The Lucknow Sentinel, 1987-05-13, Page 2Page 2--Lucknow Sentinel, Wednesday, May 13, 1987
Now until June 18 prime time for investments
• from page 1
Costello says Wilson is poised to cut out a
number of tax exemptions. In particular,
the personal tax exemption, spousal ex-
emption and the child exemption will
disappear after tax reform is brought into
effect. He says Wilson will replace the per-
sonal tax exemption with a tax credit,
which will result in the high and middle in-
come earners paying more tax, while
lessening taxation on low income earners.
Also, he says the first $1,000 earned from
stocks and bond, which is now tax-free,
will be cut out under the tax reform.
"Since inflation is no longer high, this in-
ducement will go," he said.
However, he believes the dividend tax
credit, where an investor can earn 25,000 in
tax-free dividends from the stock market,
will Continue.
"The corporation makes money and
pays taxes on it. What's left over, they pay
out in dividend; if dividends are taxed,
that's double taxation, he said.
"There's going to be an increase in cor-
poration taxes so I can't see any value by.
wiping out the dividend tax credit. It
should increase, but I don't think it will.
Interest rates
Costello says' interest rates will be head-
ed even lower than current levels citing
"the ecomomy can't sustain high interest
rates."
"Between 1950 and 1987 there has only
been one shot upward in the interest rates,
otherwise we've had stable interest rates
during that time," said Costello.
As for his preference of investment op-
portunities, he says mutual funds, stocks,
and rental real estate will continue to do
well. In the next two years, he expects the
stock market to be "headed for higher
heights". Real estate is currently "going
into a bit of a dip" in the larger markets
such as Toronto, but he expects the; real
estate market, as always, will rebound.
When investing in stocks, or mutual
funds, he warns investors they should be
buying quality stocks and mutual funds
which have a "track record". He also said
an investor is someone who invests "for 10
years at a crack" as most investments
need that amount of time to mature.
To emphasis the investment potential of
the stock market, he pointed out that an in-
vestment 10 years ago in a Bank of Mon-
treal term deposit would now be worth
$34,086 while buying $10,000 in Bank of
Montreal stocks 10 years ago would now be
worth $42,417.
"Your better to buy the bank than lend
them your money. The $8,300 (difference)
is the worst you could have hoped for... as
we've went through the worst economic
period in the last eight years," he said.
Mutual funds, an investment whereby
the entire gamut of stocks, bonds, mor-
tgages, and real estate are purchased, is
also where the smart money's going, he
said. In a 10 -year period $10,000 in a trust
company, with the highest interest rates in
history, would earn $53,400 while $10,000 in-
vested in Industrial Growth and
Templeton Growth, both mutual funds,
would earn, $181,043 and $263,694, respec-
tively over the same time frame.
Costello also explained how to make a
mortgage tax deductible where money is
borrowed on the equity of a house and plac-
ed into a self-directed RRSP. By restruc-
turing the mortgage and paying into the
self-directed RRSP, a double tax deduc-
tion is created.
But, this double deduction is one of the
things that could be curtailed under the tax
reforms, says Costello.
"Michael Wilson is aware of it, so you
better explore this avenue before June 18,"
he ,said.
Also on Costello's list of good in-
vestments is the RRSP, but he says people
who plan to invest in RRSP should be plan-
ning at the first of the year, instead of
some point during the year.
But, he recommends once more that if
you're putting money,into an RRSP, do it
before June 18, as this is another area that
could be under the scrutiny of Finance
Minister Michael Wilson.
How do you get money out of your RRSP
tax free? Costello says the "classic exam-
ple" is where an investor with a $50,000
RRSP would borrow $100,000 above that
amount. In one year, $12,000 would be tax
deductible while taking $12,000 out of the
RRSP, which is taxable, creating offset-
ting tax deduction. In six years, using this
method, all the money would be accounted
for, and completely tax-free.
Bad investments in Costello's view are
Guaranteed Investment Certificates
(GICs) and Canada Savings Bond.
Although they are guaranteed in-
vestments, there is no growth potential as
"you are never allowed to get back more
than you put in".
In the case of Canada Savings Bond,
Costello says they are actually a "negative
investment". He said the interest rate on
savings bonds has fallen to 6 per cent, on
which two per cent is taxable, leaving the
investor with a 4 per cent return on the
bond. With an inflation rate of 4.3 per cent,
the return is actually a negative
percentage.
"You should own enough Canada Sav-
ings Bonds that it's a safety net of about
$100 in case it's needed," said Costello.
r
o
Villag,GuMarket
, d
528-3001Senior Citizen
"Igri 5% Discount
W E DELIVER. - On Mondays Only on Orders
WE RESERVE THE RIGHT TO LIMIT QUANTITIES. of $10.00 and oyer excluding
PRICES IN EFFECT TILL CLOSING SAT., MAY 16/87 cigarettes and tobacco
Celebrate The
Beginning Of Summer
with These Holiday
SAVINGs
450 G.
Reg. 2.69
SAVE 1.42
*ALB,
SIZE
MAPLE LEAF
Hot Dog
Wieners
•
KNEtIITEVS OWN
Pure �re Beef
Burgers
5 La 8. 9 7
10 La
17.77
CANADA'S FINEST GRADE: `A" BEEF
Chuck
Blade Steak
F�3fi•,
h' cusp
CLIP AND SAVE
This Coupon Worth40
HOSTESS
Chips & Snacks
Special Price
.Without Coupon
.1.1 7
Offer expires Ma, 16/87
7S0 ML.
•
With This Coupon
epst
RKULAR
CLIP AND SAVE
t
r �
This Cou rP_ r Worth -�0
r
HEINZ, 455 MI. Plastic
Ass t. Varieties
Bar-B-Que
Sauces • ith This Coupon
i
Special Price Without Coupon 1.17
Offer expires May 16/87
PUS t El' l' rrl'
MEAITYME
C114,04,1. How Ru&cet'., Witt 411# Conon:
yal I'40o Without COO* 3.97
Mai 6/87 5571 ..
(:ANADA GRADE `•A""
PRODUCT OF U.S.A.
FRESH CRISP
Romaine or Leaf
Lettuce
Mushro
PRODUCT OF' U.S.A., CANADA NO. 1
Vine Ripe
Tomatoes •
69.
1.52 KG.
Tomatoes now available
from Bruce Agri -Park.
Hamburg or Wiener
Rolls 8'S
Large Eggs
PRODUCT OF t .S.A, CANADA NO. 1
FRESH, .SWEET
DOZ.
SAVE
.48
•
•
KNECHTEL'S
Black Forest
Hams
C RYOV'AC
WHOLE
HALF'
OR
MINI •
Cat
48 OZ
6.55 KG.
1.8.
WINNER
$50.00
FREE GROCERIES
Week Of May 9/87
SHIRLEY BOLT