Online Financial Library
A new investor freedom in the RRSP world
All articles written by CFPG
Published - Dec.23, 2005
Federal legislation has removed the old 30% RRSP foreign content rule—it now allows for a full 100%. When the old restrictions forced us to limit our foreign exposure, the industry developed strategies without any penalty, to legally allow much more foreign exposure that probably will slowly become extinct (though still will perform according to plan in the meantime), such as:
There were 30% foreign-content limits in some Canadian mutual funds that would boost the overall content an extra 21% to 51%; (Continue)
International Investing Opportunities
International diversification can help decrease your overall level of risk when the Canadian market is performing poorly
Canadians generally prefer to keep their investments close to home, investing solely in Canada. Federal government regulations have now stopped any RRSP foreign content restrictions, which sought to control our investing to include higher Canadian content.
Where Canadians continue to ignore the international markets available to them in their RRSPs and non-registered investments, they do so at their own peril, since foreign content mutual funds can help boost returns and decrease overall risk. (Continue)
About Charitable Donations
Make sure you save your charitable donation receipts and apply this information when it is time to do your tax return
Of your total donation receipts, your first $200 of donations provide a tax credit of 16%, and a 29% tax credit for the amounts over $200. Consider saving them over a number of years (up to five) to make sure that you only get the reduced rate on the first $200 once, in the future year of claim. This reduced rate on the first $200 applies to your spouse also, so claim the donations on one return. (Continue)
How to set up a buy-sell agreement
If you own your own business, and have potential buyers, it is important to set up a buy-sell agreement while you are alive and capable of doing so. Here's how:
1. You'll need to hire a corporate lawyer who has had experience assisting business owners set up buy-sell agreements—the wording and structure need to meet Canada Revenue Agency's (CRA's) standards, especially regarding measuring the value of the company. This is because CRA stands to receive tax on any capital gains that may be triggered at any future date. (Continue)
A long-term view
Consider these ten points when planning your investments. Understand the influence of business and market cycles
Long-term investors understand that markets are cyclic
You have probably heard the term "bull market" with reference to a rising market and "bear market" with regard to a falling market. These primary trends are most obvious because they correlate to the business cycles of expansion and retraction. The economy's expanding boom and retracting bust cycles recur, on average, every 4 to 7 years. (Continue)
7 inaccurate perceptions of fund investing
Here are several common mistakes that investors make
- Having no clear investment goals. Determine what you want from your mutual fund portfolio. This will help you choose the right investments to realistically meet your future expectations.
- Trying to time the market. Don't get caught in the cycle of greed and fear that compels people to buy high and sell low. Make regular investments to benefit from dollar cost averaging (DCA) to level out the peaks and valleys of the market. It is time in the market, not timing, that counts. (Continue)
Self-directed RRSPs have all the same characteristics and benefits of regular RRSPs. There are, however, five distinct advantages when managing your mutual funds:
1. Administration fees may be reduced by rolling all your RRSP accounts into one self-directed RRSP.
2. A self-directed account allows you to hold investments offered by more than one fund company under one umbrella. For example, you could hold five different companies’ mutual funds, and two segregated funds within one self-directed RRSP. (Continue)
Medical Expenses
When claiming medical expenses it may be more favourable to claim them on the tax return of the spouse or common-law partner with the lowest net income. This is because the claim is reduced by 3% of net income which will reduce the net claim for the medical expenses. You can include medicines that can be purchased over-the-counter insofar that a doctor prescribed them (including certain herbs and/or vitamins) and your pharmacist notes that. (Continue)
Patience is still a virtue
When it comes to 'Buy and Hold' investing
DO invest patiently
The term "buy and hold" relates to an investing strategy of buying securities with a good long-term outlook for capital gains. Investors patiently hold the stocks (or stock funds) for long periods of time, waiting for their gains to accrue favourably.
DON'T expect markets to always boom
Investors who "buy and hold" realize that it is important to control their feelings because all stock markets will inevitably display enormous volatility over short-term periods. There is a cycle of ups and downs in the world of business referred to as the business cycle. Stock markets will never rise or fall forever. The mutual fund investor who does not have the persistent fortitude to stay invested may sell when the market goes down, defeating the mandate to achieve growth. Growth is only achievable over a much longer period, regardless of the peaks and valleys of business cycles. (Continue)
Diversity: Winning Fund Strategies for Financial Fitness
Just as a well-balanced diet builds a healthy body, well-diversified investments build a healthy portfolio. Investing in just one stock or in one geographic area, though initially perhaps a good choice, could leave you financially vulnerable.
Why do we need to diversify? Why so much attention to building a balanced portfolio?
Careful diversification is the key to achieving financial fitness. You diversify to minimize exposure to the risks associated with investing in only one asset class or too few capital markets.
When developing a balanced portfolio, incorporate at least three important asset classes: i) cash or cash equivalents (money market funds), ii) income securities (bond, trust, or dividend funds) and iii) growth investments (equity funds), and do so among various world markets. (Continue)
Home Buyer's Plan
You can tap into your RRSP to buy a home
You and your spouse can withdraw funds from your RRSPs to purchase a home under the Home Buyer's Plan (HBP). You can qualify for the HBP if the home you want to purchase is:
an existing or newly built home in Canada
a Canadian, detached or semi-detached home, townhouse, condominium, mobile home, an apartment in an apartment complex, or a share in a co-operative housing corporation
to be built or acquired before October 1 in the calendar year after the year you withdraw funds
occupied as your principal residence within one year from the date purchased. (Continue)
The tax mechanics of using your car for work
If you lease a car, you can deduct the entire amount, up to CRA's maximum (currently about $800 plus taxes per month), while considering any tax restrictions relative to your employment, business-use, or a percentage attributed for personal use.
When the lease is up, you own nothing, and return the car. If your lease payment is less than $800 before taxes, you may want to renegotiate the amount to that limit with the leasing company to take full advantage of the deduction .
Prosper from the current Spending Wave! In the current Great Boom
Invest in what you buy. When you purchase a mutual fund, you are investing in what you buy and use, day after day
Investing in what we buy. When you purchase a mutual fund, you are investing in what you buy; and more importantly what the majority of the populace buys and uses, day after day. For example, General Electric may build your alarm clock. Your shampoo may have been manufactured by Procter and Gamble, your hair dryer by Braun. You may be inspired by tunes played on a Sony or Sanyo stereo. You may be enjoying the ingenuity of General Motors, Toyota, or Volvo as you drive. You may work on a Gateway, Dell or IBM computer. Companies trading on stock exchanges all over the world build almost everything you touch in a waking day. These same companies are often available to all of us to invest in, via mutual funds—simply investing in what we ourselves buy .(Continue)