easy ways to save $100 a month so that you can start making regular contributions to your RRSP: Skip the movies and rent a DVD • Cost of a movie and snacks for a family of four: $60 • Cost of DVD rental and snacks: $10 Savings per month: $50 Just one night brings you half way to your $100 target! Skip the take-out coffee • Daily coffee on the way to work each month: $36 • Fill a thermos from home: $10 Savings per month: $26 If you bring your own java to work. Bring your lunch to work • Sandwich and a drink from the local deli: $7 • Bring your leftovers: $0 Savings per month: $140 Even bringing your lunch a few days a week will help to meet your savings target each month. A look at what went wrong and what to do rightFinancial JACQUIE GOWING ACCOUNTING SERVICE Accounting & Income Tax Preparation Monthly Bookkeeping Tailored To “YOUR” Needs • Reconciliations • Personal, Farm • Government Remittances Business & Corporate • Payroll • Electronic Tax Filing All services available on site or at our office RR 2 Bluevale 519-887-9248 Fax 519-887-9454 A little goes a long way (NC) Now that there are only a few weeks left until the RRSP deadline, Canadians are taking new measures to ensure that they are saving enough for retirement. According to the 2008 Desjardins Financial Security Rethink Retirement survey, Canadians are more willing to make compromises to save for retirement and are being more selective about where they place their hard-earned retirement savings due to the recent financial turmoil. This is in sharp contrast to previous survey results, which indicated that most Canadians were confident in their financial goals for retirement, regardless of market volatility. When asked what they would be willing to do to increase their retirement savings, Canadians said they would: • Postpone a major purchase or expense to avoid financing or using credit (83 per cent) • Take less expensive vacations (77 per cent) • Bring lunch from home rather than buying it or eating at a restaurant (69 per cent) • Significantly reduce car use, and consequently gas consumption (68 per cent) • Reduce spending on sports or cultural activities (62 per cent) • Get rid of the household’s second car (58 per cent) • Reduce spending on activities for children (35 per cent) More information on the survey is available online at www.rethinkretirement.ca Lost money in 2008?Seek A Second Opinion! ENIB provides a total wealth management service. A licensed professional can help you plan and achieve your financial, retirement, insurance and education goals. ➟Global Diversification ➟Tax Efficient Investing ➟Private Wealth/ICPM Investment Services “Ask how risk-protected growth generated positive returns in 2008!” Receive a confidential second opinion of how Private Wealth Management can: ➟Reduce your Risk ➟Reduce your Tax ➟Increase your Returns Get a Private Wealth Management Account Working for you today! Call Elliott Nixon Insurance Brokers (519) 523-4481 Save for retirement at any cost