Smart Investing

To successfully deal with an investment advisor, you have to understand the core of the relationship.

Don’t rule out income trusts for your RRSP just because they have taken a hit from federal tax changes. Many trusts are good businesses that will continue to pay healthy cash distributions and provide good growth for your portfolio over time.

Exchange traded funds (ETFs) linked to stock indices are a viable, cost-effective, well-diversified alternative to mutual funds in an RRSP.

Are you properly diversified in your RRSP? This is a question I expect everyone with a portfolio has considered and perhaps received advice on from an investment advisor.

The goal of RRSP investing is a comfortable retirement. Here are 10 guiding principles to get you there.

The spousal RRSP is still an excellent means for couples to split income and save on income tax despite the federal government’s new rules allowing pension splitting.

Canadian Canadian investors have done well from having a high proportion of their portfolios in stocks in the past five years but investment experts believe Canadians would be wise now to go global.

As we head into RRSP season, here are nine key questions to ask to ensure you are on the right track.

Mutual funds specializing in health care stocks have performed poorly in recent years but that may be about to change.

A U.S. economist is challenging the widely held notion that inflation is low and there is little need to inflation-proof an investment portfolio. The points he raises are serious enough that investors should reconsider how their portfolios are structured and whether a sizeable position in precious metals is warranted.

Wills and estates lawyers often see families fighting – caught in an inheritance battle that the deceased never expected would happen.

Dividend or distribution reinvestment plans, known as DRIPs, give investors an edge in building their retirement savings. DRIPs allow investors to automatically reinvest dividends from companies or distributions from income trusts into additional shares or units without any transactions costs.

Ever wonder who gets taken in by phony tax-shelter and investment schemes? A lot of people in Canada end up losing a bundle this way.

Even with the worry of a weakening housing sector and its potential to slow the U.S. economy further, some market strategists are optimistic that investors can make money in stocks in 2007.

Are you interested in investing in an oil sands company but you don’t know which to choose? No problem, you can now invest in all of them by buying just one security.

Selling your losing investments is an important tax-planning tactic that can turn your investment loss into a tax gain.

There are several important tax-saving initiatives that must be carried out before December 31 in order to get the benefit for the 2006 tax year. Here are 10 in the investment area that need to be considered as soon as possible since they may take some planning and possibly a visit to your tax accountant.

Resource tax shelters have made a lot of money for Canadian investors in recent years and this is likely to continue if commodity markets remain reasonably strong – something that is likely if Asian economies continue to grow rapidly.

When water flows from your kitchen tap, what do you see? It should be dollar signs. Investors have enjoyed a boom in water stocks that shows no signs of ending.

The B.C. and Ontario securities commissions have launched two useful websites highlighting investment frauds and how to avoid them.

Uranium may be radioactive but it is a friend to investors. Despite the recent downtrend in other commodity prices, the price of uranium has continued to rise. It recently pushed through a new high of $54 U.S. per pound, up 25 per cent in the past six months.

A frequent question from investors is: How and where can I find an investment advisor who I can trust? It’s an important question for anyone wanting to be successful in investing. And one would think that, surely, someone has a good answer.

For investors in business income trusts, the risk of a cut in cash distributions can be substantially reduced if one pays attention to four key financial indicators, says a recent report by Dundee Securities Corporation.

Too much diversification in your portfolio can hurt investment returns. It is advisable to diversify to some degree -- splitting your portfolio into several asset classes such as equities, bonds, income trusts and other categories such as real estate to spread risk and reduce volatility. But the practice of diversification within an asset class, particularly equities, can be taken too far, in the opinion of Larry Sarbit, a successful portfolio manager based in Winnipeg.

Do you want to make your home mortgage interest tax deductible? Fraser Smith, a retired West Coast financial planner, knows the way to do it and is actively promoting the technique, known as the Smith Manoeuvre, through seminars, books and a website (www.smithman.net).

Mutual fund managers are having a hard time beating the S&P/TSX Composite Index and this raises questions for Canadian investors about the value of traditional, actively managed equity mutual funds.

A buying opportunity may have emerged for dividend-paying stocks, says UBS Securities Canada Inc. strategist George Vasic.

The reduction in the tax rate on dividends has boosted the attractiveness of preferred shares, which usually pay dividends quarterly.

Investors wishing to donate stocks to charity should consider the advantages of donor advised funds.

Canadian securities regulators recently took the unusual step of issuing an “Investor Watch” on principal protected notes (PPNs).

In the wake of the recent correction in commodities markets, investors may be wondering how they should be positioning their portfolios. In a recent commentary, entitled “How to Play the Commodity Cycle,” the Montreal-based advisory firm BCA Research (www.bankcreditanalyst.com), widely respected among institutional investors worldwide, counseled investors earlier this month “to position for the outperformance of oil versus base metals prices.

When do you think the current stock-market correction will be over and stocks will begin rising again in a sustained way? If you think that will happen when North American central banks stop raising interest rates, you’ll probably be wrong, according to UBS Investment Research Strategist George Vasic.

Here are 10 basic strategies to help grow your net worth and your ability to have a comfortable retirement.

With overseas stock markets plunging recently, Canadian investors with foreign holdings are likely wondering if they’ve made a mistake. But global investing expert Gavin Graham, chief investment officer of the Toronto-based Guardian Group of Funds (GGOF), says Canadians are on the right track in diversifying their investments on an international basis as long as they do it the right way.

After reviewing the numbers behind the deteriorating U.S. housing market, a top investment analyst in California recently sold the family home and moved with his wife into a rental apartment. His knowledge and experience led him to the conclusion that things will get a lot worse in the housing market as it works off a speculative bubble and this will have negative implications for credit markets overall and the U.S. economy.

Buying when it’s cheap, or buying on dips, on the expectation that the market will recover is not the only way to profit from a downturn in the market.

Analysts are again talking about a buying opportunity for gold. After suffering through a correction that may last well into the summer, which tends to be a seasonally weak period for gold, the gold price is expected to resume its climb on its way to its previous 1980s record high of $870 per ounce (U.S.) when the U.S. dollar resumes its downward trend.

A number of new mutual funds launched recently focus on providing monthly income to retirees. The fund companies say they are simply responding to feedback from investors and how people approaching or in retirement think of their income needs.

Is your investment portfolio ready for hurricane season? Chances are very high that hurricanes will batter the U.S. Gulf oil and gas fields and refineries again this year and push crude oil prices up to record levels, says a special report by CIBC World Markets.

Bonds have performed poorly so far this year and investors should expect more of the same for the rest of the year.

The price of many commodities may be peaking but uranium is expected to enjoy a boom for many years to come, offering investors good opportunities to make money along the way.

The rise in the price of gold has recently been attributed to world political factors, such as Iran’s defiant stance on uranium enrichment. But even when world political tensions concerning the Middle East eventually subside, there is one underlying cause - the re-pricing of U.S.-dollar assets because of that country's unsustainable deficits - that is likely to continue to keep precious metals in an uptrend for years to come.

People love to talk about rising house prices or winning stock trades at dinner or cocktail parties but it is unlikely that you have heard someone confessing to falling for a financial scam. It would be too embarrassing. Yet, scams are quite common and there’s a good chance someone you know has been taken in and lost money.

Timing the market is always difficult to do and that is why some investment professionals advise against it. But the stars are lining up for a substantial correction in the stock market in the coming six months, so the strategy of “sell in May and go away” – otherwise known as “buy when it snows and sell when it goes” – looks to be appropriate this year.

Several new closed-end funds have been launched recently to catch the upside for energy, long-life assets such as the oil sands and booming Alberta. The funds provide instant diversification for your portfolio, but you should buy them only if you believe that the oil price will remain at a high level for years to come.

If you want to avoid paying any more in income tax than absolutely necessary next April, you should get organized as soon as possible. To get you thinking seriously about tax planning, particularly related to the investment scene, here are some ideas beyond the usual steps of making RRSP contributions and setting up RESPs for the kids

Investment strategies should take into account the many tax breaks available to investors. A dollar saved on income taxes is a dollar that can be invested to build wealth.

Canadian tax law provides many good opportunities for parents to split income with their children and thereby save on income taxes.

The progressive nature of Canada’s income tax system provides couples with several techniques to split income in order to save on taxes – all sanctioned by the rules set out by the Canada Revenue Agency (CRA).

Every tax accountant has seen the numerous errors that people can make in preparing a tax return. Some of the errors are simple calculation mistakes. But what bothers tax specialist Lloyd Henry the most is the failure to take advantage of available deductions and credits. It means people end up paying more income tax than they should.

Investors interested in precious metals may want to include some silver as well as gold in their portfolios because the underlying fundamentals suggest that the silver price may rise even faster than the gold price in the future.

The great variety of principal protected notes (PPNs) currently on the market are potentially rewarding to investors seeking better returns than GICs and bonds. But PPN structures can be quite complex and investors need to spend a lot of time working through the details to know exactly what they are getting.

It is definitely a good idea to have bonds in your RRSP to provide regular income or to balance out the risks of holding equities. But many Canadians make costly mistakes in how they invest in bonds.

When properly selected, income trusts are ideal assets to include in a growth-oriented RRSP. Canadians have traditionally focused on buying stocks or equity mutual funds to obtain super-sized growth for their retirement nest egg, but the successful track record of many income trusts shows that they can also meet RRSP growth objectives.

The Canadian equity mutual fund landscape is changing, the lines are blurring, and investors wanting to know exactly what they own or are about to buy would benefit from a Sherlock Holmes-type magnifying glass to read all the fine print.

Here are 10 guiding principles in RRSP investing that will help you achieve your ultimate goal of having enough money for a comfortable retirement.

Seeking a better return than they can get elsewhere, many Canadians are choosing stocks for their RRSPs. Whatever stock-picking system is being used in the search for winners, here are some smart rules that should increase the chances that this do-it-yourself approach will pay off.

Exchange-traded funds (ETFs) are still less popular than mutual funds or direct stock and bond ownership but they have several advantages for Canadians building their RRSP portfolios.

If you don’t have the right type of investments in your RRSP, inflation will eat into your retirement savings. Bank savings deposits, GICs or even traditional bonds held within an RRSP are unlikely to provide the inflation-proofing you need.

As we head into RRSP season, here are eight key questions to ask to ensure you are on the right track to having what you need in retirement.

Many investors have been successful in achieving superior investment returns with a strategy of investing in stocks that have a long history of increasing dividends. This same strategy is now being applied to income trusts in a new closed-end fund called the Payout Performers Income Fund.

If monthly income is the goal, there are many Canadian securities and funds that provide it. But thinking that it may be advisable for a number of reasons for Canadians to diversify to foreign sources of income, Franklin Templeton Investments has recently introduced a new international fund, the Templeton Global Income Fund.

If the world economy slows as predicted by economists at New York investment bank Morgan Stanley, it won’t be easy for Canadian investors to make money in our stock and bond markets in the coming year. Capital gains are likely to come only from picking the right stocks.

The new iUnits Dividend Index Fund being offered by Barclays Canada is likely to attract significant interest from investors for two reasons. First, the federal government recently cut the effective tax rate on dividends. Second, the new fund comes with an annual management fee that is less than a third of what traditional dividend mutual funds charge.

If you are buying income trusts only on the basis of the cash yield they offer, you could be in for a nasty surprise. Some investors already know this from hard experience, as a few income trusts have run into industry downturns that have led to a reduction or suspension of distributions. But a recent report by Accountability Research Corp. warns individual investors to be careful about income trusts for a different reason.

One argument for investing in Chinese stocks at the present time is that since they have done so poorly in the past year, they must be due for a rebound. Another is the country’s real economic growth rate of 9 per cent, which is a very rapid rate that has persisted for some years. Still another is the expectation that China’s currency will be revalued upward at some point in time to reflect its outstanding success as an exporter.

Real return bonds have done exactly what they are supposed to do in the past few months – protect investors from inflation. As energy prices have pushed inflation rates up in recent months, real return bond funds have continued to move higher. At the same time, traditional bond funds have suffered.

Income deposit securities may soon be as common as income trusts in Canada. The early November decision by Cinram International Inc. to adopt the income deposit security structure instead of becoming an income trust is likely the beginning of trend that presents a new level of complexity for income trust investors.

If you are thinking of getting married, you should first see a financial advisor and initiate a discussion with your potential spouse about how money and investments will be handled in the relationship. By talking it out before the wedding, you have a better chance of avoiding money triggered marital disagreements, which a recent survey found were quite frequent and also damaging to other parts of a couple’s relationship.

If you haven’t put gold or gold shares in your portfolio yet, CIBC World Markets equity analyst Barry Cooper thinks it’s not too late. Proclaiming “the bull market has just begun,” he presents in a mid-October research report the 10 factors he thinks will cause gold to average $525 U.S. per ounce next year versus a recent price of $460 per ounce.

Your investment portfolio can benefit from a number of year-end tax strategies if you take action soon enough. Many tax-saving initiatives take time to implement, particularly if you need to talk to an accountant, and year-end is fast approaching.

In blue-chip stock investing, it is not enough to focus on earnings, dividends and growth prospects, since for some companies, there may be a major pension deficit lurking in the wings and threatening, if interest rates stay low, to be a drag on the company’s performance in 2006.

Is your investment portfolio ready for the possibility that the U.S. consumer spending boom will turn into a bust this winter and sink the U.S. stock market? That prediction comes from a Canadian fund manager with a reputation for making the right calls and profiting from them.

Are you feeling desperate about the amount of money you will have in retirement? That’s the frame of mind most people were in when they chased high returns and then subsequently lost large chunks of their savings in the Eron Mortgage fraud in British Columbia, according to a ground-braking study funded by the B.C. Securities Commission.

Would your investment portfolio survive an economic shock from a flu pandemic, a U.S. recession or the Canadian dollar soaring to par with the U.S. dollar?

Mavrix Fund Management recently kicked off the fall season for resource tax shelters with its offering of the Mavrix Resource Fund 2005-II Limited Partnership. Resource tax shelters offer investors the opportunity to invest in a basket of junior mining and oil and gas explorers with the added benefit of a tax deduction for the full amount invested.

Are you getting worried about how long the commodity boom will last? For those with a case of ‘nerves’, the financial engineers on Bay Street are offering two never-seen-before funds that will let you play commodities with no downside risk or diversify in the energy sector in a way that allows you to benefit even if energy prices head down.

Income-trust investing has become more complicated with the recent revelation that U.S. tax authorities are not allowing U.S. firms to deduct high interest payments going to foreign parent companies.

If you are relying only on trust in your relationship with an investment advisor, you may be in for a surprise at some point – in the same way that Canadian poet, singer, songwriter Leonard Cohen was surprised to find out recently that $5 million (U.S.) of retirement savings he entrusted in 2001 to a personal manager has been whittled down to $150,000.

High oil prices are creating difficult choices for investors as they have raised the risks of holding energy stocks and index funds linked to the S&P/TSX Composite, of which 25% is energy stocks.

Before you invest, think self-defence. That’s the message from the North American Securities Administrators Association (NASAA), which has developed 10 self-defence tips for investors, including “don’t be a courtesy victim,” something Canadians in particular may be prone to.

Investors tend to gravitate towards big-cap companies when choosing dividend-paying stocks. But a recent UBS Investment Research study shows that mid-cap stocks with solid dividend records significantly outperformed their big-cap counterparts in the past 10 years.

With Canadians no longer fettered by a 30-per-cent foreign limit in RRSPs, the hunt is on for the best places in the world to invest retirement money. Given its potential for rapid growth and its fair treatment of foreign investors, India should definitely be near the top of the list.

Regular RRSPs are currently not protected from creditors in the event of bankruptcy in most provinces. This will change if federal legislation introduced in June becomes law, but since it provides only partial protection, Canadians may still resort to other techniques to protect their retirement savings.

There is an important connection between a recent survey showing Canadians are not talking about money with their aging parents and the move by some provincial governments to reduce from six years to two years the limitation period on civil law suits related to investment losses.

Will rising interest rates scuttle the booming income trust market? Not according to a recent research paper on income trusts published by two portfolio managers specializing in trusts at TAL Global Asset Management.

Mutual fund investors should re-think their attraction to balanced mutual funds, which include both an equity and bond component. The fee structure for these funds makes them an unnecessarily expensive way to achieve the diversification investors are seeking.

The investment chefs on Bay Street have come up with a new culinary delight for those Canadian investors who want to savour the commodities boom but still want monthly income. The new all-in-one meal, the first of its kind, is the Sentry Select Commodities Income Trust, which is currently being distributed by Sentry Select Capital Corp. via advisors and planners.

The strategy of investing in stocks with steadily growing dividends received a solid endorsement from a recent research report by UBS Securities Canada Inc.

The U.S. National Association of Securities Dealers found in a survey that individual investors have such a poor understanding of bonds that it felt something had to be done. So it recently launched a special educational website, called Smart Bond Investing.

A new Brompton closed-end income trust fund, called the Tracker Fund, offers investors an opportunity to profit from the inclusion of income trusts in the S&P/TSX Composite Index.

The Asian-led demand for commodities and resulting surge in Canadian resource stocks has been good for Canadian investors in recent years but are the recent pullbacks in oil and metals prices signaling the end of the commodities boom? No, say two mutual fund managers with the Guardian Group of Funds (GGOF).

High-yield corporate bonds can provide the income investors are seeking but there is substantial risk involved. A recent Moody’s Investors Service report on corporate bond defaults underlines the fact that sometimes companies go bankrupt and bondholders get little or nothing.

Should a family have two investment advisors? That’s a practical conclusion one could draw from a recent Merrill Lynch study that found that men and women invest differently.

Depletion is a familiar fact of life for those involved in oil and gas production but it is unfortunately little understood by most Canadian investors even though it is likely to be the key factor in the investment outlook for many years to come.

If you hold stocks either directly or via mutual funds, you may want to take a close look at what you own and decide if your portfolio will survive Fed Chairman Alan Greenspan’s “stagnation or worse” prediction for the U.S. economy.

If you’ve been thinking about investing in commodities in your RRSP, you may want to take a close look at a new commodity index fund being launched this month.

A group of Toronto-based portfolio managers is introducing hedge-fund tactics to the income trust market in a way that will allow individual investors to participate.

A buying opportunity is developing in the income trust sector where the unit prices of many trusts have fallen 10 per cent or more from their recent record highs.

A little tax planning can help investors save on income taxes, and any saving helps build wealth.

If you are looking for yield, it may be worthwhile to shop south of the border where bond yields are generally higher now.

The financial engineers at Faircourt Asset Management have introduced a new way to invest in income trusts that reduces the risk involved. Investors in the recently offered Faircourt income trust deposit notes will not only get monthly cash distributions from a portfolio of income trusts but they will also have downside protection – in the form of a guarantee from the Bank of Montreal that they will get their initial investment back in eight years.

Resource tax shelters have produced great after-tax returns for investors in the past five years and more of the same is likely in the next couple of years as energy and metals prices are expected to stay high.

Investors could have avoided the Portus hedge-fund mess if they had asked one important question to their advisors: “How much are you getting paid if I invest in these hedge-fund notes?” The answer, if truthfully given, would have raised a warning flag up as high as a Rocky Mountain.

Two real return bond mutual funds were recently introduced to meet the apparent growing investor concern about inflation.

The goal of RRSP investing is a comfortable retirement. Here are 10 guiding principles that will help you in the end say, “I did my best, no regrets.”

When it comes to using hedge funds in an RRSP portfolio, the theory is fine but the practice is still somewhat difficult for the average investor.

If you have no foreign funds or stocks in your RRSP, you are shortchanging yourself on opportunities for growth.

Income trusts are essentially high-dividend-paying equities that should have a place alongside growth equities and bonds in everyone’s RRSP.

With interest rates still on an upward path, don’t expect to get much of a return from bonds in your RRSP in 2005. But don’t avoid them; think of bonds as a form of insurance to provide some stability in your RRSP portfolio in case things go horribly wrong in equity markets

One of the hardest parts of RRSP investing is choosing the right stocks, or equity mutual funds, to achieve the long-run performance one needs for a comfortable retirement.

Surveys show that the majority of Canadians are worried about having enough money to live on when they reach retirement, but at the same time the statistics show that we’re not saving enough. What's going on?

Among the various New Years resolutions you adopt, be sure to include the following: “I will be a smarter investor in 2005”. The key to being smarter, of course, is knowledge. Fortunately, obtaining the knowledge you need doesn’t have to cost you anything beyond having a computer and an Internet connection.

With the recent listing of a new exchange traded fund (ETF) for gold on the New York Stock Exchange, Canadian investors now have an easy way to invest in gold bullion – inside or outside of their RRSPs.

Standard & Poor’s recently published a report showing that only about a third of actively managed Canadian equity mutual funds have outperformed the S&P/TSX Composite Index over a five-year period.

Mutual fund statistics show Canadian investors have been pulling out of foreign equity funds as the Canadian dollar has surged upward and hurt returns for these funds in the past couple of years. This appears to have been the right choice to date, but with the Canadian dollar so high that it is inflicting pain on Canadian business, there are two good reasons why investors should now be looking to increase the foreign content of their portfolios.

When investing in income trusts, a major concern for investors is that a trust may cut or reduce its cash distributions in the future due to some unforeseen event. A new fund being offered by Lawrence Asset Management aims to address this concern by investing only in income funds or trusts that are flush with cash – those that have low cash payout ratios.

Dividend-growth investing is a simple strategy: If you buy stocks with growing dividends, in a decade or two the dividends will exceed anything you can hope for from bonds or income trusts. But implementing such a retirement investment strategy is not that easy, especially if you try to do it all yourself.

Four mutual fund companies recently announced that they are setting up TSX-listed closed-end funds that will mimic the mutual funds they manage except for one main exception – the use of leverage.

If U.S. bond guru Bill Gross is correct about the future, the U.S. dollar will continue to slide and U.S. inflation will continue to move higher – both carrying important implications for Canadian investors.

There are several important tax-saving initiatives that must be carried out before December 31 in order to get the benefit for the 2004 tax year. Here are eight in the investment area that you should consider as soon as possible since it may take some planning and possibly a visit to a tax accountant to get everything done right by year-end.

There are storm clouds on the horizon for investors with longer-term bonds and bond mutual funds in their portfolios.

When it comes to tax-loss selling, it’s better to sell your losing stocks in October or November than to wait for year-end to do it. The reason is quite simple: you’ll likely get a higher price for them.

The proliferation of hedge fund managers in Canada in recent years has been triggered in large part by the lucrative fees involved. So it was more than a little surprising to see Pro-Hedge Funds Inc. announce last month that it will not charge fees on its new Capital Preservation Fund in any quarter that the fund generates a loss for investors.

Investors in mutual funds specializing in income trusts may want to compare what they own with a new Barclays Canada fund containing the top 100 income trusts and offering a very low annual management fee.

Fall is the peak season for resource tax shelters, which have produced sizeable after-tax gains for investors in recent years as resources prices have trended upward. Several resource tax shelters are already in the process of being marketed to investors and more are probably in the works.

When the Hot House Growers Income Fund suspended cash distributions recently because of plunging tomato prices, its unitholders took a major hit as the unit price dropped from $11.75 to $7. The situation has its lessons for income trust investors but it also could be an opportunity, albeit a risky one, for those willing to bet on a tomato-price recovery and the fund’s diversified growth strategy.

Investors have done well holding real estate investment trust (REIT) units in recent years. But a recent analyst report raises a warning flag about this corner of the income trust market and concludes that some REITs will perform a lot better than others in the coming year.

Some advisors are recommending the use of index-linked exchange traded funds (ETFs) for their greater tax efficiency and lower annual portfolio management costs.

On the issue of tax treatment, Canadian mutual funds and exchange traded funds (ETFs) have many similarities. But there is an important difference with respect to capital gains that can give ETFs the edge.

When it comes to investing hard-earned money, Canadians and their investment advisors tend to stick with mutual funds that have shown consistent long-run returns. This is probably the main reason why they are not flocking to socially responsible funds, which remain a small fraction of total fund assets in Canada.

Canada’s financial engineers are relentless innovators. After pioneering income trusts, which have become very popular, they have come up with a new structured product that splits the cash distributions of those income trusts in a way that creates tax advantages and greater choice for investors.

It’s unfortunately rare that an investment advisor or financial planner would advocate the holding of gold or other precious metals in a retirement portfolio.

For investors who want to grow their portfolios over time, choosing a dividend-paying stock involves a lot more than simply looking at the dividend yield.

A recent Ontario Securities Commission report highlighted some very disturbing findings about how scholarship plans are sold in several provinces across Canada. After reading the report, my conclusion is that Canadians are not well served by the scholarship plan dealers that operate at the periphery of Canada’s investment scene.

From the cradle to graduation, there are some good opportunities to split investment income with your child. Taking these opportunities will allow you to save income tax and therefore build wealth faster.

The old saying “you get what you pay for” apparently doesn’t work all the time for mutual funds. In fact, according to a study by an Edmonton analyst, the opposite occurs most of the time. The study shows that, while there are always exceptions, mutual funds with high management expense ratios (MERs) produce lower final returns on average for investors than comparable mutual funds with lower MERs.

An unfortunate shortcoming in Canadian law puts self-employed business people and entrepreneurs at a disadvantage with respect to protecting retirement monies from creditors.

For small investors trying to save enough for retirement in RRSPs, it’s worth keeping track of what the big guys are doing. OMERS, one of the largest pension funds in the country, has recently declared that it cannot earn enough from stocks and bonds, so it is shifting some investments into infrastructure projects yielding 10 per cent or more.

Seniors who need extra cash or income usually think of cashing in RRSPs or RRIFs or even selling their homes. But, depending on the circumstances, the best answer for some may be the lump sum one can get from a reverse mortgage, especially since the mortgage interest would be tax-deductible if the lump sum is invested.

If you own mutual funds, you likely know that you are paying an annual percentage fee, known as a management expense ratio (MER), on your holdings even though the fee isn’t displayed on the monthly or quarterly statements you receive. What you may not know is that the fund company keeps only about 40 per cent of that fee.

Do you want to give your graduating child or grandchild a gift that would last a lifetime? Then forget about a car or a trip to Europe. For families with some cash to spend, the best gift to reward accomplishments in high school or university would be to salt away some money into investments in the child’s name.

Many fund companies offer two versions of the same equity mutual fund — the traditional trust version and the increasingly available corporation version. For mutual fund holdings outside of RRSPs and other registered plans, the corporate version offers investors greater flexibility in managing a portfolio as well as the opportunity to save on income taxes and build wealth faster.

Couples can take advantage of at least three income-splitting techniques to save income taxes on investment income. These mainly require the higher-income spouse to lend or give money to the lower-income spouse to invest.

Bay Street lawyers and investment bankers have coined the phrase “Income Participating Security” for a new version of income trust. The Income Participating Security (IPS) definitely fills a need and, depending on how things play out, it may end up dominating the sector sometime down the road.

With inflation possibly headed higher, it may be time to put some inflation-indexed bonds, known as real return bonds, in your RRSP. Real return bonds (RRBs) compensate investors for inflation by linking the interest coupon and the principal to the consumer price index (CPI).

Investment advisors are supposed to provide proper advice that takes into account a person’s age, investment knowledge and objectives. Most advisors do a good job and earn the trust that is placed in them. But not all advisors put a client’s interest first. Some are driven more by commissions.

Now that the 2003 income tax returns have been put to bed, it’s time for investors to do some serious tax planning. If you want to avoid paying any more in income tax than absolutely necessary next April, you have to get organized as soon as possible. The common saying “If you snooze, you’ll lose” applies every bit as much to saving taxes as it does to many other things in life.

During the recent inflation scare, the markets reacted in textbook fashion. Bond yields started to rise as traders dumped bonds and this triggered a sell-off in interest-sensitive equities like utilities, banks, income trusts and real estate investment trusts (REITs). These developments provided a roadmap for investors who may want to protect their portfolios against the future ravages of inflation and rising interest rates.

If a stock analyst makes a buy or sell recommendation on a stock, it’s worth taking notice, as it could be a good idea. But for a couple of good reasons, individual investors shouldn’t blindly follow the advice.

While financial markets have produced some great returns for investors over the past year, lurking beneath the surface is a frightening investment scenario linked to record-breaking U.S. deficits.

The ideal situation for everyone is to have enough money to make the maximum allowable RRSP contribution each year and make the maximum prepayments allowed without penalty on their mortgage. But few people are lucky enough to be able to do this. Most face a dilemma each year over what to do with any funds they can spare.

Some commentators in the investment community, and in the media for that matter, fancy themselves as contrarians. When an investment sector like income trusts is hot for a time, they warn that it will soon cool off.

Investment planning should always take into account the many tax breaks available to investors. A dollar saved now on income taxes is a dollar that can be reinvested and used to build a larger retirement portfolio.

Choosing the right investment advisor can mean the difference between having a successful, profitable portfolio and a string of unfortunate disappointments. Investment advisors are not all alike and choosing one is somewhat similar to buying a vehicle in that what you drive depends on your needs and preferences.

Exchange-traded funds are a rapidly growing segment of the investment market. But while they have caught on with institutions and active traders, there hasn’t been widespread interest on the part of individual investors.

The terms “back-load”, “front-load” and “no-load” relate to the amount of commission, if any, investment advisors earn for selling mutual funds to investors. The back-load version of a mutual fund is the least desireable for investors for a number of reasons. It can and should be avoided.

For those without a great employer-sponsored pension plan, a comfortable retirement will depend on a successful RRSP strategy. Here are 10 key rules to guide you in achieving that goal.

Those with foreign investments in their RRSPs can be forgiven for feeling burnt by the sharp rise of the Canadian dollar in 2003. At a time when the U.S. and many other foreign stock markets were booming, the effective returns to Canadian investors holding foreign funds were meagre.

A properly diversified RRSP portfolio should have its equity mutual funds diversified on the basis of the style being used to manage them.

Most RRSP investors have a mix of stocks and bonds in their portfolios but they would be wise to consider adding hedge funds. Hedge funds for many years were only available to institutions like pension funds or very wealthy individuals. But new developments now make them available to the average RRSP investor.

Is it worth paying for a guarantee that you’ll probably never use? That’s the key question regarding the use of segregated funds instead of mutual funds in an RRSP. For practical purposes, segregated funds and mutual funds are very similar, as they both invest in stocks and/or bonds. But segregated funds provide a certain degree of protection that mutual funds don’t have.

Of the many ways of investing in bonds in an RRSP, mutual funds are the least attractive. This is because mutual funds charge hefty fees that eat up a large portion of the potential return.

How to invest in stocks? It’s a question that most RRSP investors find quite difficult to answer, especially after the scary market gyrations of the past few years. It doesn’t help that many still have a lingering headache from watching the major stock indices sink for three years in a row before rebounding sharply in 2003.

Canadians get inundated in the months of January and February each year by mutual fund advertising and calls from investment advisors pushing them to make a Registered Retirement Savings Plan (RRSP) contribution. For the most part, the advice is right.

When an investment advisor quotes a yield of, say, 5 per cent for a security, most people would think that they would actually receive a cash return of 5 per cent a year if they invest in it. In some cases, they would, but in others they wouldn’t. That is because the term “yield” can mean a dozen or more different things in investing.

It’s time we introduced retirement planning into our children’s education. The schools aren’t doing it, so parents must if they want their children to be financially adept. Here is an example that parents can use to introduce the subject.

Tax-loss selling occurs when investors want to trigger a loss in order to offset their capital gains and thereby avoid paying income tax. Since this usually takes place as the year comes to an end, it also means that December is an ideal time to hunt for bargains in the Canadian stock market.

Investors who routinely contribute the maximum to their RRSPs would be wise to consider resource tax shelters for additional tax-deferred investing opportunities. Given the recent share-price gains for junior resource companies, such tax shelters have yielded substantial after-tax returns for participants.

As the end of the year approaches, financial planners are urging parents to make sure they set up a Registered Educations Savings Plan (RESP) if they don’t already have one and get the contribution in by the December 31 deadline. While RESPs are a good vehicle to save for a child’s post-secondary education, a two-pronged strategy that includes the use of an in-trust account is even better.

The consensus among market strategists is that U.S. stocks will continue to climb in 2004. The bulls are counting on continued growth in the economy to push profits and stock valuations higher. But not everyone is bullish. Some very experienced market experts believe the recent upswing in stocks is a liquidity bubble that is about to burst.

The latest twist in hedge fund investing in Canada is the introduction of index-linked performance. Instead of having returns dependent on a single manager, or a small group of managers as is the case for fund of fund situations, a new trust being introduced for small investors for the first time links returns to an index that tracks the performance of the top 60 hedge funds in the world.

Investors needn’t worry that there are serious abuses in initial public offerings (IPOs) of shares in Canada similar to those recently exposed by law officials in the United States.

Think of mutual fund managers as restaurant chefs, setting out to prepare great meals for investors in the form of spectacular portfolio returns. What would you think if these ‘chefs’ do not eat their own cooking?

While investment firms don’t want it publicized, Canadians investors are successfully getting redress for the wrongs perpetrated by stockbrokers and other investment advisors.

The price of gold is up more than 30 per cent in the past two years and this may only be the beginning. The case for a long-run bull market in gold rests primarily on the view that continued economic, political and military uncertainties in the world and intensified personal insecurity will drive an increasing number of investors to protect their capital with gold and gold shares.

Individual investors in Canada have flocked to income trusts for a very good reason: with only a few exceptions, they have been reasonably stable and provide significantly more income than bonds.

Hardly a day goes by without someone in the media warning that if something seems too good to be true, it usually is. Yet, ordinary people are still getting caught up in investment scams.

For investors, tax planning should be a year-round event. It is not just for April, when tax returns must be filed. There are several important tax-saving initiatives that must be carried out before year-end in order to get the benefit for the 2003 tax year.

Bay Street’s financial engineers, who are always hard at work creating new investment vehicles, have recently come up with two new income trust funds that offer unique advantages for investors. One is a fund that invests only in specialty business income trusts.

The enormous U.S. budget and trade deficits are already having an impact on investment portfolios through the decline in the U.S. dollar (and appreciation of the Canadian dollar and European euro), a rising gold price and a recent upward adjustment in longer-term bond yields. But it is not too late for investors to take protective action in their portfolios.

Among buy-and-hold investors and advisors, momentum-style investing is usually labelled as risky, with warnings that it leads to nasty outcomes. But the superior performance of the Synergy Canadian Momentum Class fund is giving the shunned style some respectability.

One of the key advantages of dividend reinvestment plans, or DRIPs, is that participating investors don’t have to pay brokerage commissions on the additional stock investments they make. Under such plans, dividends are automatically reinvested into new shares without any transaction costs.

Investors in dividend-paying stocks and mutual funds can be excused for wondering if they have the right investment strategy. The non-dividend-paying NASDAQ led the way higher from March into this summer’s highs.

Recent court and regulatory decisions have highlighted some costly advisor errors regarding RRSPs and RRIFs. In one case, the advisor failed to ensure that a beneficiary was designated when an RRSP was converted to a RRIF, leaving an eldest son without the inheritance intended for him.

If you want your money to be professionally managed, there is no escape from fees. The key thing is to be smart about getting the most out of paying the fees, to avoid paying more than necessary, and to line up your advisor’s interests with your own.

Many North American companies have hidden pension plan deficits and, additionally, are not deducting the cost of stock options. For some, this is causing corporate earnings to be drastically overstated and stock prices to be overvalued.

Most investment portfolios are geared to an inflationary, not a deflationary, economy. This is because deflation, meaning a general decline in prices in the economy, hasn’t been seen in North America since the 1930s depression. Could deflation occur here again in the near future? Some economists have warned that it could, although inflation still holds sway at present.

Family fights don’t always occur when a loved one passes away. But estate lawyers see a lot of conflict and bitterness, even in cases where there is a will. It is not enough, as many financial planners recommend, to have an updated will.

A recent report on Canadian labour-sponsored venture capital funds by two university professors stirred up considerable controversy with its conclusion that despite the associated tax breaks, labour funds are not worth investing in because of high annual management fees.

With many stock market pundits saying that a ‘buy and hold’ strategy will not work in the coming years and the only way to make money in stocks is to ‘buy and sell’, individuals may be tempted to try their luck at picking stocks and playing the swings in the market. However, picking stocks or picking the time to buy them is only the first part of a winning strategy.

In thinking about the estates they will leave behind, individuals most often focus their attention on probate taxes. Some are so adamant about avoiding probate taxes, which can be more than 1% of the assets left behind, that they sometimes get into probate-avoiding arrangements that trigger unintended capital gains taxes or other negative consequences.

When it comes to tax strategies, most individual investors think of RRSPs or RESPs and rightly so, since they are great ways to defer taxes as you build your investment portfolio. But if your planning ends there and your non-registered investment money is going into mutual funds without much further thought, you may be missing out on three important tax strategies that can be applied to mutual fund holdings.

The financial engineers of the Canadian investment community are making it increasingly easy for individuals to invest in hedge funds, which have earned their standing as a legitimate asset class by outperforming equity funds over the past three years. The latest innovative examples are two different hedge fund notes that allow individuals to invest as little as $2,500 and carry the added benefit of a bank guarantee on the initial investment.

After a couple of false starts, Canada’s security regulators are finally introducing a new computer-based disclosure system for insider trading that will allow investors, with only the click of a computer mouse, to see what senior executives are doing with their stock holdings.

A new self-governing gold trust being set up in Canada will make investing in gold bullion as easy as calling a stock broker or placing an order over the Internet. The Central Gold-Trust, to be traded on the Toronto Stock Exchange, will be the first gold-only, exchange-traded investment vehicle in Canada.

Barclays Global Investors Canada has launched a new exchange-traded index fund that gives investors a much more tax-efficient way of investing in income trusts.

Hedge funds are managed by free-wheeling cowboy or gunslinger-type investment pros who face none of the restrictions put on equity fund managers. This ‘Wild West’ of investing has outperformed equity funds on average over the past three years. But there are many reasons for investors to be cautious and to take a long, hard look at the details of any hedge fund before getting involved.

Like equity investments, bond holdings in a portfolio need to be well diversified as a way of minimizing risk and lost opportunities. A successful strategy for doing this is the bond ladder, which spreads risk over a series of different maturities.

Investors in bond funds, or balanced funds with bond holdings, inevitably suffer “yield leak.” This occurs when a healthy chunk of interest earnings is eaten up by the annual fee paid to the fund manager. Except in some special circumstances where holding a bond fund makes sense, this is easily avoided through a strategy of direct investment in bonds.

Strip bonds carry higher yields than regular bonds and this is why many Canadian investors have been attracted to them. But their total annual return performance can be more volatile than regular bonds. With Canadian interest rates predicted to rise, strip bond investors could be in for a negative surprise of the kind suffered in the last three years by stock investors.

With many income trusts offering annual cash yields of 8 to 11%, investors are naturally attracted to them. But choosing one or more for a portfolio can be a daunting task. For one thing, there are more than 100 income trusts listed on the Toronto Stock Exchange. Sifting through the details for even a tenth of that number would be very time consuming.

In preparing their own income tax returns, people often make errors. Every tax accountant has seen a lot of them. They range from simple calculation mistakes to failure to take full advantage of available deductions and tax credits.

Whether or not they earn income, 18-year-olds should file an income tax return. It is the only way they will be eligible to receive the federal GST tax credit as soon as they turn 19.

Real return bonds have done exactly what they are supposed to do in the past few months – protect investors from inflation. As energy prices have pushed inflation rates up in recent months, real return bond funds have continued to move higher. At the same time, traditional bond funds have suffered.

A U.S. economist is challenging the widely held notion that inflation is low and there is little need to inflation-proof an investment portfolio. The points he raises are serious enough that investors should reconsider how their portfolios are structured and whether a sizeable position in precious metals is warranted.