International stock markets outpaced Canada’s through 2013, while interest rates remained low. This has presented some unique challenges for Canadian investors, particularly retirees.
When to Use Tactical Investment Strategies
The U.S., global, and European markets have all had a very good year, so be cautious about putting in new, large lump sums into those areas. That strategy usually doesn’t end well.Canada’s market has lagged, owing to our weak metals/resource sectors. For those who made big money in precious metals over the past 10 years, congratulations! Latecomers to the party were hammered by 50 percent declines this year.
This continues to be a sector best played by getting in and out at opportune times. Buy after a big correction and sell after big gains, so you’re playing with “house money.” But use this strategy only for small and volatile sectors.
Interest rates continue to be very low, which makes it more difficult to earn decent returns in fixed income, but we need to have money here for volatility and safety reasons. Retirees will need to have a significant portion of their assets in equities, because of the current low interest rate environment.
Safe investments (bonds, Guaranteed Income Certificates, mortgage funds, Canada Savings Bonds) are in a low return window, and that shows no likelihood of changing anytime soon.
Tax Planning/Government Grants
RRSPs: Look at your Registered Retirement Savings Plan (RRSP) to see if you can add anything before the deadline of March 3, 2014, to save on 2013 taxes.TFSAs: Check your Tax-Free Savings Account (TFSA) limits to see if you can add anything to this great tax-free plan that can be used to supplement retirement income and fund big-ticket purchases not in your day-to-day budget, and holidays. Younger investors are using the TFSA to help buy a home, so they don’t have to redeem their RRSPs and slow down compounding in those plans.
Hunt for Tax Breaks
Always be searching for ways to save tax and get all the free government monies that you are entitled to. It’s no secret Canada is a highly taxed nation, so why not do whatever is prudent to reduce your tax burden with some planning?Fund Fee Breaks for High Net Worth Investors
Many mutual fund companies have reduced fees if you invest $100,000 or more. That threshold was $250,000 minimum previously. Check with your financial adviser to see if you can get into a series with lower management expense ratios if your assets are significant.As your assets grow, you can save substantial amounts of money by investing in these High Net Worth (HNW) series. Studies show there are more and more Canadians whose assets fall within those parameters.
I hope your portfolio has seen a healthy increase this year. After a decade of moderate returns, it’s nice to get a good year from most parts of the world. Unfortunately, Canada is one of the areas that is currently underperforming, but that won’t last forever. Nothing does.
Have a great holiday season and a prosperous New Year!
Friends Read Free