Winter 2012

Best practices for ensuring your income tax return adds up.

Each year Canada Revenue Agency electronically analyzes approximately 25 million income tax returns and selects some for further scrutiny. Getting tapped for a review can simply be the result of random sampling or for reasons that include higher than usual deductions, discrepancies between the income that you report and information slips filed by employers and excess RRSP contributions. There’s no way to guarantee CRA won’t choose your return for review but here are some tips for making sure you are ready.

Winter 2012

After experiencing what has been called a lost decade in terms of investment returns, it would be unusual if investors weren’t discouraged. The average return from a balanced portfolio (60% equities/40% fixed income) from 2000 to 2010 was 3.8% per annum, primarily from bonds. And the current state of economic affairs doesn’t offer much in the way of encouragement. Interest rates remain at historically low levels; the yield on mid-term Government of Canada bonds hovers around 2.6%. Economic growth in the developed world will be weighed down for years to come as governments seek to slash deficits through reduced spending. Aging populations place growing demands on the public purse and de-leveraging continues by governments as well as among consumers. Emerging markets, while still likely to experience higher GDP growth relative to the developed world, still do not have sufficient domestic consumption to offset lower demand from the developed world. The one bright spot is inflation, which has remained in check for the better part of two decades, and the low rates on long-term bonds indicate that this is not expected to change soon. So where can the long-term investor look for returns?

Fall 2011

Introduced in 2009, Tax-Free Saving Accounts (TFSAs) give every Canadian resident age 18 and older the opportunity to invest $5,000 per year tax-free. By 2011, a couple could save $30,000 and not pay any tax on the investment earnings! Top up TFSAs now and then make your 2012 contribution of $5,000 on January1st. Students, who are 18 or older, can withdraw $5,000 from their RESP each year and contribute the money to a TFSA. The funds grow tax-free and can be used for any purpose in the future.

Spring 2010

Are ETFs just one more investing flavour of the month or a new portfolio mainstay?
If you haven’t heard about ETFs, you can’t have been reading the financial press of late. Although they have been around for the last two decades (the first ETF was introduced in the Canada in 1989), ETFs’ popularity has exploded in recent years and so have the number of ETFs available. Currently, it’s estimated that there are more than 1,600 ETFs offered worldwide and, in Canada alone, a recent tally had 145 ETFs listed on the S&P/TSX index. As an investment vehicle, ETFs have currently captured the attention of investors but do they have the staying power to earn a place in your portfolio?

Spring 2011

In the opening chapter of his book Future Babble, Dan Gardner chronicles the events of the last century that went unforetold and the numerous predictions about the future that failed to materialize. He goes on to explain why wanting to know the future is part of the human condition and how we get it wrong, over and over again. Anyone paying attention since the start of this century knows that there have been some spectacularly wrong predictions in the last decade or so, beginning with the Y2K non-event. At the same time, much of what has shaped life in the 21st century, such as 9/11, wasn’t even on the radar screen. People seeking that extra edge for exploiting developments when investing will find this revelation disappointing. But for others, the certainty of uncertainty serves to reinforce the wisdom of following a disciplined investment plan.

The debate surrounding commodity prices has heated up in recent months. It’s not the first time this issue has captivated investors nor is it likely to be the last. In the past decade alone, the boom or bust question about commodities made headlines in 2000, 2002, 2006, 2008, 2009 and now again in 2011. For Canadian investors, with almost half of our market’s capitalization linked to two commodity-based sectors – energy and materials, it’s an important discussion.

Fall 2010

Why do investors so often act against their own best interests and sabotage their investment plan? The answer lies in the relatively new science of behavioral finance.

For the past twenty years, DALBAR Inc., an investment research firm, has published its annual Quantitative Analysis of Investor Behavior. The results, for any investor, are sobering. For the 20 years ending December 31, 2009, the S&P 500 index had an average annual return of 8.20%. During the same period, the annual return for equity fund investors averaged just 3.17%. Fees can account for some of the difference but the rest is credited to investor behavior. To paraphrase the comic strip character Pogo – we have seen the enemy and he is us.

Fall 2007

Institutional investors have used alternative investments for years and now retail investors want to get in on the action. Is this necessarily a good thing?

Investors can be a fickle lot. Despite having substantially boosted portfolio values in recent years, traditional equities and bonds are losing favour. With the likelihood of lower returns on the horizon from both stocks and bonds, investors are throwing these traditional investments over for “alternative” investments – hedge funds, private equity funds and venture capital funds. So what exactly are these alternative investments and are they right for you?

Summer 2010

For some time now, the consensus has been that interest rates have had nowhere to go but up. Now that interest rates are on the rise, what does the increasing cost of credit mean for your portfolio?

It’s easy to believe that rising interest rates are bad for portfolios. As interest rates rise, bond portfolios may fall as existing bonds in the portfolio decline in value. On the equity side, the increased cost of borrowing takes away from earnings, at least until businesses adjust by either raising prices or cutting cost or a bit of both. But history gives us a different perspective on the effect of rising interest rates on portfolio returns.

Summer 2010

Canada has been spared many of the disruptions experienced in the United States and is in much stronger financial shape than the other G7 countries.

Canada is experiencing a new economic expansion with real GDP expected to increase by an average of 4.0% annually. The private sector is now taking over from the public sector as the growth driver. Increases in employment have recovered three-quarters of the jobs lost in the recession. Canadians didn’t experience the kind of wealth destruction that has taken place in the U.S. and although household debt has increased, the household debt service ratio of interest payments to disposable income is still low at 7.44%. Every province is sharing in the growth rebound, with Alberta experiencing the fastest rate of growth. This picture is in sharp contrast to the United States, where real GDP growth is expected to have an average annual increase of 3.0%.

As the sun sets on the worst decade for stock markets since the 1930s, you may be wondering what’s next. A large number of investors cut their investing teeth in the last 20 years. Investing in equity markets was something that just about everyone was doing in the 1990s – by 1999, more than half …

Fall 2009

A little perspective can have a sobering effect. Here we are, just over a year from the collapse of Lehman Brothers, considered to be the kick-off to the financial crisis, and while unease remains, the widespread panic that resulted from the crisis has long subsided. There are now reports that the recession has ended in most developed countries including the United States. Just how was the greatest financial crisis since the Great Depression avoided? And as we look ahead, what are the risks to the fledgling recovery?

Summer 2009

At one time, diversifying into the U.S. markets was considered a “no-brainer”. The world’s largest and most dynamic economy was the place to be when it came to wealth creation. But with U.S. markets having provided little to cheer about and the U.S. economy facing its biggest crisis since the Great Depression, should Canadian investors take a pass?

Spring 2009

In the midst of one of the biggest market meltdowns in recent history, managing wealth through a disciplined investment policy is being called into question. But is there really a better way?

Staring out on the cover of the Spring 2009 issue of Globe Investor is a rather chagrined looking Donald Coxe. One of Canada’s leading money managers, Don Coxe made a big bet in 2008 and lost. He launched the Coxe Commodity Strategy Fund near the peak for commodity prices in June of 2008 only to see the fund’s value slip 55% by October. Coxe remains bullish on commodities over the long term but his experience illustrates the problem of cherry-picking hot sectors or asset classes.

Spring 2009

Our goal at T.E. Investment Counsel is to provide clients with access to investment managers who will consistently deliver added value over the long term. We take a proactive approach, meeting regularly to discuss issues and conducting qualitative and quantitative reviews at least quarterly.

Winter 2009

The Economist wrote in its December 6, 2008 issue, “If savers treated financial assets as they do other goods, they would sell them when they are expensive and buy them when they are cheap. Actually they do the opposite. They piled into the market in 1999 – 2000, at the peak and are piling out of it now.” The Economist is referring to the U.S. market, but here in Canada we have had our own version of this phenomenon. According to the Investment Funds Institute of Canada, in 2007 when markets were near their peak, net sales of mutual funds soared to $34.9 billion, the highest since 1997. By October of 2008, net redemptions were $8.4 billion and year-to-date net sales were just $2.2 billion.

Looking to find your place in the sun? With real estate values falling in many U.S. hot spots and the Canadian dollar flying high, this could be your opportunity. Here’s what to consider before you buy. Flip through the weekend real estate section of your newspaper and you’ll likely see what is a growing trend …

What’s on your mind? The fallout from the sub-prime crisis and the growth of the Canadian dollar are just two of the topics clients are asking about. T.E. Wealth explored these issues and what it means for investors with T.E. Investment Counsel. Strategies: The sub-prime mortgage crisis continues to be in the headlines. What’s going …