Wednesday, February 18, 2009

March 2, 2009 is the RRSP Deadline

Only 15 days to the RRSP deadline for contributions to your RRSP that you can deduct from your 2008 income.

Time is running short. If you need to consider topping up your RRSP, please call me for an appointment soon. The last week in February is very busy and I would hate to be unable to accommodate your meeting request. When you come, we can discuss investment options from the safe option to the growth option and everything between.

RRSP investing for 2009

You can also consider taking advantage of the bear market by setting up a monthly, automated investment for dollar-cost-averaging [DCA] for your 2009 RRSP contribution. This would see you buy into growth investments bit by bit without the worry of trying to pick the bottom of the market.

A new idea for this year

Given the merits of DCA, some fund companies have developed an interesting option, the "DCA fund." You can contribute to this fund now before the March 2nd deadline and collect your RRSP contribution receipt for 2008. As a DCA fund, you are buying a safe, interest-earning investment that then moves your money into balanced or growth investments bit by bit over the year ahead. This works well for clients who need to make their RRSP contribution before the deadline but don't want to invest all at once into growth investments.

These are just some of the ideas I have.

I can be reached at 403-229-0128 or by replying to this email.

Cheers!

Tom

March 2, 2009 is the RRSP Deadline

Only 15 days to the RRSP deadline for contributions to your RRSP that you can deduct from your 2008 income.

Time is running short. If you need to consider topping up your RRSP, please call me for an appointment soon. The last week in February is very busy and I would hate to be unable to accommodate your meeting request. When you come, we can discuss investment options from the safe option to the growth option and everything between.

RRSP investing for 2009

You can also consider taking advantage of the bear market by setting up a monthly, automated investment for dollar-cost-averaging [DCA] for your 2009 RRSP contribution. This would see you buy into growth investments bit by bit without the worry of trying to pick the bottom of the market.

A new idea for this year

Given the merits of DCA, some fund companies have developed an interesting option, the "DCA fund." You can contribute to this fund now before the March 2nd deadline and collect your RRSP contribution receipt for 2008. As a DCA fund, you are buying a safe, interest-earning investment that then moves your money into balanced or growth investments bit by bit over the year ahead. This works well for clients who need to make their RRSP contribution before the deadline but don't want to invest all at once into growth investments.

These are just some of the ideas I have.

I can be reached at 403-229-0128 or by replying to this email.

Cheers!

Tom

Tuesday, February 10, 2009

MAKING SENSE OF THE MARKETS

...................................................................................................................

The media currently love to talk about how we might be headed into another depression, it's a terrible time to invest, and that current events are going to unfold as they did in the 1930s. I wanted to address this briefly.

What we've heard?

The "dirty thirties" were a terrible time to be invested in the stock market because there was a depression going on. Let's examine this claim

The background and the facts--

The Depression was triggered in part by the collapse of the stock market from 1929 - 1931. The performance of the New York stock market at that time--as measured by the S&P 500-- looked like this:

1929....-10%.....[this has been rounded so read it as a drop of less than 10%: i.e. 0 to -10%]
1930....-30........[-20% to -30%]
1931....-50

Needless to say, this drop was a severe blow to investors and gives one pause to think of how it could have happened. It makes for a fascinating story but let me give you a brief summary: there were two major things at play.

1. The stock market in the 1920s was influenced, literally, by a handful of wealthy families. As a group, they met over cigars to engage in stock market manipulation on a grand scale and, sadly, no one stopped them. They helped push stock market prices to irrational levels to feed their greed.

2. The small investors in the stock market routinely invested--it's hard to believe now--ten dollars where nine of those were borrowed!

So you can see that the stock market then was a house of cards. And when the cards fell, not only were investors faced with large losses, the small investors were left with large debt.

What is interesting, for the purpose of this newsletter, is the part you don't hear about now, namely, what happened to the stock market in the aftermath? Here are the numbers--

1932....+20%
1933....+60
1934....-10
1935....+50
1936....+40
1937....-40
1938....+40
1939....-10
sum...+150%

Conclusion--even the worst bear market was followed by a strong bull market. And there is an historic correlation: the worse the bear market, the stronger the bull market that follows.

My recommendations--

1. Bear markets are to be tolerated. Be patient, hold on to your stocks, the bull market is coming.
2. Investors who have the courage to buy in a bear market, when no one wants to buy, have been very well rewarded.

To repeat what I've said in previous newsletters, I don't know when the next bull market will begin. But for people who are invested--or who now buy more--and then are patient, the timing won't matter. And waiting for the end of the bear market before investing is like waiting for the wind to change direction.

Cheers!

Tom

Tom Buck M. Ed CFP
Assante Financial
403-229-0128


PS--one of the most interesting documentaries I have every watched is shown periodically on PBS as part of the series, "American Experience." The show is titled The Crash of 1929. It can be watched online at--

http://www.pbs.org/wgbh/amex/crash/program/index.html

Sunday, February 1, 2009

2008 Year-end Statements

Greetings!

Year-end 2008 Statements will be arriving any day

The turbulent markets since September 2008 have caught the attention of all of us. Bear markets come along on average once in every four years. This one has been harsh and is reminiscent of what investors experienced in 2001, the mid-1980s and the mid-1970s. We should expect, then, that a snap-shot of your portfolio on December 31, 2008 may well be alarming.

As I have done in my regular newsletters to you, allow me to provide context and be encouraging-

--Bear markets are part of investing for growth and are always followed by recovery. Recovery often occurs suddenly.

--Only a portion of your portfolio is exposed to the volatility of growth investments.

--For growth, you own good businesses [i.e. TD Bank, not General Motors] which will benefit from the recovery. It is just a question of when the recovery will come, not if.

--My client portfolios have not been hurt nearly as much as the stock markets.

--Stock markets recover before the economy does.

--Your exposure to growth investments is, by design, meant to be long term. Further, your time horizon is old age--not retirement--so as to protect your money from the erosion of inflation throughout your remaining years. So you have time to wait for the recovery and, with patience, you will realize the growth that you need.

--As a measure of my confidence in the recovery, I have invested $80k of my own money since the bear market began [trying to behave like a Warren Buffett]. Should you have cash to invest for the long term, I encourage you to consider doing the same. We can talk about it.

A number of clients have come in for a review [and to discuss an appropriate Tax-Free Savings Account for them]. This has allowed a discussion to take place and for information to be shared that clients are not getting from the media. Clients have appreciated the information and been encouraged by it.

I welcome a visit from any of you. If we have not done a review for a year, then we are due to meet.

Finally, I have attached some interesting reading on market volatility and the behaviour of successful investors. I highly recommend that you read it, and would appreciate your feedback. You can find it on the net at--

http://www.nezperce.org/content/081024%20Davis%20Funds%20Wisdom%20ofGreat%20Investors.pdf

Thank-you for your patience.

Tom

PS--what statements are coming? You will receive statements from fund companies, from MRS and B2B Trust for any self-directed accounts and Assante will be sending a comprehensive statement [showing the mutual funds you own but not term deposits].

TFSA, the Tax-Free Savings Account--Part II

Hello again!

This letter is Part II of my information on the new TFSA, the Tax-Free Savings Account.

"With its ability to immediately shelter investment-related income from taxation, the TFSA should become an indispensable wealth planning tool for all Canadian investors," ---says Doug Carroll, Vice President, Tax & Estate Planning at Invesco Trimark.

I sent out Part I before Christmas and again a few days ago. Part II today is meant to sharpen your thinking on the TFSA and how it can be an opportunity for you. We are all used to paying tax on investment growth. We put money in a savings account and we have to declare the interest and pay tax. Or if we buy a mutual fund or stocks and bonds outside an RRSP or RESP, we will again receive investment growth that we have to pay tax on. The TFSA eliminates, forever, any tax on investment growth and thats what makes it exciting.

So you ask--"If I'm going to take advantage of a TFSA, what do I need to have to get going?" The answer is--

--money to invest. You can put in up to $5000 into a TFSA in 2009 either with a lump-sum or set up a monthly automatic PAC plan with as little as $50 per month. If you don't have any money but you do already have OPEN investments [i.e. investments outside an RRSP or RESP], you can transfer $5000 from your OPEN investment into a TFSA.

"So I have some money but should I be putting it in my RRSP or RESP [an educational savings plan for your kids]?

Yes, most people should contribute to their RRSP and RESP first, before setting up a TFSA. [If you're not sure you are "most people," then just ask me.]

"OK, so I have some money to put in a TFSA, so what should I invest in?

A TFSA can hold the same investments as an RRSP or RESP. So the question of what to invest in is the same as always and depends on--

--how long you are going to invest for.

--whether you want conservative investment returns, OR long-term growth.

Other things to consider--

--when you take money out of a TFSA, you can put in back into the TFSA but not until the following year. Therefore, a TFSA does not work as a short-term savings account where you are putting money in and out of the account regularly.

--the TFSA has one advantage: sheltering investment growth from tax. It follows, then, that the more growth you have in your TFSA, the greater the tax you save. Consider two investors each 50 years old. They each plan to put $400 per month into a TFSA for 15 years. The first investor puts his money into a conservative investment earning 4% [interest]. After 15 years, he will have $98,000 and will have saved $10,400 in taxes.* The second investor goes for growth at 8% per year [capital gains]. After 15 years, he will have $138,000 and will have saved $13,200 in taxes.**

Having said this, the foremost consideration for any investor is when he needs his money back from the TFSA: if he wants his money back in 3 years or less, the conservative investment approach is required.

*as compared to making the same investment outside a TFSA.

**remember that capital gains are taxed at a lower rate than interest income.

Bye for now,

Tom

Tom Buck, M. Ed. CFP
Certified Financial Planner
Assante Financial Management Ltd
#600, 1414-8th Street SWCalgary, AB T2R 1J6
TEL 403.229.0128
FAX 1.866.386.9776