RRSP season an excellent time to bone up on investor skills
Feb 17, 2009     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

The 2009 RRSP season could be a tough sell for investors who got scorched last year during the global meltdown on financial markets.

However, a contribution to a registered retirement savings plan – whether it’s in equities, mutual funds, guaranteed investment certificates or whatever – will still yield a welcome tax refund.

And while you’re at it, ask yourself if you could have done anything different last year while the losses were deepening, simply by being a better investor.
Not only would you benefit, but your financial adviser would likely appreciate sitting across from somebody who doesn’t just shovel over cash without a murmur.
“I prefer having someone who knows and understands and has an appreciation for what is going on – that client is a better client,” says Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver.

“That client is going to be trying to get the best performance, and doesn’t want to jump on the bandwagon. And he or she knows that this is a long-term affair.”
Mastracci added that he’s noticed investors are certainly better educated in one key area than they were a year ago – understanding that the market is risky.
“Everybody is aware of taking a haircut.”

An excellent resource for the novice investor is the Ontario Securities Commission where you will find investor information and the Investor Education Fund .
“Just giving up is not an option,” says Tom Hamza, president of the Investor Education Fund.

Investing, Hamza says, “isn’t that intimidating; you just have to understand some basic things and have a framework to advance with, and you will be OK.”
The Investor Education Fund website offers explanations in simple language about all types of investments and how to shelter them from tax through RRSPs and the new tax-free savings accounts.

For example, the section on mutual funds describes what a mutual fund is, what it will cost, how to buy one and whether they might be a good choice.
OSC resources offer a wealth of information for the novice – and also for investors who regard themselves as experienced.

A segment on questions to ask when choosing a financial adviser is particularly helpful because many people don’t know much about shopping for one.
“Working with your financial adviser is actually something that has come to the forefront in the financial crisis, just because there is more of a focus on maximizing the value of that investor relationship,” said Perry Quinton, manager of investor communications at the OSC.

“When markets are going up, it’s pretty easy to sit back and let someone else do it.”
Questions to ask include whether the adviser is registered with securities regulators, which provides an assurance of basic qualifications.

Asking how an adviser is paid is also apt – and it’s not like asking your neighbor at a dinner party how much she earns.

“You’re the one paying it so you need to know how you’re paying it,” said Quinton.
Some are paid by salary so the cost of their advice is built into their products. Some receive commissions on what they sell, while others charge a fee based on your portfolio.

For investors who want to get serious, there is the Canadian Securities Course.
Investment professionals, including those seeking a brokerage or mutual funds licence, have to pass this course.

The CSC, which costs about $900, delves into how to analyze corporate financial statements and gives the lowdown on all financial instruments, including structured products and derivatives.

Whichever route you take, you should feel a lot more in control by not leaving everything up to the adviser.

“I really believe investing is a lifestyle choice, and that means there is work involved,” said John Stephenson, portfolio manager at First Asset Funds.
“And for many people that is offputting, and perhaps life is complicated and for that reason people would rather just forget about it,” Stephenson said.
“While you may rely on your investment adviser, you still have an obligation to understand what is in your statement, what he’s doing at least in the broadest terms … and you’d better be pretty comfortable that this guy knows what he’s doing.”

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Canadians looking south to buy get-away-from-it-all property
Sep 02, 2008     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

Tannis Dawson, a senior tax and financial expert in Winnipeg with Investors Group, (TSX:ING) Canada’s largest mutual fund company, said “one of the big things that’s sending them (south) is our currency.”

The loonie “has been on par or nearly on par with the U.S. dollar for some time now and that has many thinking that it has levelled off and probably isn’t going any higher,” she said.

As a result, for those who can afford to pay cash for a house, they are “in a good position because they know what their currency is going to be and their exchange rates,” said Dawson.

Many Canadians also have concluded that “there’s a limit to our second home real estate market,” said Dawson.

Properties in many resort areas such as Muskoka in Ontario, Canmore, Alta., and the mountains near Gatineau, Que., have shot up in value over the last two years.

It is more expensive to try to buy in Canada than in the U.S. when looking for the same square footage, she says.

For example, says Dawson, a property in Canmore cost about $400,000 a couple of years ago. Now it is $600,000.

In the U.S. by comparison, she says, in 2002 a house cost about US$325,000 or about C$519,000. In 2008, a US$325,000 home now goes for about C$325,500.

Allen says “what we’re finding is that the people we’re getting inquiries from and who appear to be buying are baby boomers that have retired or are about to retire.”

Last winter, “there was definitely an increase in the number of Canadians buying property in Florida,” says Allen.

However, so far this year, she says, the market has softened a bit.

Some, she says, are hesitating about buying a property because of concern over the the U.S. economy, whether it is going to continue to slow down, with housing prices falling even lower.

“They say, Oh boy, we can finally buy our property after renting all these years. Then they say well what is happening with the economy. Is it going to go lower, are we going to buy and then lose money.”

This is especially true with buyers who see the property as mainly an investment rather than just a holiday sort of place, says Allen.

Dawson has some tips for people wishing to buy a property in the United States.

“It is best to have the funds to pay for a U.S. property up front especially when the currencies are at or near par” so as to take advantage of the strong Canadian dollar, she says.

If people have enough equity on their house in Canada, “they can take out a mortgage on that … or do a line of credit or some personal debt,” she says.

She also suggests buying a property in U.S. dollars at the start. Over the last 30 years or so, the Canadian currency has been more likely to fall rather than rise in value against the American dollar.

For Canadians looking to buy a get-away-from-it-all piece of paradise down south, this is probably one of the best times to take the plunge with the Canadian dollar strong and U.S. property values tumbling, say real estate experts.

And some baby boomers who are retired or about to retire are doing so even though they are concerned they might buy on the high side only to see the value of their investment sink if the U.S. economy falls into a deep recession, the experts say.

Figures from the U.S. National Association of Realtors indicate that 11 per cent of all foreign buyers of homes in the United States last year were Canadian.

In Florida, the U.S. state with the highest foreign ownership, Canadians made up nine per cent of buyers in 2007, up from 7.1 per cent in 2005.

Connie Allen, owner of Alternative Realty Corp. in Burlington, Ont., characterizes the Canadian interest in U.S. properties as “anecdotally a lot of interest is being expressed and there are some who are buying.”

“Very much, though, more inquiries than sales,” said Allen, whose company specializes in properties in the sunshine state.

“If you take the U.S. way, you’re probably not going to be really bad off when it comes to currency fluctuations.”

About 53 per cent of Canadian buyers take out mortgages and 47 per cent pay cash, according to figures compiled by Investors Group.

Dawson says it is more expensive to get a U.S. mortgage. “In the U.S., if you’re a non-resident they require you to put down 30 to 40 per cent of the property value.

“Plus you need six months worth of reserve. You have to put six months of your mortgage payments, insurance payments and your property taxes in an escrow account … looked after by an escrow agent,” she says.

If you take out a U.S. mortgage, for most U.S. banks it is necessary to find a prospective property first, then go and arrange a mortgage, says Dawson.

If you take out a Canadian mortgage on a U.S. property, you can go to the bank first and see how much you can raise, and then go shopping in the U.S. As well, you don’t have to put down as much.

Allen says most Canadians who buy property in Florida, do so for the long term. “They’re not looking to come down to Florida and flip a property.”

“In a lot of cases, their children will be of age, and they will want to use it.”

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Canada top retirement destination for British: survey
Feb 01, 2008     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

British citizens have selected Canada — ahead of New Zealand and Portugal — as the top country in which to retire, according to a survey measuring perceptions of quality of life.

The survey of British expatriates living around the globe was commissioned by NatWest International Personal Banking. Respondents gave Canada a mean score of 63.95 out of 80, with high marks given for housing, natural environment and availability of consumer goods.

“There are a number of different reasons why people relocate abroad, to be nearer to family and friends, to start a new job, or as the study demonstrates, to increase their quality of life,” said David Isley, head of NatWest International Personal Banking, in a release issued Friday.

“This is only likely to increase in the future, with many more taking the decision to spend their twilight years sipping sangria in Spain, Chianti in Italy or eating maple syrup and pancakes in Canada.”

Nine in ten respondents said they were enjoying a higher quality of life abroad and six out of ten said they had no plans to return to the U.K. Ninety per cent of expatriates who completed the survey said leaving home put them in a stronger financial position, and 81 per cent said that since moving, they enjoyed a greater sense of well-being.

The study projects that by 2025, 1.8 million Britons may retire abroad. By 2050, this proportion could increase to 3.3 million.

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RRSP or Mortgage?
Aug 13, 2007     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

It’s RRSP season and that means you can’t turn on the TV without some talking head trying to bully you into making a fat contribution. But if you’re younger and still paying off your first house, you shouldn’t be saving a cent for retirement this year. That’s right – it would be more prudent to forget contributing to your RRSP altogether and pay down your mortgage instead.

The debate as to whether you should focus on your RRSP or your mortgage has raged on too long. Part of the problem is that the banks win twice if your RRSP takes precedence: they get fees from selling you mutual funds in your RRSP, and they keep you in your mortgage for longer. That’s why their traditional advice is to put as much money in your RRSP as possible and then use your tax refund to pay down your mortgage. This approach certainly won’t land you in the poorhouse, but it’s not the optimum way to go.

Both shelter you from tax

The biggest misunderstanding in this debate surrounds the tax implications of the two approaches, says Malcolm Hamilton, actuary extraordinaire at Mercer Human Resource Consulting in Toronto. Many people think that your RRSP payments are tax sheltered and your mortgage payments are not. No wonder: when you put money in your RRSP the tax man sends you a juicy tax refund, but when you make an extra mortgage payment, you get nada.

But Hamilton says that RRSP payments have no significant tax advantage over mortgage payments. That’s because every time you make an extra mortgage payment you reduce the principal amount that you’ve borrowed, which means that you will pay less interest in total over the life of your mortgage. All of those future interest payments that you no longer have to make would have been made with after-tax dollars, so in effect, you not only save the interest, but the tax on that interest too.

It’s hard to get your head around, but the net effect is that you get a tax-free return on the money you use to pay down your mortgage, just like the tax-free return you get inside an RRSP.

It comes down to risk

If neither approach has a tax advantage over the other, then the next logical thing to look at is the return. Do you get a better return on your money by paying down your mortgage, or by investing it in your RRSP?

Most comparisons will tell you that you get a better return from your RRSP, but those comparisons don’t play fair. Usually they’ll compare, say, a 6% mortgage rate to something like an 8% return on your RRSP. Paying down a 6% mortgage is like getting a 6% return on an investment, so they conclude that the 8% return you get on an RRSP is the better deal.

That seems reasonable, but it’s not a fair comparison at all. That’s because the 6% return you get on your mortgage is a sure thing, and the 8% return on your RRSP is not. The truth is, a guaranteed tax-free 6% return is almost unheard of right now. An investment product offering such a return would devastate the market for GICs, T-bills and bonds as investors stampeded to the higher guaranteed rate.

Not only that, but the comparisons usually forget that the average mutual fund in Canada charges over 2% in fees, so the actual return you could expect from an RRSP after fees is more like 6%. “And in order to get that 6%, you’re going to have to take on the full risk of being in the stock market,” says Hamilton. “I think that most investors will appreciate that if you’ve got a choice between a high-risk 6% return and a no-risk 6% return, you’re well-advised to take the latter.”

The dangers of success

Since paying down your mortgage offers you the best risk-adjusted return, anyone who’s buying their first house should concentrate on that task, even if it means neglecting your RRSP contributions for a while. However, there are some dangers.

The biggest pitfall is that you’ll be so successful at paying down your mortgage that you’ll think you can afford a bigger house than you really can. You also have to keep in mind that once your first house is paid off, you really do have to get going on those RRSP contributions. If instead you decide to turn around and buy a bigger house, you could run into trouble.

The most important thing to remember is that paying down your mortgage and building your RRSP are both worthy causes. In the end, if your biggest financial concern is which one you should put your money in, you’re probably going to be just fine either way.

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Canada's Best Places to Retire
Mar 29, 2007     post this at del.icio.uspost this at Diggpost this at Technoratipost this at Furlpost this at Yahoo! my web.

I was recently reading an article online regarding the best Canadian cities to retire in and was excited to know that my current location of Charlottetown, PE made the top 60 in North America, not just Canada.

In the Top 20 places within North America was another maritime location, Halifax, which I’ve been to on numerous occasions. Now my view on the two is that Charlottetown is much friendlier and definitely a slower pace, which is why I fell in love with this place 9 years ago.

On the other hand Halifax excelled in the area of entertainment and nightlife. Although the last couple of years has seen Charlottetown host some excellent concert series with our annual Festival of Lights (July 1st week-end) and more recently the Blast at the Beach festival; which last year seen the Black Eyed Peas visit out little Island and rumors are spreading that Aerosmith will be the headline band this year for Blast at the Beach 2.

But these types of concerts are not likely selling points for newly retirees. Its the lifestyle that will draw you in and keep you here for years to come.

The article I read can be viewed here

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