Managed Money Reporter Newsletter — Issue 199, October 2003


Editors: Carl Spiess & Allan McGlade


Featured Articles



RESPs - Get Your Grant this Year

With the end of 2003 in sight, we want to remind our clients who are saving for their children's or grandchildren's education to make your RESP contribution before the December 31st deadline.

A recent Statistics Canada survey showed that nearly 90% of Canadians want their children to attend university or college. Unfortunately, the same survey showed that only 40% of parents have actually started setting money aside for post-secondary education.

According to Human Resources and Development Canada, a child born today can expect to pay about $85,000 for a four-year undergraduate degree. If the child wants to enter one of the professions – such as medicine or law – that number could be even higher.

The good news is that there are specialized savings plans available to help you deal with this coming cash crunch. A registered education savings plan (RESP) could allow you to place up to $42,000 per child in a tax shelter, and also receive an additional $7,200 in grant money from the government.

If you'd like to learn more about how this kind of plan could work for you, please see:
Registered Education Savings Plans and Scotiabank's official RESP Page

Canada Savings Bonds

Here's a reminder that Canada Savings bonds are on sale again this year.  They can be held in your ScotiaMcLeod, RSP, RRIF, RESP or non-registered account.  The regular series yields 1.75%, and the premium bond yields 2.45% (rising and compounding at 3.34%) over 5 years.   At these rates, it is difficult to get excited, but for more details, visit http://www.csb.gc.ca/home/ or call us.  November 1st is the deadline for these rates, but the bonds will be available each month until April 2004.  We of course have a wide variety of other bond options available for you, and longer term government stripped bonds are yielding over 5%.

Investing 101 - Foreign Funds and the Canadian Dollar

The good returns in the US markets over the last 6 months have helped Canadian investors portfolios, but not as much as you may think.  The reason: the rising Canadian dollar.

For example, the US S&P 500 index is up 18.4% since March 31st.  However, translated back into Canadian dollars, that is only 8.9% as the loonie appreciated (and US$ fell) over that time frame.

Some analysts are calling for the Canadian dollar to rise to 83 cents, close to its purchasing power parity level. Some are even calling for the dollar to go higher - all the way to par.  This would continue to hamper returns on your foreign investments over the near term.

For this reason we continue to recommend that you maintain a healthy balance (see chart) between Canadian and International investments.  Of your equities, roughly 50% Canadian, 50% international is appropriate for those with a 10 year time horizon.  We have more research on foreign investing.  Please contact us if you would like to discuss your overall account balance.

Recommended Reading

The most interesting article we read this month is from MSN money.  For anyone who has wondered, "am I saving more or less than average?", here are some great statistics.

http://money.msn.com/saving-money/compare-income-debt-savings.aspx

While the figures are for the US, the results are interesting.  Again the old "wealthy barber" rule of thumb, "pay yourself 10% first" turns out to be the best advice.

Due Diligence

As part of our ongoing commitment to monitor your investments, in the last month we have met with a number of fund managers. These are some of the most notable comments, from those responsible for a large percentage of our client assets.

Ian Hardacre: Trimark Canadian Fund/ Trimark Select Balanced Fund Ian continues to be a very conservative manager, holding 35-40 individual stocks in his portfolios.  The Balanced fund holds the same companies as the Canadian fund, but also has a significant weighting (40%) in bonds.

Bill Kanko: Trimark Fund / Trimark Select Growth Fund
At last week's presentation, Bill Kanko delivered the same message he delivers every year: Find good companies that are being ignored by the market and hold them until other investors recognize the stock is undervalued. While there may be nothing exciting about his investment style, the long-term returns on his funds are something to get excited about.

George Morgan: Templeton Growth Fund
Some may call him the 6 billion dollar man, as that is the total assets that he and his team are responsible for managing.  We met with George last Friday, and his overall strategy and methodology have not changed in the last 4 years, or the last 6 months since we last met with him.  What has changed, is the performance of the fund, which is up 23.4% since our last meeting.  They say patience is a virtue ...

Harry Lange: Fidelity Growth America
Harry Lange started his career with Fidelity on October 19, 1987, so he is no stranger to bear markets. His growth investment style has not prevented him from finding good companies within the U.S. marketplace over the past three years. Unfortunately for unitholders, the rise in the Canadian dollar has negated much of the returns he has generated year- to- date. Our meeting with Harry confirmed our belief that the Fidelity Int'l Portfolio fund should continue to be a core holding and the Fidelity Growth America is appropriate for investors who want additional exposure to the U.S. equities. It is also worth mentioning that Harry continues to invest in the larger tech names such as Microsoft and Motorola.

Dennis Gartman: The Gartman Letter
This was a very interesting presentation, by a renowned stock trading newsletter author.  While most managers are persistently optimistic (which makes sense since they run stock portfolios), Dennis Gartman simply trades for his own account, then writes about it in his newsletter.  He lives in Virginia, and does not actually manage other people's money.  So his optimism about the Canadian Market, our stable politics, and a rising Canadian dollar may be surprising.  He predicts continuing low interest rates, and oil heading to $20 a barrel.  He likes Canadian stripped bonds for retirement accounts.  

While he was in Toronto, he also appeared on ROBTV.  To view the program, please visit: http://www.robtv.com/channels/hubs/pastprograms_highlights_tue.html see 5:30 pm at around the 8 minute mark for a video replay of his ROB interview.  (Note, this ROB TV link will only work for the week of October 21st.)

Staff Profile - Sharon Calvert

Now in her 17th year at ScotiaMcLeod, Sharon is the most experienced Investment Associate on our team.  Sharon enjoys helping our longest standing clients, and specializes in bonds, RRIFs, conservative investments.

Sharon also understands the ins and outs of complicated administrative matters, and has helped solve many a complicated client situation.  Her patience and vast experience is a great asset to our investment team.

In her personal time, Sharon enjoys her garden, travel and her new puppy.  In fact, by digging up the garden, the new dog is helping to ensure that Sharon and her husband always have plants in need of care!

Account Maintenance - Beneficiary Designation

If it has been a while since you reviewed your beneficiary, please consider doing so. Your RRSP or RRIF can transfer without a tax obligation to your surviving spouse or dependent child, and the process is made simpler by having a beneficiary on file. 

Please contact us if you wish to confirm your beneficiary, or use our http://managedmoneyreporter.ca/forms/ca-42.pdf form and fax it to 416-863-7479 if you want us to update our records.

If you have other Estate planning questions, please let us know, and we will be pleased to advise on your situation.

Mutual Fund Reporter Recommended Website of the Month 

If you  are looking for more information on RESPs, visit CCRA's RESP information site:

http://www.cra-arc.gc.ca/E/pub/tg/rc4092/rc4092-e.html#P9_59 

 



Contact Us

T.  416.863.RRSP (7777)
     1.800.387.9273
F.  416.863.7479
E. carl.spiess@scotiawealth.com
    allan.mcglade@scotiawealth.com

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