Managed Money Reporter Newsletter — Issue 133, February 1998

Editors: Carl Spiess & Allan McGlade

The Last Minute RRSP Rush

By John Zufelt, Director

Where To Invest

In our January issue we mentioned that ScotiaMcLeod's Head of Equity Research, believes the TSE 300 index could deliver a potential 22% return from current levels. Long bonds are now slightly over 6% compounding and still offer 5% real growth above inflation (currently .9%). Historically, this has indicated good value and we continue to offer guaranteed stripped bonds on the back page. Short term rates have increased in the last month (in support of the Canadian dollar) and are now approximately 4.5%.

Investment Objectives

Another way to make your decision based on the paragraph above is, if your goals are:

Long-term growth - buy recommended equity funds

Conservative growth - buy recommended balanced funds, bond funds or stripped bonds

Defensive and short-term - buy money market or a Treasury Bill funds.

Many people make the mistake of waiting until the last minute to make their RRSP contribution and then choose a short term investment with a low yield or low return instead of receiving greater growth from more appropriate investments.

Recommended Funds

Here at the MFR group we analyze funds for both performance and risk. We favour funds that offer above average returns, lower risk and good long term management. We publish a separate brochure entitled, "Your Investment Options" (enclosed in the January MFR) which contains our short list of selected funds. If you did not receive this, please call and request that it be mailed to you or ask for a specific recommendation to fit into your portfolio. Sample recommendations are:

Growth Funds
Spectrum United Canadian Equity Fund
Universal Canadian Growth Fund
AIC Advantage Fund

Balanced Funds
Fidelity Canadian Asset Allocation Fund
Global Strategy Income Plus Fund

Follow The Manager

The chart below shows how important it is to know who is managing the fund. Look at Cambridge Balanced fund, which lost Tony Massie over 5 years ago. It had seen good performance while he was running it, but it is now the lowest returning, and highest risk balanced fund over the last 5 years. His new fund, Global Strategy Income plus has the best risk return tradeoff of all funds over the last 5 years.

Tony Massie's PerformanceClick image to enlarge ...

Naturally, we monitor changes in fund managers on your behalf and make recommendations accordingly.

Guaranteed Growth Funds

Last month we told you about G.I.F. Funds (Guaranteed Investment Funds) now available for your ScotiaMcLeod RRSP accounts. These are mutual funds that guarantee your principal amount invested. You may also make your RRSP account creditor proof. You are not locked into the investment and you may switch among funds within the family. Call for our recommendations.

RRSP Loans at Prime

Again this year, we are pleased to offer Scotia-bank RRSP loans at prime rate. Act quickly!

Call Us @ 863-RRSP or 1-800-387-9273
or e-mail us.

Attention RRSP Investors

Turn $109,994 into $425,000

Rates 100% Guaranteed by the Government

Coupon Value at Maturity Now you can eliminate all worries about the stock market or where interest rates are going by buying Government Coupons (Strip Bonds) which are ideal for RRSP's RRIFs and Pension Rollovers. These coupons come in maturities from 1 to 30 years. You buy them at a discount to their maturity value (much like a treasury bill.) In the above example, each coupon costs only $258.81 and matures August 6, 2020 at $1,000.00.

If your RRSP buys 425 coupons for $109,994.25 they are government guaranteed to mature at $425,000 with no need to worry about CDIC insurance! We have thousands of other coupons available to meet your individual needs. Some Examples are:

(Subject to Change)
Maturity ValueYield to MaturityMaturity Date
Ontario$812.73$1,0004.77%June 8, 2002
British Columbia$574.32$10005.41%June 9, 2008
Manitoba$406.18$10005.89%July 22, 2013
Ontario Hydro$258.81$10006.08%August 6, 2020

To demonstrate the effect of compounding, select various Strip Coupons that mature in different years:

Current Value of RSP/Current Price of CouponxValue of Coupon at Maturity=Your Retirement Nest Egg

Example from top of page: $109,994.25 divided by $258.81 times $1,000 equals $425,000.

FeaturesYou receive guaranteed reinvestment rate protection and compounding of your money. Unlike locked-in investments, Strip Coupons can be sold (subject to market conditions)before maturity.
SecurityBearer Coupons are a direct obligation of the Federal or Provincial Government and are free of credit risk regardless of quantity purchased (no $60,000 limit).
ActionCall us now for a quote on our best rates, tailored to exactly match your retirement and investment goals. This is a free, no-obligation quotation.


Contact Us

T.  416.863.RRSP (7777)
F.  416.863.7479

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

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