Managed Money Reporter Newsletter — Issue 187, September 2002

Editors: Carl Spiess & Allan McGlade

Featured Articles

Back to School - Time to think about RESPs

Now that the kids are back to school, for people with children or grandchildren, September is a month of mixed blessings.  Like the gentleman dancing in the store selling school supplies singing "Its the most wonderful time of the year", children heading off to school means the kids are out of the house for most of the day.  But it also can instill fears about how much university may cost down the road.

Registered Education Savings Plans (RESPs) can help.  A terrific guide to RESPs is on the Scotiabank website, the Scotiabank RESP Q&A guide.  For more information and links, also visit the Mutual Fund Reporter RESP page.

We continue to recommend international funds for very young investors RESPs, and then strip bonds and GICs as investments as the children become teenagers.  For those with 15 year olds, considering RESPs for the first time, remember, your RESP must be set up by December 31st this year. 

Please contact us at any time if you wish to have more information on RESP options.

Recommended Reading - Battling A Bear

Last month, the markets headed down again, both in Canada and abroad.  The frustrating statistics are becoming record breaking, with markets and funds now reporting the worst 5 months in the last 15 years.

We recently received a very good article about the state of the markets, by Russell, the organization behind several of ScotiaMcLeod's Managed Account Programs.  We have been given permission to reproduce the Battling A Bear article in its entirety for you:

The Russell commentary on Battling A Bear is the most concise 4 page summary that we have seen, outlining clearly what investors should be doing.  It is highly recommended reading.

How to Beat Low Interest Rates

It has been said that the more things change, the more they stay the same.  10 years ago, in the September 1992 Mutual Fund Reporter, I wrote about "How to beat low interest rates".  Since GIC rates were low then, and continue to be low now, dividend paying stocks continue to be a good investment to consider.

Our top recommendation 10 years ago was to invest in the Dynamic Dividend Fund, which holds a wide range of preferred shares and dividend paying common shares.  Its consistent returns, low management fees, and very low risk (volatility), continue to make it a favoured fund, especially outside RRSPs, where the dividend tax credit makes the after tax return that much better than GICs.

It is important to remember that the fund's return over the last 10 years would (in a taxable account) be the equivalent of over 10% from a GICs investment, and it has been a very long time since GICs were offering over 10%.  Dynamic Dividend Fund now also holds some income trust units, and continues to be a great holding for conservative accounts.  We would be pleased to provide tax effective investment recommendations for your non-registered investments.

Staff Profile - Nicole Keeler

We are pleased to welcome back to our team Nicole Keeler.  Nicole recently returned to us from her second maternity leave, and is now in her 11th year with our team.

Nicole is responsible for day to day servicing of client accounts, and also helps to manage the structure and processes of our group, to ensure our systems operate efficiently.  Continuing education to keep up with changes in tax and RSP regulations are always a part of the job.  Keeping abreast of fund and investment industry trends also ensures that Nicole and the other members of our team are best able to help you with your investments.

For more information visit our team profiles page, and please feel free to contact Nicole at (416) 863-7435 or

Fund Profile - TD Real Return Bond Fund

In the universe of 4,000 Canadian mutual funds, there are only a few that are truly unique.  One of those recently came to our attention, the TD Real Return Bond Fund.  Like many bond funds, this fund invests in Government bonds but in particular, a kind of bond whose returns are pegged to inflation.

Real return bonds (RRBs) are currently available from a number of government issuers, and have terms anywhere from 10-30 years.  The bonds are structured such that they pay interest (or grow) at a rate above inflation.  Due to the taxable nature of interest income, RRBs are best to be held in registered accounts. 

The current yields on RRBs are around 3.25%.  Basically, with inflation running at 1.5% at present, the bonds give you a 4.75% return, similar to 5 year GICs.  However the beauty of these investments is that if inflation ever returns to say 5%, your return would grow to 8.25% (inflation plus 3.25%).  Of course, if inflation drops to 0% or if we experience deflation, a lower or even negative rate of return is possible.  However your purchasing power will grow at 3.25%.  

If this seems a bit confusing, the important thing to know is that there is a simple way to invest in RRBs, through a professionally managed fund.  The fund can benefit from changes in the supply and demand of RRBs, and has had great performance over the last 5 years, as demand for RRBs has grown.  Of course, there is a management fee on the fund, which you would eliminate by having us purchase RRBs for your account directly, but for smaller accounts, or clients who are worried about inflation but don't want to be bothered with all the details, we would recommend a look at the TD Real Return Bond Fund.

Fund News - Spectrum Funds Renamed to CI 

Over the last month, the majority of Spectrum funds have been re-branded as CI funds.  In some cases, the fund managers have also changed.  Two weeks ago, we were among the 25 advisors across Canada that got a personal telephone call from Kim Shannon, the new lead manager of the CI Canadian Equity Fund.  Kim has taken over the renamed Spectrum Canadian Equity Fund, and plans to use the same skill that has propelled the CI Canadian Investment Fund to some terrific returns.  We are pleased with that manager change and will advise clients directly if there are any changes we don't like.

Please contact us if you have any questions about the Spectrum -> CI changes.

Mutual Fund Reporter Recommended Website of the Month 

On the Human Resources  & Development site, you can find information on how to get a Social Insurance Number (SIN) for yourself or for a child.  A SIN# is required for a child if you are planning on setting up an RESP and since it can take several weeks, we recommend you get the SIN# now if you are planning on making an RESP contribution by December 31:


Contact Us

T.  416.863.RRSP (7777)
F.  416.863.7479

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