Where Does Your Money Go?

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Are hot stock tips bombarding you by e-mail? If you’ve ever surfed the Internet looking up investment related topics you may have unknowingly given your email address to one of many Internet scam fraudsters, or should I say spam companies. They claim to be legitimate firms providing a valuable service to the investing public.

In 2005 the Canadian Government’s Task Force on Spam estimated that there are more that 100 million investment-related emails sent every week. With all this good investment advice so freely given out we should all be millionaires.

Its seems nowadays about 80% of e-mails received are junk mail, not that its illegal to send e-mails. However, a lot of the hot stock tip e-mails are outside the regulated industry. When it comes to investments, stock information comes in many forms whether it is from advisors, newspaper articles, Internet surfing, friends and relatives and yes, through e-mails.

Most, if not all, “hot stock tips” we receive in our e-mails are unsolicited. It’s very enticing when you receive a personalized e-mail promising high returns and very low risk, but you must buy now. But how can we decipher between a good and bad tip? Usually it’s only after money has been lost.

The Ontario Securities Commission (OSC), the Investment Dealers Association (IDA) and many brokerage firms have set up educational programs for the public, clients and advisors to help identify the difference between legitimate advice and spam e-mails. Visit the OSC web site at www.osc.gov.on.ca for more information about how to recognize and protect yourself against investment scams and frauds.

Before you decide to “jump on board” with one of these “hot stock tips”, do your homework. Search the company and look for any regulatory filings. Talk to your stockbroker to get their opinion. The advisor will review your goals and assist you in making a decision on whether this investment fits your risk profile. Their role is to look after your best interests. At this point you may still proceed and buy the stock, but if your advisor had cautioned you against this move you will be on your own if the investment turns out to be a flop.

A lot of these “get-rich-quick” scam e-mails, are sent by people who are just under the radar of the criminal authorities for fraud, theft or forgery. In the end these spam e-mails will always be around and it’s “buyer beware.”

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments Inc. with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Everyday Tax Saving Strategies

In Canada we supplement our four seasons of weather with additional seasons to represent major money and tax saving events. We have just passed the “RRSP Season.” It’s the time of year when people who want to save a few dollars on their income taxes will stock a few dollars away in an approved Registered Retirement Savings Plan. We have now entered the “Tax Season.” This is the time of year when everyone has to reconcile his or her income and expenses with the federal government.

It’s too late to make tax-planning decisions that will have much of an impact on your 2006 tax return. Other than RRSP contributions, the time to do that was before December 31. You can however, begin making plans that will have an impact on the taxes you pay in 2007 and beyond.

Decisions to place money into a Registered Retirement Savings Plan, RRSP, will reduce your taxable income and possibly result in a tax refund or reduce the amount of tax owing. The RRSP has added benefits of tax deferral and tax sheltered growth. You can defer this income to a later date, possibly to a time when you are earning much less income and realize a huge tax saving. During the period of deferral your investment grows tax free or sheltered. The name of the RRSP game is immediate tax reduction, tax deferral and tax sheltered growth.

Another tax planning strategy is income splitting. This involves decisions that will shift income from a high-income person to a low-income person. Spousal RRSPs have been the obvious planning opportunity to shift retirement income to a lower income spouse or partner. The federal government announced last fall that pensioners, starting in 2007, could split up to 50% of pension income with their spouse. Due to age restrictions the viability of a spousal RRSP still warrants a close look.

Opening up “in-trust” accounts for minor children could have the effect of shifting income into the hands of your child. Capital gains are taxed in the hands of the child rather than the parent. Watch out though, as dividend and interest income will still be taxed in the hands of the parent.

Plan your retirement income carefully. It may be to your advantage to convert your RRSP into a Registered Retirement Income Fund, RRIF, early. The concept is to reduce the RRIF capital and therefore lower the mandatory RRIF payment in later years. This strategy could be helpful to preserve your ability to receive the Old Age Security benefit without the claw back. The current claw back begins at income levels above $63,511.

Tax planning strategies should not be seasonal but should be considered very carefully throughout the year. Speak to your financial planner to learn more about these and other tax planning strategies.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments Inc. with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca. Website: http://www.invested-interest.ca/

The following article was contributed by Ottawa-based financial planner Rick Sutherland, CLU, CFP, FDS, R.F.P.

Bonds Versus Bond Mutual Funds – Which is Better?

We are often asked the question ‘Why would I invest in a bond mutual fund as opposed to buying individual bonds?’ There are many reasons why one would choose to own a bond fund rather than owning bonds directly.

Bonds can sometimes be difficult securities for individuals to buy and sell. This can give the bond fund greater liquidity (the ability to convert to cash) than owning individual bonds.

A Bond fund offers instantaneous diversification. Much like equity mutual funds, bond funds are comprised of many different fixed income securities. This gives the investor an optimal mix for safety and diversification. The term to maturity of the bonds can range from short-term (1 to 5 years) to long-term (over 30 yrs) and everything in between. All levels of government including federal, provincial and municipalities issue bonds. Even corporate bonds can be added for higher returns and a little added risk. As an individual you would need to be very wealthy to duplicate the diversification offered through the ownership of a bond fund.

When talking about the Bond market, size does matter. Bond fund managers can be trading millions of dollars each day. This gives them considerably more purchasing power than individuals. The result is better pricing and potentially better returns for bond fund investors.

Bond fund managers are considered institutional investors, giving them a greater access to available bond inventory at a cheaper price. Depending on their relationship with the bond dealers the bond fund manager may be given exclusive access to bonds on an “initial issue” basis. The retail bond investor is rarely offered an opportunity to participate in an initial issue. You are typically limited to what the bond dealer is offering at their asking price with no ability to do a price comparison.

So while there are individuals that can build and manage their own bond portfolio, most people do not have the time, resources or the expertise to take on this challenge. For ease and efficiency investors receive good value for the management fees charged by owning bond funds.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 613-798-2421 or E-mail at rick@invested-interest.ca. Website: http://www.invested-interest.ca/

We got reviewed by Canadian Capitalist! Check it out: http://www.canadiancapitalist.com/2007/04/10/test-driving-spending-profile

More press in the Ottawa Citizen today. Lots of new sign-ups!

Hey, I just got interviewed on Invisible Ink by Zachary Houle! Take a look: http://zacharyhoule.ottawabloggers.com/2007/02/01/five-questions-lisa-wall-spending-profile/

The holidays, though joyful and festive, can be a strain on your finances. You may have purchased items on credit, and are now wondering when and how you will pay for them. The first step is always to know how much you have spent. You need to gather your receipts, credit card statements, and bank statements, and record them in your Spending Profile account. This will give you the full picture. Even if it’s ugly, you need to know this information in order to make informed choices when managing your money.

Don’t worry if you haven’t logged on in a few months; just start fresh today. Each month is analysed separately, so when you return to your account, the missing data won’t affect your current and future results. Get the full benefit of your Spending Profile account by using it regularly to help you stay on top of your spending, pay off your debts faster, and reach your financial goals sooner.

Forgot your password? Get a new one here.

Have you tried the automatic import feature yet? You can import transactions from your bank straight into your Spending Profile account! It’s quick and easy – just sign in and click on the button at the top left.

Did you know? Spending Profile accounts are now free! So if your account had expired, it is now active again. You can always get a new password if you have forgotten it.

Wishing you the best in financial health for 2007!

It appears most young people today are NOT saving for reitrement, and of those who are, most invest their money the wrong way (ie in bonds instead of stocks).

- Anne began saving at age 40 and invested in bonds.She has $118,000 at age 65
- Barbara began saving at age 40 and invested in stocks.She has $240,000 at age 65.
- Carol began saving at age 20 and invested in bonds.She has $265,000 at age 65
- Diane began saving at age 20 and invested in stocks.She has $1,128,000 at age 65

See the full article here: http://www.ricedelman.com/planning/kidsncash/generationY.asp

Tag! You’re it! I just became part of a game of “Blog Tag”. To participate, I have to post a blog entry with 5 little known facts about myself. My blog is normally not about me; it is about personal finance and how my website, Spending Profile, can help people reach their financial goals. But it’s nice to put a human face on technology, at least to show that there is an actual person behind the screen.

So here goes:

1. I was born in Bath. No! Not in a bath, but in the town of Bath in the South of England. Do I have a british accent? No – except when I get angry. I came here when I was 2, but we visited England often since my Dad was in the navy.

2. When I was 3, I came within 12 hours of dying of an apendicitis. They didn’t think it was that because it was the youngest case they had ever had. They finally realized, but my appendix had already burst and sent “bad stuff” all over. They cleaned it up and I recovered.

3. I play clarinet in the Ottawa Symphony Orchestra. I studied music at the Quebec Conservatory of Music and graduated “avec grande distinction”, although I was so nervous at my final exam I was sure my hair would turn white overnight like Marie Antoinette!

4. I watch Lebanese soap operas! Yes, well, I have a reason: I am learning Arabic. I study soap operas because they use everyday language. I write down every word and translate them to English. I am learning Arabic because a) I love languages, and b) my fiancé is Lebanese, and I need to be able to speak to his relatives when I visit Lebanon!

5. I am an avid scrapbooker. I have a circle of scrapbooking friends, and we go scrapbooking together every week. We each own a scrapbooking cart, which is a suitcase-sized container on wheels that holds all our tools and paper supplies. Scrapbooking is a hot new trend, and we are out to convert people to it – a major success will be when we convert our first MALE scrapbooker!

Hmm. I have to tag other bloggers now:
- Kristina Mausser from Digital World. I saw her give a great presentation at Bar Camp Ottawa on writing for the web.
- Ryan Lowe, who I met briefly at Demo Camp in November, and whose blog I have read.
- Mark Levison, whose tool scrum I checked out, and who has a blog.