FEBRUARY 2018 ISSUE: The Novice Chart Reader. M … · John Hyslop Hamilton john.hyslop@sympatico .ca Matthew Moore Kincardine/Port Elgin 519-371-6592 Irving Freilich Kingston 613-544-3257

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MONEYBEATING THE TSX

2017/2018 Annual UpdateRoss Grant Page 14

IN THIS ISSUE:

Author, SEAN COOPER:

Sneak Peek of his book

BURN YOUR MORTGAGE

Stock Charts Can Be Misleading To The Novice Chart Reader. Jon Kalos P.8

Is Pet Health Insurance A Good Investment? Gail Bebee P.27

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EDITOR-IN-CHIEF: Lana SanicharEDITOR: Peter HodsonCONTRIBUTING EDITORS:Ed Arbuckle, Margot Bai, Robert Barney, Dan Bortolotti, Ian Burns, Bruce Cappon, John De Goey, Donald Dony, David Ensor, Ken Finkelstein, Derek Foster, Benj Gallander, Robert Gibb, Andrew Hepburn, Shelley Johnston, Robert Keats, Cynthia Kett, Ken Kivenko, Camillo Lento, Marie-Josée Loiselle, Alan MacDonald, Brenda MacDonald, Gina Macdonald, Robert MacKenzie, Ross McShane, Ryan Modesto, Caroline Nalbantoglu, Tim Parris, Peter Premachuk, John Prescott, Kyle Prevost, Brian Quinlan, Wynn Quon, Rino Racanelli, Colin Ritchie, Scott Ronalds, Norm Rothery, Stephane Ruah, Allan SmallDavid Stanley, John Stephenson, Brian Tang, Angelo Vicere, Becky Wong.

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FEBRUARY 2018 Volume 37, Number 5

REGULAR FEATURES Shareclubs 4

Sharing With You 4

Dividend & Company News 5

Model ETF Portfolio 5

Annuities Offer Income For Life 13

Ask The Experts 32

Money Digest 34

Canadian DRIPs with SPPs 35

Top Funds 36

Canadian ETFs 38

SPECIAL FEATURES

The Latest Gabfest On Embedded Commissions Ends John De Goey 6

Stock Charts Can Be Misleading To The Novice Chart Reader John Kalos 8

Investing Inside An Insurance Policy – Part 3Universal Life Insurance As An Investment Colin Ritchie 10

BTSX 2017/2018 Annual Update Ross Grant 14

Buy Cruise Stocks If You Can Handle Rough Seas Richard Morrison 17

The Three Classes Of Indicators Donald W. Dony 19

Book Excerpt: Burn Your Mortgage The Simple, Powerful Path To Financial Freedom Sean Cooper 21

TFSAs– Tips And Traps David Townsend 23

The Learning Curve And Historical Performance Don Mackenzie 25

Is Pet Health Insurance A Good Investment? Gail Bebee 27

Seniors And Home Modification Tax Benefits Ed Arbuckle 29

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PeterPeter Hodson

Irecently found myself (after 24 hours or so of flying and transports) hiking with a group

of people in New Zealand. One of my fellow travellers was a retired investment banker from the US, a very nice fellow. Of course, we got to talking shop, and I came away with some interesting insights in investing.

I rattled off 10, or 15, of my favourite Canadian companies. Names such as Dollarama, Constellation Software, Shopify and Brookfield. Now, these are not small companies. Their dollar market value is in the tens of billions. But my new friend had never even heard of any of them.

Constellation, at $15 billion market cap, has been about the best Canadian stock over the past decade. And here was a recently retired executive, in the stock business nonetheless, who has never even heard of this great Canadian company.

So I got to thinking: Is the Canadian market really that regionalized? (Yes, probably). But also, 'what happens when the world finds out that Canada has some great companies’? (Valuations will likely rise, a lot).

I was, frankly, stunned. The investment world is so focused on all the name brand, trendy companies, such as Facebook and Amazon, that an entire subset of companies might be, more or less, getting ignored.

How does this impact you, the investor? Well, maybe some of the 'hot' names are overpriced, and maybe some of the 'unknown' names represent better investment opportunities.

Take a look at your own portfolio. Does it read like a shopping list of name brands? Sure, you likely own good companies, but maybe not great stocks. Maybe, some lessor known names might be better.

Something to think about, at least, while we freeze our way through another Canadian winter.

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Canadian MoneySaver z https://www.canadianmoneysaver.ca z FEBRUARY 2018 z 5

MoneySaver DIVIDEND& COMPANY NEWSIn this column we list recent news, events, dividend income news and any other relevant information for

MoneySavers. News items are those received after our last publication date.

Canadian MoneySaver MODEL ETF PORTFOLIOETF SYMBOL CATEGORY PRICE # OF

UNITS TOTAL % OF PORTFOLIO

iShares 1-5 Year Laddered Corporate Bond CBO Fixed Income 18.51 506 9,366.06 6.8%

iShares DEX Universe Bond XBB Fixed Income 30.99 166 5,144.34 3.7%

iShares S&P/TSX Canadian Preferreds CPD Fixed Income 14.38 460 6,614.80 4.8%

iShares S&P/TSX Capped Composite XIC Equity: Canada 25.71 980 25,195.80 18.3%

iShares S&P/TSX Cdn. Div Aristocrats CDZ Equity: Canada Div. 27.00 613 16,551.00 12.0%

iShares U.S. High Yield Bond Index ETF XHY Fixed Income 19.83 350 6,940.50 5.0%

Vanguard FTSE Emerging Markets Index VEE Equity: Emerging 34.72 194 6,735.68 4.9%

Vanguard FTSE Developed Europe All Cap VE Equity: Interntional 29.45 304 8,952.80 6.5%

SPDR S&P 500 SPY Equity: U.S. 266.88 29 9,751.80 7.1%

Vanguard Div. Appreciation Index VIG Equity: U.S. Div. 101.99 74 9,509.55 6.9%

iShares Russell 2000 Growth IWO Equity: U.S. Growth 186.60 45 10,580.22 7.7%

BMO Covered Call Utilities ZWU Equity: N.A. Div 13.71 437 5,991.27 4.3%

Vanguard Information Technology Index VGT Equity: U.S 164.78 27 5,605.82 4.1%

Consumer Discretionary Select Sector SPDR XLY Equity: U.S 98.64 43 5,344.32 3.9%

Cash Cash Cash 5,531.46 4.0%

Total Portfolio 137,815.40

Exchange Rate 1.26 $ Gain/(Loss): 37,815.40

Inception value: 100,000.00 % Gain/(Loss): 37.82%

Inception date: October 18, 2013 % Annualized: 7.93%

Prices are at market close on Dec 31, 2017. Individual prices are in USD$. Portfolio values, $Gain/(Loss), % Gain/(Loss), % Annualized all reflect USD$ values are converted to CAD$

CURRENT NOTES: none

OTHER NOTES: Keep in mind all investors are different. This portfolio is designed as a guide in setting up your own personal portfolio. Unique considerations and adjustments need to be made to reflect your personal situation. Please perform your own due diligence before making investment decisions. For use by Canadian MoneySaver subscribers only. Not for redistribution.

Please direct portfolio questions to [email protected]

• Blackstone buys Pure Industrial REIT (AAR.UN) for $8.10, a 20% premium.

• Peyto Exploration (PEY) cuts monthly dividend from $0.11 to $0.06.

• Open Text (OTEX) gets added to the S&P TSX 60 Index.

• Potash and Agrium merger closes, forming new company, Nutrien (NTR).

• Brookfield Business Partners (BBU.UN) buys nuclear power company Westinghouse for $4.6 billion.




The Professional Advisor

The Latest Gabfest On Embedded Commissions Ends

I n a process that seems to be taking an eternity, the Ontario Securities Commission (OSC) held their latest Roundtable discussion in mid-September 2017 on the subject of possibly

discontinuing embedded commissions. Followers of this lumbering process may recall that the original paper on the subject, Consultation Paper 81-408, was released in January 2017 with comment letters due by June 2017. Part way through that exercise, the OSC also held an “outreach” session where the paper’s principal authors presented a Powerpoint presentation about what the paper entailed followed by a Q&A session to make sure that all interested stakeholders were on the same page. The predecessor concept known as the “Fair Dealing Model” (FDM) is well over a decade old now – although, in fairness, a few relatively modest elements of FDM have already been enacted.

Regulators noted that a whopping 142 submissions were presented on the subject of trailing commissions, which is an informal record of sorts. What they ultimately do about embedded compensation is a matter of supreme concern, it seems. The original venue was overbooked in mere hours, so a larger venue was secured and it, too, was filled to capacity.

Maureen Jensen, the CEO of the OSC, kicked off the event by emphasizing that the status quo was not an option while allowing that no decision had been made regarding what policy direction regulators might take. Jensen went on to say that the preliminary policy direction would be released by the spring of 2018. If past experience is any guide, observers will note that the regulatory lawyers know that since summer officially begins on June 22, they will likely release their proposal in the third week of June – just in time for everyone to bring it to the cottage as they leave for their summer holidays.

John De Goey

Jensen went on to say that the objective of the initiative was to address the harm that is perceived to exist in the current system while simultaneously minimizing negative consequences. She said regulators remain open to alternative solutions provided that those alternatives addressed regulatory concerns about harm – the most notable of these being the perceived conflicts of interest that are part and parcel with embedded compensation. She went on to say that embedded compensation doesn’t seem to align with the needs of investors and that we all need to “make it better for the investors”. Before moving on to the three separate panels on related topics, Jensen noted that Canada is a jurisdiction with only modest penetration of low-cost products, while OSC lawyer Chantal Mainville stressed that regulators were keenly aware of the possible threat posed by triggering “unintended consequences”.

The first panel dealt with options around capping or standardizing trailing commissions. The options of both capping (i.e. setting a maximum rate) and standardizing (i.e. setting a specific rate) on trailers was discussed. The context was whether any of these alternatives could be implemented in a way that might sufficiently mitigate the conflict created by trailing commissions. The panel also explored the impact that these alternatives might have in regards to access to advice and competition in the marketplace. Consultant Neil Gross noted that neither standardization nor capping put the cost of advice in the investors’ control, saying that neither option responded to the primary problem of advisor conflict.

The second panel looked expressly at the possibility of discontinuing the deferred sales charge (DSC) option. Once again, the panel looked at what might happen to access to advice and competition in the marketplace, but also delved a bit further into dealer business models. As you might expect, some participants were more persuasive than others.



I was pleasantly surprised to hear comments from John Adams, President and CEO of PFSL Investments Canada Inc, who noted that his firm has instituted a one-time commission policy, so that funds on an expiring DSC schedule cannot be re-invested into a new (typically seven-year) redemption schedule. I also noted that 3 of the 4 panelists suggested that the DSC option was about choice – even as they made no direct comments regarding bias and conflict.

Marian Passmore of The Canadian Foundation for the Advancement of Investor Rights (FAIR) suggested that we already have an advice gap in Canada, since it is her view that investors are “not getting objective advice now – and not getting advice that is in in their best interests”. In so doing, Passmore turned the question from one of access to advice for small investors to one of quality of advice. You might say that Passmore was more worried about a “good advice gap” that was already baked into the system than a mere “advice gap” caused by reduced access to advice.

After a short break, the third panel convened to discuss Enhancements to Disclosure and Choice. The topics of discussion included ways to increase investors’ awareness, understanding and control of embedded commissions and related conflicts of interest. This included the possibility of alternative payment options in addition to embedded commissions. Interestingly, despite study after study showing that most Canadian mutual fund investors still don’t know how and how much their advisor is being paid, 3 of the 4 panelists insisted that the current system is good enough.

Sandra Kegie, the Executive Director of the Canadian Federation of Mutual Fund Dealers made the point that there could be additional disclosures made at the point

when accounts were being opened where investors could be offered a choice between minimal (mandatory) services at a lower price and additional, value-added enhanced services at a higher price. Note that if this were to be implemented, those choosing the latter option would need to pay the difference through some form of direct payment.

Dan Hallett, a Vice-President at Highview Financial Group was clear that the terminology used by many panelists (including those on earlier panels) that the notion of small investors having to “write a cheque” is simply untrue, since the prevailing methodology for payment would be by doing either monthly or quarterly redemptions to pay the advisor and her firm. Hallett also asked why so many people were suggesting that paying directly was bad for business when, in fact, the fastest-growing segment of the mutual fund industry was F-Series funds where embedded compensation has been expressly stripped out.

The overall impression seems to be that the industry mostly thinks things are just fine the way they are. My rough count would put the score at four panelists in favour of change and nine in favour of leaving things alone. Of course, Maureen Jensen was entirely clear that leaving things as they are was simply not in the cards. After all, even organizations that consult for over a decade must do something eventually.

John De Goey is a portfolio manager with Industrial Alliance Securities (IAS) and the author of The Professional Financial Advisor IV. The views expressed are not necessarily shared by IAS, which is a member of the Canadian Investor Protection Fund.

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Investor Awareness

Stock Charts Can Be Misleading To The Novice Chart Reader

W hen talking about the stock market, most financial advisors like to use charts to illustrate the past behaviour of the stock markets.

Charts are a great vehicle to show how volatile the stock market can be year to year, and they also show the long-term returns of various stock markets. One such chart is called the “Morningstar Andex Chart”. There is a great deal of valuable information on this chart including past periods of inflation, recessions, interest rates, etc. However, the main information on this chart is past performance of the stock markets around the world. Long lines that stretch the length of the document from left to right represent the returns. Advisors use this tool to illustrate how the markets have performed in the past, especially to the novice investor. However, this chart can be deceiving if you don’t read it properly.

When you first observe the Andex Chart, it seems that the markets go up smoothly with small drops here and

John Kalos

there, but all of us know that this is not the case. Markets can drop by as much as 50% (circa 2008-2009), but by looking at the chart, it looks like a small decline. The reason is that this chart is what we call a “logarithmic chart” instead of a “linear chart.”

If you look at the numbers on the Andex Chart, the solid coloured lines represent how the value of $100 has progressed in various markets since 1950. Let’s assume that we bought the markets for $100 in 1950. The $100 became $1,000 at around 1970. The distance on the chart between the $100 point and the $1,000 point (you see these values at the left-hand side of the chart) is about 3cm. Now let’s look at the chart between $1000 and $10,000. The distance between these values is also about 3cm. When you look at the distance between $10,000 and $50,000 it is only about 2 cm. So, let’s assume that our $100 became $50,000. If the $50,000 went down by 50% to $25,000, this loss would be represented by a 1 cm drop on the chart which is hardly visible when

you look at the entire chart. This is where it becomes misleading. If you look at the lines on or around 2008-2009, most markets did drop by 50%, and yet the chart fails to show this dramatic drop to the novice chart reader.

If you want to see how the markets have progressed over the years, it’s best to look at a “linear chart”. This chart shows a complete picture of how the markets have behaved over the years in real numbers. It gives you a realistic sense of how volatile the markets can be. The chart I have included covers the period between 2000 and 2017. Observe the Andex Chart over the same period. It looks far less dramatic than the linear chart.

The Andex Chart is a tool which I have used with my clients as well and the other



MoneyTip

data on it is very useful and interesting. However, if an advisor is showing it to you, it’s important they explain why it looks so “smooth” and to show you a linear graph as well.

John Kalos, CFP, Fin.Pl. is an independent Certified Financial Planner (CFP) at IRONSHIELD Financial Planning. He is also the founder of "Confessions of an Ex-Banker" Podcast which can be downloaded on iTunes. He can be reached at [email protected].

Debt Levels In Canada Haven’t Reached ‘Crisis Mode’ Yet: Former CIBC Chair

Despite Canadians holding on to record levels of debt, the country is not in “crisis mode” yet, according to one Canadian business leader who says the growing amount of consumer debt shouldn’t be discussed in general terms.

“The debt level cannot be taken [in] absolute [terms]. It needs to be taken relative to the assets that Canadian citizens have at the same time,” Charles Sirois, co-founder and chairman of Pangea and a former CIBC chairman, told BNN in an interview Tuesday.

Sirois put the blame for soaring debt partly on rising home prices and greater levels of home ownership, noting debt levels increase when people buy more expensive homes.

National home prices topped $496,500 in December, up 5.7 per cent from a year earlier, according to the latest data from the Canadian Real Estate Association. Home sales were also up 4.1 per cent on a year-over-year basis for the month.

Despite higher home costs, Canadians shouldn’t stop worrying about consumption levels, Sirois said.

“Obviously the debt level on the consumption side is something that we should worry about,” he said.

“That’s the balance that needs to be achieved.”

“I think it is prudent right now that we should encourage Canadians to reduce the debt level or stabilize it,” he added. “We should be cautious about debt, but we should not be panicking about it.”

Sirois’ comments come a day after a survey released by MNP, conducted by Ipsos, revealed 33 per cent of Canadians can’t cover their basic monthly bills. Almost half (48 per cent) of respondents said they only have a $200-buffer to cover their costs.

The survey was released in time for the Bank of Canada’s next interest rate decision on Wednesday January 17, 2018.. It is widely expected the bank will raise rates 25 basis points to 1.25 per cent, with the implied probability of a hike sitting at 90 per cent as of Tuesday morning.

Forty-two per cent of respondents to the MNP survey said they would be in financial trouble if rates rise much higher.

Source: Nicole Gibillini, BNN

https://www.bnn.ca/debt-levels-in-canada-haven-t-reached-crisis-mode-yet-former-cibc-chair-1.969571.


https://www.bnn.ca/debt-levels-in-canada-haven-t-reached-crisis-mode-yet-former-cibc-chair-1.969571




Legal And Big Picture Planning

Investing Inside An Insurance Policy – Part 3Universal Life Insurance As An Investment

Think that life insurance is just a tool to make sure that junior gets the university vacation if you die in your 40s, your spouse doesn’t have to worry about mortgage payments if

you die in your 60’s or your kids have enough money to pay the final tax bill on the family cottage if you die in your 80’s? Not so fast, says the insurance industry. They are now seeking a place at the table when clients discuss ways of funding their own retirement, particularly for those clients in higher tax brackets and those that have their own corporations.

The first two parts of this series have detailed some of the significant tax advantages enjoyed by life insurance and steps you can take to mitigate risk when looking to invest through life insurance or if you’re already the proud owner of a policy to call your own. To date, I’ve said little about your actual investment options inside an insurance policy, although I’ll focus solely on “Universal Life” or UL policies, the insurance that most closely resemble traditional investments. For those of who are fans of Participating Whole Life (“Par”) Policies, you’ll unfortunately have to wait until next time. Finally, regardless of whether you’re looking at either of these types of policies or even more basic permanent policies, my (hopefully) final article in this series will hopefully provide you with guidelines to use when measuring life insurance against traditional investments, as any comparison between options is only as accurate as the underlying assumptions.

But, before I go any further, I wish to thank the insurance advisors I’ve canvassed for their insurance investment recommendations: Lee Brooks of View 360 Insurance Advisory (New Westminster, British Columbia), Tyler Eastman, Sun Life Advisor (Terrace, British Columbia), John Ong, Certified Financial Planner (Vancouver, British Columbia) and fellow

Colin Ritchie

MoneySaver Contributing Editor, Rino Rancanelli, owner of CorporateTaxShelter.ca (Oakville, Ontario).

Setting The StageWhile Par Policies are something of a mysterious black

box that spits out policy dividends each year and often offer guaranteed increases in cash value, UL policies are generally more transparent, flexible and multi-purpose creatures. There is a set minimum premium payable monthly or yearly for guaranteed death benefit or “face value” of the policy but extra contributions are allowed into what is called an “accumulating fund” that is essentially a tax-free investment account whose balance at death is paid out tax-free on top of the face value. Each insurer offers its own set of different investment options. Traditionally, this meant predominantly mutual funds, which has often meant more uncertain and volatile returns than Par Policies and some rather steep investment management fees.

Like Par Policies, the greatest risk to owning a UL is having the policy run out of money when the owner doesn’t have extra funds to contribute to the cause. Traditionally, there has been a far greater chance of this happening for UL policies than their Par compatriots for a few reasons:

• Volatility Although a UL policy will offer you far more upside than a Par Policy, it also exposes you to double-digit losses in a year if you pick riskier investment options and all does not go well.

• Inability to lock in gains If you get paid a policy dividend in your Par Policy, it gets added to the cash value and the insurance company can’t take it away from you the next year if their investments don’t perform as expected. Accordingly,

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they invest more conservatively and factor lots of margin for safety when setting premium rates. UL policies give clients the chance for making a lot more profit but don’t generally provide them with this safety net, except for “limited pay” policies that at least ensure that you are no longer responsible for ongoing premium payments after a set period of time even though any additional contributions you’ve invested are still fully at risk. I have listed a few exceptions to the rule later in this article.

• Overly optimistic investment return assumptionsIn the 80’s and 90’s, when markets soaring and interest rates were high, UL policies were the policies of choice, while Par Policies were considered yesterday’s news. Although illustrations for both types of policies purchased during this period have not lived up to expectations, UL policies (particularly if invested in mostly equities) took far more of the pain. While Par Policies ended up paying less than everyone hoped, at least they continued to pay out policy dividends year over year. In contrast, negative portfolio returns in UL policies meant that the anticipated growth that was supposed to pay future policy premiums was not merely growing slower than expected but was actually shrinking. That meant policies running out of money far sooner.

• Yearly Increases in Premiums It was common for clients to purchase UL policies that had yearly increases in their insurance costs (sometimes to set ages and sometimes indefinitely) to keep costs low in the early years so they could have more money working for them in their investment fund. The theory was that the opportunity to have more money in the market longer helped clients since the extra profits they would earn on their investments in the early years would pay for the increased insurance costs on the back end. When performance lagged and the clients didn’t continue to contribute fresh funds to keep their UL policies on course, the increases in fees, modest for younger clients but growing significantly for older clients, ultimately made many policies unsustainable. By contrast, Par Policies generally offer a level premium for life so that, even if they weren’t able to be self-funding as early as originally illustrated, the cost of keeping the policy going was not nearly as significant.

On the other hand, life is about learning from one’s mistakes. Just because UL policies have performed badly in the past, doesn’t mean that there is no place

for them in your future. The potential tax savings and advantages offered by these policies are real and can still offer significant benefits to the right clients. For the same reason that it can be a mistake for investors to completely shun investing in the stock market just because they’ve been bitten in the past, it may also be a missed opportunity for investors to not investigate using ULs now merely because of past problems. The secret is often to learn from and fix the mistakes of the past rather than abandoning a strategy without a backward glance.

Along those lines, the insurance industry has made some significant changes to their investment offerings and the investment fees charged on these offerings that do a lot to mitigate risk and enhance performance. Moreover, no one is purchasing these policies on the expectation of continuous double-digit returns, which means that it is now a lot easier for ULs to live up to their promises. In defence of insurance advisors past, however, it wasn’t merely the insurance industry that was assuming that investors in that period would continue to enjoy double-digit returns in perpetuity; many investment portfolios burdened by similar unrealistic expectations also floundered and flopped.

Finally, more clients select policies with level premiums, specially designed policies that allow tax sheltering but reduce or even almost eliminate the insurance costs over time, or, if they do choose yearly increases in costs, doing so with a contractual right to switch over to a fixed yearly charge at a later date of their choosing at a predetermined rate. In other words, they can take advantage of the rather significant savings and potentially improved overall results by paying yearly increasing rates for a number of years but preselecting a time to bite the bullet and switch over to level rates based on their age at that time in order to control future costs. In the end, UL policies are a lot like an electric drill– if used in the right situation, in a careful, safe manner and regularly maintained, it just might be the best tool for the right job, although if used inappropriate, there is the chance of pain and shocks.

Changes in UL Investment OptionsIn my previous article in these series, I argued that it’s

important to manage your UL policy in the same way as the rest of your investments. This means reviewing and potentially rebalancing the investments inside your portfolio at least once a year, changing your holdings if your time horizon and risk tolerance change and getting your insurance advisor to update your policy illustrations



every few years so you can make small changes immediately rather than facing large changes later.

Noting all of this, in the end, it still often comes down to investments inside the policy. My personal bias is to use UL policies for the slow and steady portion of your portfolio rather than the “shoot for the moon” component. The less volatile your investments, the less likely things can go wrong. Furthermore, for the same reasons I love investments that pay interest and dividends along the way in order to reduce the need to eat into capital during down markets, I love similar investments inside UL policies in order to generate cash to pay the annual premium costs.

Fortunately, there are an ever-increasing number of investment options. One insurer actually offers more than 200 investment choices for UL investors, although I am not completely convinced that more is always better. Many of these are mutual funds, often the same ones you could select within an RRSP or an open account, but they aren’t the only game in town. Here are a few of the more innovative choices:

• A Mortgage Investment Corporation BMO offers you the chance to invest in a portfolio of mortgages held by a Mortgage Investment Corporation (“MIC”) that would pay around 6% and is a non-stock market investment. Since this is a private investment, this means not having to worry about stock market fluctuations and, despite a low interest rate environment, earning a yield that is probably higher than the one used to illustrate the performance of your UL policy. It also means that yield should increase relatively quickly when mortgage rates go up, as the mortgages are all two years or less and there are always mortgages coming due and fresh money is being lent at the new market rate.

• A Stock Market Investment that Guarantees No Losses

BMO offers the “Guaranteed Market Index Account”, which it describes as offering the security of a GIC with exposure to the TSX 60. It’s a simple proposition – you get 50% of the market upside each year but none of the downside. Although this doesn’t eliminate volatility and still means having to eat into capital during a bad year to pay premiums, it does offer some exposure to the market during good times and better protects your capital during the bad ones.

• Absolute Return Funds Sun Life offers a fund designed to make a yearly profit

of 5% more than the overnight lending rate over every 3-year period, regardless of market conditions by using a bunch of strategies, depending on market conditions at that time. Thus, instead of claiming a successful record merely because it has lost less than its competitors, it is only successful if it’s making you the promised profit, regardless of what the market does. Furthermore, they strive to be less than half as volatile as the global stock market.

• Diversified AccountsSun Life Offers the Sun Life Diversified Account that reminds me a lot of the investment portfolio you’d receive inside a Par Policy: private mortgages, some private investments, real estate, public bonds and some public equities. It also smooths returns in order to provide less volatility and predictability. At the time of this article, it pays daily interest equal to about 4% per year and guarantees that your yearly return will never drop below 0%.

• Hybrid UL / Par PoliciesIndustrial Alliance offers a product called the “Equibuild” that is designed to give you the best of both worlds. The basic premiums go into a fund that generates guaranteed cash value like you’d enjoy with a Par Policy and pays policy dividends. Any extra money you contribute can be allocated to Equibuild Fund, which is the Par Policy equivalent, or towards more traditional UL investments. There is also even the option to use extra money to buy an additional paid up death benefit each year. As another feature, there is a cash for life feature where the owner is guaranteed payment for life if he wants to use the policy for retirement purposes.

Obviously, there are likely other intriguing insurance investment options out there, as these are only some of the options I’ve discovered on my own and through my cadre of insurance advisor friends. I suggest doing what I do when working with financial planning clients who are potentially interested in life insurance – collaborating with a licensed insurance advisor (which I am not, as my focus is on big picture planning despite owning my Certified Life Underwriter Designation and having spent 15 years advising insurance advisors) who can make specific policy recommendations.

Unless your insurance advisor is experienced in overall financial planning and knows your situation, I strongly suggest getting a financial planner familiar with your overarching financial plan review the size, type and ownership of the policy suggested to ensure that it’s the



best possible fit. Think about buying life insurance like shoe shopping – even though you need new runners for an upcoming marathon, if you buy the wrong pair or overpay, you may either not make it across the finish line or, if you do, the resulting discomfort and stress of cramped toes or living outside your budget may ultimately make the experience a lot less enjoyable.

Also, when deciding whether to own the policy personally, corporately, in a trust or as a combination of these choices, it’s important to get it right the first time, as there are often tax costs that can arise if you have to change ownership of a policy later. Unfortunately, I often get involved after the policy is already in place, when options are more limited and changes can be expensive.

ConclusionAlthough many clients feel more comfortable with

Par Policies (which I will talk about more next time), I still see UL policies as a strong choice for the right client in the right situation. They offer more flexibility and transparency. For example, some UL policies both allow the entire cash value of the investment account to be withdrawn tax-free during life in the event of a disability and allow you to change your policy investments at your own discretion, which may allow clients to perform better over the long term if they play their cards right.

In the end, each policy has its own advantages – for example, clients planning on borrowing against their policies during retirement are often able to borrow more against the cash value of Par Policies than their UL cousins while someone planning on withdrawing directly from their policy during retirement might be better served with a cheaper UL policy with reducing insurance costs. Ultimately, I believe that insurance can become a valuable tool in many retirement plans and that the type of policy best suited to the purpose depends on the client and situation. In these days of steadily increasing income tax rates, life insurance and all the tax benefits that come with it might be worth a second look when looking to fund your retirement.

Colin S. Ritchie, BA.H. LL.B., CFP, CLU, TEP and FMA is a Vancouver-based fee-for-service lawyer and financial planner who does not sell investment or insurance, just advice. To find out more, visit his website at www.colinsritchie.co

Annuities Offer Income For Life

Best Prescribed Annuity Rates: $250,000 10-year Guarantee

1. Male Single Life Prescribed Annuity ages 65,70,75 and 80

2. Female Single Life Prescribed Annuity ages 65,70,75, and 80

3. Joint Life Prescribed Annuity Male/Female ages 65,70,75, and 80.

Annuity income values were obtained from highly rated Canadian insurers and are for illustration purposes only.

Annuity rates change daily. Income and tax rate will depend when the annuity contract is issued.

Rino Racanelli, independent annuity [email protected]

Male age at purchase

Annual income

Annual Taxable Amount

65 $15,418 $3,091

70 $17,588 $2,846

75 $19,925 $2,423

80 $22,527 $2,253

Female age at purchase

Annual income


65 $14,499 $3,449

70 $16,271 $2,956

75 $18,442 $2,261

80 $21,323 $1,946

Joint age at purchase

Annual income


65 $13,119 $3,570

70 $14,576 $3,106

75 $16,539 $688

80 $19,396 $0


http://www.colinsritchie.co



Beating The TSX

BTSX 2017/2018 Annual Update

A pril of 2017 marked the end of our first decade of early retirement. It was an interesting exercise to reflect on that time. We left work just before the Financial

Crisis and then watched the stock markets lose 40%+ of their value. I may be stating the obvious but the worst time to retire is at the beginning of a market decline. It certainly was a test of our investment strategy.

Ironically, I spent many years working as an electronics test engineer devising ways to push electronic assemblies to extremes to identify failure mechanisms. I was well aware of the benefits of such testing. The end result produced high confidence that the assembly would work reliably even under extreme conditions. Fortunately, the stress test of the Financial Crisis on the Beating the TSX (BTSX) strategy had a positive outcome in the long term. By sticking with dividend-paying stocks and staying invested in the market, it paid off. The markets recovered all their losses and have reached new highs. The dividends eventually started to grow with many of the stock’s dividends growing much faster than inflation.

If you followed my advice in last year’s summary, you have kept track of the return of your portfolio and are able to compare your return to the return of the BTSX. Hopefully you have equalled or exceeded the BTSX return and have not spent too much time in the process. There will be few investors that both beat the long-term returns of the BTSX strategy and only spent 8 hours per year of effort.

For new CMS readers, please note that I use David Stanley’s BTSX process to pick the stocks each December 31st for the following year, with a few modifications. If you are interested in the modifications you can reference my February 2016 article which can be found on the CMS website.

Ross Grant

January – December 2017 ResultsAs you can see from Table 1, the return for the BTSX

portfolio was 10.5%. This was 1.2% more than the iShares S&P/TSX index ETF (XIU) of 9.3%. I have also included the S&P/TSX 60 Total Return Index Value (TRIV) for comparison.

2017 was again one of the years that BTSX lived up to its name. It has occurred to me on many occasions that the name BTSX sure puts a lot of pressure on a very specific goal. Maybe the strategy should be renamed “A Fairly Good Return Without Much Effort”. This would give me a lot more leeway in-terms of performance. I had better stop there as I am starting to sound much like a

Table 1. Beating the TSX Model Portfolio Results from Jan. 1, 2017 to Dec. 31, 2017

Stock SYM Initial Price

Final Price

Change (%)

Enbridge ENB $ 56.50 $49.16 -13.0%

Power Financial PWF(POW) $ 33.56 $34.54 2.9%

EMERA EMA $ 45.39 $46.98 3.5%

BCE Inc. BCE $ 58.03 $60.38 4.0%

Shaw Communications SJR.b $ 26.94 $28.69 6.5%

Bank of Nova Scotia BNS $ 74.76 $81.12 8.5%

Fortis Inc. FTS $ 41.46 $46.11 11.2%

Telus T $ 42.75 $47.62 11.4%

CIBC CM $ 109.56 $122.54 11.8%

National Bank NA $ 54.53 $62.76 15.1%

Average Capital Gain 6.2%

TOTAL BTSX Gain (includes 4.3% dividend) 10.5%

XIU1 (includes 2.65% dividend) $22.64 $24.15 9.3%

S&P/TSX 60 TRIV2 2355.53 2585.97 9.8%1XIU is an investable S&P/TSX 60 index ETF.2Total Return Value for the S&P/TSX 60 Index. Data from TMX-Money.com



Table 3. Compound Annual Growth Rate (CAGR)BTSX - Jan - Dec list

Portfolio Index

17 Yr 11.1% 7.4%

10 Yr 10.6% 4.6%

5 Yr 13.1% 9.1%

3 Yr 8.2% 6.9%

1 Yr 10.5% 9.3%

2018 BTSX PortfolioTable 4 on the next page lists the stock picks for 2018.

These stocks are purchased January 1st and held until the end of the year, unless they cut their dividend.

You can use this list as you choose. You may wish to purchase all the stocks or perhaps use this list as a suggestion of high yielding stocks from the S&P/TSX 60 to review further.

The 4.4% dividend yield of this year’s list is another one of the exciting things about this strategy. If you can live off 4% or less of your portfolio, as is often recommended by financial experts, then you can fund your retirement income from the dividends received without having to sell any capital, making portfolio income management quite simple.

DOGs Of The Dow PortfolioAs readers of my book know, I also invest in Dogs of

the Dow, so I have decided to provide this list of stocks as well. This provides a U.S. portfolio of high dividend-paying blue chip stocks. As you can see from Table 5, for 2017 there was a return of 22.9 %. It is hard to be disappointed with such a high return, but as you can see we underperformed compared to the index which increased 27.5%. It was quite a good year for the U.S. markets!

In the list, Boeing (BA) and Caterpillar (CAT) contributed significantly to the overall return. When looking closer at all 30 stocks in the Dow Jones, I can see that there are a handful of stocks that did exceptionally well and helped drive the average up. You would have a fantastic return if you knew what those highflying stocks would be in advance. Since this is not possible, it is best to buy a larger group of stocks and focus on the overall return of the group. This methodology will more steadily move you towards your investment goals.

This return is in U.S. dollars and thus does not factor in any changes in the portfolio due to the varying

professional fund manager trying to negotiate a lower performance target.

I would like to point out that the 9.3% XIU return is great considering an investor would only have to purchase a single ETF rather than the 10 separate stocks in the BTSX. As a simple alternative to the BTSX process, I always suggest using the XIU ETF as a starting point for new investors or experienced investors who don’t have time to invest in individual stocks. I still own the XIU shares that I purchased when starting my portfolio decades ago. In years when XIU outperforms the BTSX, I am always happy to still own them.

As you review the results you will notice that Enbridge (ENB) did not have a good year even though they increased their dividend by 14.5% in 2017 and announced a 10% dividend increase that will take effect in early 2018. I find situations like this quite exciting as you can buy ENB for 13% less than on January 1st, 2017 but it is paying a 24.5% higher dividend. It is worth a closer look.

Table 2 shows the average results over the last 17 years. The BTSX portfolio that I have been using is outperforming the index by over 42%. Earning an average of 12% will allow many investors to easily meet their financial goals.

For those of you that use other financial strategies or have turned your investments over to a financial advisor, it is important that you compare your long term returns to these numbers as one potential benchmark. It is the longer-term results that all investors need to focus on. The returns of any one year are much less important.

Table 2. Beating the TSX returns vs. the index (%) 2000 - 2017

Portfolio Index

Avg Yr. Total Return (%) 12.00% 8.5%

Portfolio Outperformance 42.0%

In Table 3 the Compound Annual Growth Rate (CAGR) is shown, rather than the simple average numbers I usually work with. The CAGR number will allow a comparison to mutual fund returns or any other investment returns that indicate their CAGR number. As you can see, the BTSX portfolio currently is outperforming the index in all timeframes.



exchange rate. Table 6 shows the average results from the last 13 years with an outperformance of 9%. This result is lower than the BTSX result, but is still in our favour.

Table 6. Dogs of the Dow vs. the index (%)2005 – 2017

Portfolio Index

Avg Yr. Total Return (%) 11.4% 10.4%

Portfolio Outperformance 9.0%

Table 7 lists the stock picks for 2018. General Electric (GE) should be in the 10th position, if we were going with the true Dogs of the Dow list as I usually do. Due to a recent 50% cut of the GE dividend I have chosen to skip GE and replace it with the 11th stock, which is Johnson & Johnson (JNJ). As readers of my articles will know, I have found stocks that cut their dividends tend to have poor performance for many years after the event. This is not always the case, but there is too much risk for my liking to keep the dividend cutter in my portfolio.

I will be purchasing all of the new stocks in the 2018 lists for BTSX and Dogs of the Dow, and hoping for the best, as usual. Due to the dividend increases, one of the benefits of owning these dividend stocks is that the total income from the portfolio is growing at or above inflation each year. The total income gets an extra boost in January when the lower yielding stocks that move out of the top 10 are sold and then replaced with higher yielding stocks.

Fortunately with this system, all that is left to do for the next 12 months is to watch for any dividend changes. Hopefully there will be many more increases than decreases.

If you have any questions or would like more information, please feel free to contact me.

Ross Grant is the e-book Author of Destination: Early Financial Independence, available on Amazon and Kobo for $5.99. Free e-reader software is available for PCs, MACs, etc. to view the book. Please email Ross if you need the links. You can reach him at [email protected]

Table 7. Dogs of the Dow Portfolio - 2018. All data is in US dollars.

Stock SYM Price1 IAD2 Yield %

Verizon VZ $ 52.93 $ 2.36 4.46%

Int. Business Machines IBM $ 153.42 $ 6.00 3.91%

Pfizer PFE $ 36.22 $ 1.36 3.75%

Exxon Mobil XOM $ 83.64 $ 3.08 3.68%

Chevron CVX $ 125.19 $ 4.32 3.45%

Merck & Co. MRK $ 56.27 $ 1.92 3.41%

Coke KO $ 45.88 $ 1.48 3.23%

Cisco CSCO $ 38.30 $ 1.16 3.03%

Proctor & Gamble PG $ 91.88 $ 2.76 3.00%

Johnson & Johnson JNJ $ 139.72 $ 3.36 2.40%

Average Yield 3.43%1Stock prices at December 31, 2017 2Indicated Annual Dividend

Table 5. Dogs of the Dow - Results from Jan.1, 2017 to Dec. 31, 2017 All data is in U.S. dollars.

Stock SYM Initial Final Change

Int. Business Machines IBM $ 165.99 $153.42 -7.6%

Exxon Mobil XOM $ 90.26 $83.64 -7.3%

Merck & Co. MRK $ 58.87 $56.27 -4.4%

Verizon VZ $ 53.38 $52.93 -0.8%

Chevron CVX $ 117.70 $125.19 6.4%

Coke KO $ 41.46 $45.88 10.7%

Pfizer PFE $ 32.48 $36.22 11.5%

Cisco CSCO $ 30.22 $38.30 26.7%

Caterpillar CAT $ 92.74 $157.58 69.9%

Boeing BA $ 155.68 $294.91 89.4%

Average (includes 3.5% dividend) 22.9%

DIA1 (includes 2.3% dividend) $197.51 $247.38 27.5%

1DIA is an investable Dow Jones Index ETF

Table 4. BTSX Portfolio - 2018

Stock SYM Price1 IAD2 Yield %

Enbridge ENB $ 49.16 $ 2.68 5.45%

EMERA EMA $ 46.98 $ 2.26 4.81%

Power Financial Corp. PWF(POW) $ 34.54 $ 1.65 4.78%

BCE Inc. BCE $ 60.38 $ 2.87 4.75%

CIBC CM $ 122.54 $ 5.20 4.24%

Telus T $ 47.62 $ 2.02 4.24%

Shaw Communications SJR.b $ 28.69 $ 1.19 4.13%

TransCanada Corp. TRP $ 61.18 $ 2.50 4.09%

Bank of Nova Scotia BNS $ 81.12 $ 3.16 3.90%

National Bank NA $ 62.72 $ 2.40 3.83%

Average Yield 4.42%1Stock prices at December 31, 2017 2Indicated Annual Dividend





Sector Focus

Buy Cruise Stocks If You Can Handle Rough Seas Retiring Baby Boomers, Chinese Vacationers Helping Industry GrowRichard Morrison

Every winter my cousin Karen and her husband Ken take a cruise around the Caribbean on a huge ship that is essentially an opulent floating city.

“When we leave for our cruises we’re always pale and stressed out from work,” Karen said. “When we come back we’re tanned and relaxed, but we’re ten pounds fatter and our credit card bill is huge. Even so, it’s worth every penny.”

With a dozen or so winter cruises under their belts, Karen and Ken have recognized there is no point in trying to live frugally on a cruise ship. Their credit card statement always swells with bills from shipboard bars, restaurants, salon and spa treatments, wine tastings, Pilates lessons and cooking classes, plus fees for Internet access and shore excursions, not to mention the money lost in the casino.

“The whole experience of the vacation makes it worth the money, though,” Karen said. Since the money is flowing and the ships are full, she wondered if cruise ship lines are good investments. In my view, cruise line stocks are indeed solid choices for investors who are looking for long-term growth and can stand a little volatility.

Demand for cruising is increasing, says the Cruise Line International Association (CLIA), which represents more than 50 cruise lines that collectively account for more than 95% of global cruise capacity. The CLIA’s figures show the number of passengers carried on cruise ships has increased steadily over the past eight years. In 2018, CRIA says 27.2 million passengers are expected to take cruises, up from 25.8 million in 2017, 24.7 million in 2016 and 23.06 million in 2015. Similarly, 80% of travel agents certified by the CLIA say they are expecting an increase in sales in 2018.

Baby Boomers are reaching retirement age, which means greater demand for vacations. At the same time cruise tourism in Asia is growing at an impressive rate, with China as the main driver as more Chinese join the

middle class. A CLIA analysis on Asian cruise trends showed that between 2012 and 2017, the absolute volume of cruise travelers from Asia has quadrupled, with much of the gain coming from Chinese passengers.

Investors who want to capitalize on the trend have three publicly traded cruise stocks from which to choose. Carnival Corp. (CCL/NYSE) with a market capitalization (shares times share price) of US$47.5 billion, Royal Caribbean Cruises Ltd. (RCL/NYSE) with a market cap of US$25.5 billion and Norwegian Cruise Line Holdings Ltd. (NCLH/NYSE), with a market cap of US$12.2 billion. Investors cannot participate directly in Disney Cruise Line, as the cruise line segment is included in Disney’s parks and resorts segment.

Over the long-term, Carnival, Royal Caribbean and Norwegian have all outperformed the S&P 500. Shares of Royal Caribbean have been the biggest gainer, rising fourfold to about US$120 from US$30 over the past five years, while shares of Norwegian Cruise Line and Carnival Corp. have doubled over the same period. There have been some rough seas along the way, however. In the five weeks between late December 2015 and the end of January 2016, for example, both Norwegian and Royal Caribbean’s share prices fell 30%, while Carnival investors lost 22%.

Carnival Corp. (CCL/NYSE)Carnival is the world’s largest cruise line company, with

102 ships and 19 more coming over the next few years. Carnival’s brands include Carnival Cruise Line, Fathom, Holland America Line, Princess Cruises and Seabourn in North America; Cunard and P&O Cruises in England; AIDA Cruises in Germany; Costa Cruises in Italy and P&O in Australia. Combined, the brands employ about 120,000 people. On any day, more than 325,000 passengers are on its ships, totaling about 85 million passenger cruise days a year, the company’s website says.

Founder Ted Arison started the company in 1972 with a single second-hand ship, Canadian Pacific’s 11-year-old



Empress of Canada, and renamed it the TSS Mardi Gras. Touted as a “fun ship,” on her maiden voyage from Miami to San Juan, the Mardi Gras ran aground on a sandbar, although she was refloated and served the company until 1993. It’s been full steam ahead for Carnival since then.

In 2017 Carnival reported record full-year revenues of US$17.5 billion, up $1.1 billion over the previous year. Net income was US$2.6 billion or US$3.59 per share, down from US$2.8 billion or US$3.72 per share, hurt by higher fuel costs and less favourable currency exchange rates.

Next year, full-year adjusted earnings per share should be in the range of US$4 to US$4.30.

Carnival’s shares are the least volatile of the three, making them best suited for those who don’t like choppy seas. Carnival shares traded at about US$45 in September 2016, then climbed steadily to reach the US$65 level last summer and have remained in the US$65 range since then. At a recent price of US$67, the shares trade at about 16 times next year’s projected earnings. The dividend of US$1.80 yields about 2.7%.

Norwegian Cruise Lines Holdings Ltd. (NCLH/NYSE)Norwegian Cruise Line Holdings Ltd. operates the

Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. Norwegian has 25 ships, but will add seven more by 2025, and two more in 2026 and 2027. The company is best known for its Freestyle Cruising concept, which means that there are no fixed times or pre-arranged seating arrangements for meals, nor is formal attire required.

Carnival founder Ted Arison joined Norwegian shipping magnate Knut Kloster to set up Norwegian in 1966, using the car ferry Sunward to carry cars between Southampton England and Gibraltar. After Mr. Arison left to start Carnival, Mr. Kloster remained at Norwegian, bought a second car ferry, the Starward, and began offering combined flights with Caribbean cruises. In 1979 Norwegian bought the famous liner France, at the time the world’s largest passenger ship, poured US$100-million into it and renamed it Norway. The first giant cruise liner was popular with vacationers and prompted competitors to offer big ships of their own.

Norwegian went public on January 1, 2013 at US$25. The stock doubled between October 2014 and October 2015, slumped for a year, then climbed slowly between September 2016 and 2017. At a current price of US$53.25, NCLH trades at about 17 times earnings and about 2.2 times book value per share. The company pays no dividend.

Norwegian’s revenue and earnings have been climbing steadily since 2010. In 2016, Norwegian earned US$633 million (US$2.78 per share) on revenue of US$4.87

billion, up from profit of US$427 million (US$1.26) on revenue of US$4.34 billion in 2015. The company’s operating margin and return on capital have also grown steadily since 2012.

Norwegian said it expects 2017 full-year adjusted earnings per share to come in at about $3.90 per share. Excluding the impact from weather disruptions along with a technical issue on one of its ships, the company’s earnings projection would likely be $4.05 per share, Norwegian said.

At a current share price of US$54.25, Norwegian is trading at about 13.9 times the company’s projected earnings per share.

Royal Caribbean Cruises Ltd. (RCL/NYSE)Royal Caribbean owns and operates three global

brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. Royal has a 50% joint venture owner of the German brand TUI Cruises, a 49% shareholder in the Spanish brand Pullmantur and a minority shareholder in the Chinese brand SkySea Cruises. Together, these brands operate a combined total of 49 ships with an additional twelve on order as of September 30, 2017.

Under Royal Caribbean’s double-double program, launched in 2015, the company said it would try to grow its revenue, increase capacity and control costs to the point where earnings per share for 2017 would be double that of 2014, and return on invested capital (ROIC) would hit double digits. It is nearly there. Royal Caribbean said it is expecting adjusted EPS of $6.78 in 2017, which means at a recent price of US$120, RCI shares trade at 17.7 times earnings.

“The company is experiencing strong early booking trends for 2018,” the company says on its website. “While still early in the booking cycle, the view for 2018 is encouraging and the company expects another year of solid yield and earnings growth.”

ConclusionCruise line stocks are not for retirees seeking income,

nor are they for short-term momentum investors who hope to buy high and sell higher. And their share prices reflect too much optimism to have appeal to bargain-hunting value investors. Buy Carnival if you are looking for low volatility and a high dividend, buy Royal Caribbean if you are a momentum investor interested in riding excellent share price gains over the past few years. If you want to capitalize on across-the-board growth in the industry, take a stake in all three.

Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. [email protected]



Technical Speculator

The Three Classes Of Indicators

Donald W. Dony

Investors normally use one or two classes of indicators when they are analyzing the markets. These groups of gauges are fundamentals and technicals. However, there is a third group that

is also important for investors to remember, and that is economics.

The sensitivity of these classes of indicators to the markets is a key consideration as they tend to forecast or provide information about the markets on different time frames.

Technicals (price action) is the most sensitive to market swings as it plots equity movements in the present time. Technicals are usually the preferred tool for active investors or traders.

Fundamentals are the most recognized and widely used tool for uncovering or predicting value within a stock. There is often a time lag from posted earnings to investor reactions.

Economics (i.e. GDP, Yield curve, Unemployment rate, Inflation, etc.) is an element that few private investors rev iew or take into account when making investment decisions. This subset is the least time sensitive, compared to technicals and fundamentals and can be very contradictory. For example, economic elements can be at historically high levels for months or even years without a market correction. Or one economic indicator will point toward one direction (say, unemployment is down) and another will indicate the opposite (low unemployment creates a potential labour shortage).

Nevertheless, all three classes have a place in the retail investor’s toolbox. The key is how to use them effectively.

For more active investors, a stronger leaning toward technical analysis is suggested. This method of analysis leads itself perfectly to an individual with a one to two year investment hold time frame. It is also the most sensitive to any changes in data to the security and can adapt easily adapt to a trader’s own style.

Fundamental analysis is well suited for a mid-to-long term investor. They will highlight changes to a company’s finances.

Economic indicators are just another layer of valuable data and can provide clues about changes in the economy that can affect the stock market which in turn, can change the fundamentals of a company. For example, if the US Unemployment rate starts to rise, month over month,



MoneyTip

this is a negative sign for the S&P 500. It indicates the economy is no longer growing. The stock market has an inverse trading pattern to the US Unemployment rate. As the stock market starts to rollover, companies are usually quick to reduce their overhead costs and keep their stock afloat. Laying off employees is the fastest way to achieve this goal.

Another way to employ economics is to use the consumer. Spending from this group represent the largest component of US GDP and one of the largest piece in Canadian GDP. When this important group feels optimistic, they buy more discretionary items. When they are concerned about the economy they purchase more staples. Consumer buying is a leading indicator to the stock market.

Bottom line: There are three basic methods or tools for stock analysis. Fundamental analysis is by far the most common. Technical analysis is used primarily for trading. Economics is an area that most investors don’t employ, perhaps because of its complex nature or because they don’t feel this area of finance has an impact on stocks. But it does. A great free source for economic data is on the website: www.tradingeconomics.com

Donald W. Dony, FCSI, MFTA. Analyst, past instructor for the Canadian securities institute (CSI), editor for the www.technicalspeculator.com, [email protected], 250-479-9463

Why Your Investment Strategy Should Fit On An Index Card

Harold Pollack, a professor of public policy at the University of Chicago, generated a good deal of buzz a few years ago by scratching out "all the financial advice you'll ever need" on a 4x6 index card.

Morningstar readers may disagree about some of Pollack's advice--specifically, his exhortation to avoid picking individual stocks and to skip actively managed funds. But it's hard to disagree with Pollack's overarching goal of helping investors cut through the clutter and focus on what really matters. Investing well doesn't have to be complicated, despite the investment industry's efforts to make it seem otherwise. Instead of getting bogged down in byzantine and often expensive products and strategies, investors will have a better shot at reaching their financial goals if they tune out the noise and focus on basics like saving enough and taking advantage of tax-sheltered wrappers.

In a similar vein, you should also be able to distill your own investment approaches into just a few easy-to-understand sentences--or at least get them onto a single note card. Such a process can serve several important goals. First, it can help ensure that your investment strategy isn't too complicated and doesn't require too much maintenance on an ongoing basis. While you may be willing and able to devote a big share of your time to your portfolio right now, that may not be the case at other life stages.

Employing a streamlined, straightforward investment strategy can also be helpful from the standpoint of succession planning for your portfolio. If you can't explain your investment approach to your spouse, trusted adult child, or other loved one in plain language and in just a few sentences, it would probably be difficult for them to manage without a lot of hand-holding from you. Portfolio succession planning is important at every life stage, but especially for older adults who are actively drawing at least a portion of their living expenses from their portfolios. It's important that your spouse knows which accounts you're relying on to fund your ongoing living expenses.

Having a skinnied-down, clearly articulated investment strategy can also serve as a litmus test for the specific investments you hold or might consider buying in the future: If an investment doesn't sync up with the simply stated strategy, then it probably isn't a good fit for your portfolio...

Source: Christine BenzMorningstar

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http://www.tradingeconomics.com

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http://www.technicalspeculator.com


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Book Excerpt

SNEAK PEEK: Burn Your MortgageThe Simple, Powerful Path To Financial FreedomSean Cooper

Y ou may have heard of my story. I’m the guy who paid off his mortgage by age 30. CBC News filmed my mortgage burning party and it went viral. While a lot of people

know I’m mortgage-free, I wanted to share my story of how I got there and why I decided to do it.

Here’s a sneak peek of my new book, Burn Your Mortgage.

The Mortgage-Burning PartyDing-dong, the mortgage is dead,” I triumphantly

announced as I set fire to my mortgage in front of my cheering family and friends outside a pub in the heart of downtown Toronto. The three year journey to mortgage freedom was finally over.

At the ripe old age of 27, I had bought my first house. It’s a beautifully renovated three-bedroom bungalow in Toronto, Canada’s second most expensive housing market, where the average detached house goes for over $1 million. I purchased my house for $425,000, which was a bargain. I was thrilled to finally be able to call myself a homeowner. It had taken me over two years of house hunting and two failed offers to find a place I could call my own. All my hard work and frugal living had paid off. I made a sizable down payment of $170,000, leaving me with a mortgage of $255,000.

Six figures of debt—slightly over a quarter of a million dollars—is pretty intimidating, especially when just one person is carrying it, so I made a plan to pay down my mortgage as quickly as possible. I chose a five-year fixed-rate mortgage at 3.04%.

Melissa Leong of the Financial Post, Canada’s business

newspaper, wrote about my ambitious plan to be mortgage-free. She talked about my single-minded path to debt freedom, which included living in the basement of my new house while tenants thumped around upstairs. Managing to pay off over $100,000 of my mortgage in a year and half, I could taste mortgage freedom.

The journey toward mortgage freedom wasn’t easy. Between my two jobs as a senior pension analyst and a personal finance journalist, I typically worked up to 80 hours a week, putting every spare penny toward my mortgage. I was careful with my travel budget but still managed to have fun. I didn’t take extravagant vacations but instead did daytrips to Niagara Falls and went camping. I was diligent and dedicated. I watched my spending on clothing, entertainment and dining out. I made paying off my mortgage my top priority. Basically, I ate, breathed and slept my mortgage.

Some people have questioned my lifestyle choice. Yes, I could have done a better job of achieving work-life balance, but I see it as short-term pain for long-term gain. I may have worked very hard for three years, but now I have the rest of my life to enjoy, without a massive mortgage holding me back.

September 22 will forever be a date etched in my memory, for it’s the date I paid off my mortgage. I managed to pay it off in three years and two months, ahead of schedule, and before turning 31.

To celebrate, I threw a mortgage-burning party to thank my family and friends for their support (burning the mortgage papers is an old tradition for homeowners who’ve paid off their home). After living conservatively, I went all out. I spent hundreds of dollars on a new suit and on hosting the party—I wanted it to be the mortgage-burning party for the ages. I invited the CBC to film the big moment when my mortgage papers went up in flames.



I had prepared a speech in which I talked about how I hadn’t taken any shortcuts in paying off my mortgage, joking that didn’t have a trust account the size of Paris Hilton’s. My mother was the inspiration for my paying down my mortgage so quickly. When she was downsized during the dot-com bubble, she struggled as a single mother to pay the mortgage and raise two children. Seeing what she went through, I vowed to pay down my mortgage as soon as possible. I lightheartedly remarked that it would be the most important day of my life—until my wedding.

After delivering my speech, with friends and CBC reporter Sophia Harris waiting in anticipation, I attempted to set fire to my mortgage papers. Things didn’t go as planned—for five minutes I tried unsuccessfully to light the papers. Finally they caught fire and went up in flames. I felt like the weight of the world was lifted off my shoulders. This, I thought, is what mortgage freedom feels like.

My story aired on CBC’s The National. Thanks to a stroke of luck and good timing, the story went viral. I received coverage in all the major media outlets in Canada: CBC, CTV, BNN, Global TV, the Globe and Mail and the Toronto Star. My story made headlines around the world. I was featured in the U.K.’s Daily Mail tabloid and appeared on Australia’s top-rated breakfast show, Sunrise. In the U.S., I filmed a segment for Good Morning America and was a guest on Dave Ramsey’s syndicated radio show.

Although I garnered a lot of attention from the media, it wasn’t all good publicity. I was painted as a frugal extremist—someone who lived like a pauper, eating Kraft Dinner for every meal and never going out with friends. I do enjoy Kraft Dinner on occasion, but that particular portrayal of me couldn’t be further from the truth. I’m just a regular, fun-loving person. When I’m not working, I enjoy catching up with friends, cycling, weightlifting, public speaking, cooking and creative writing. And I’m not ashamed to admit I’m a bit of a nerd—I’m a big fan of Chicago P.D., Law & Order and Star Wars. And I’m relentless in achieving my goals.

My story is polarizing. Some people think I did a great thing; other people, not so much. You be the judge. Here are comments I received on a CBC News story:

“...Upstanding citizen works his life away, lives in miserable squalor and forgoes human relationships for years. How is this an inspirational story?...”

“...Yet another privileged white man bragging about how he “did it on his own.” But did anyone notice how big his down payment was? Or the fact that he has a $75K+ full-time job?...”

I get where these people are coming from. Paying off your mortgage in three years is probably not realistic for most people. The good news is that you don’t have to pay off your mortgage in my timeline. My story may be exceptional, but hopefully you can draw inspiration from it. If I can pay off my mortgage so quickly, you too can do it faster and sooner than you imagine. And you don’t have to ditch your friends, eat only Kraft Dinner and go to financial extremes to pay off your mortgage sooner.

Sean Cooper is a speaker, money coach and personal finance journalist. Follow him on Twitter @SeanCooperWrite , email him at [email protected] or visit his website http://www.seancooperwriter.com.





Tax Strategies

TFSAs– Tips And Traps

David Townsend

A lthough a relatively new financial product, tax-free savings accounts are well-utilized and have become a mainstay in many financial plans. The annual contribution

room is indexed to inflation (rounded to the nearest $500) and the additional 2018 room is $5,500. This means that anyone who was eighteen in 2009 and has been a Canadian resident for the last ten years could have made total TFSA contributions of $57,500 as of 2018. A couple could have a combined total of $115,000.

As is always the case, finance has made the TFSA rules complicated and there are tricky spots. Hopefully the following will help guide you through without any unpleasant surprises.

Track Your Own TFSA Contribution Room

CRA closely monitors TFSA contributions and taxpayers’ available contribution room. As many know, TFSA contribution room can be accessed on-line. However, that information is not up to date so it is often not reliable. Be skeptical of the numbers if you have recent withdrawals or contributions (see below) or hold TFSA’s with more than one institution.

If you want to make a contribution and your spouse has unused room, consider a contribution to his or her TFSA. There are no income tax implications for the contributing spouse. On marriage breakdown, amounts can be transferred directly between the former partners’ TFSA’s without affecting the contribution room.

Be Careful Making A Withdrawal And Re-Contribution

Some make the mistake of withdrawing funds

from one TFSA and redepositing the funds in another account. Intuitively you would think that is allowed. Unfortunately, however, the TFSA withdrawal does not increase the contribution room until the next calendar year.

That is difficult to understand, so to provide an example. Kevin never made TFSA contributions but wanted to catch up and contributed $52,000 in January 2017. However, in June 2017, he decides to move his TFSA to another institution. Kevin withdraws the $52K from the one institution and then redeposits it in another TFSA at a different bank. Unfortunately, even after the withdrawal, Kevin’s 2017 contribution room is zero. He will be over-contributed for six months in 2017 and will have to pay over $3,000 penalty tax.

As of January 2018, Kevin’s contribution room will be restored for the $52,000 withdrawal so he will no longer be over-contributed. His TFSA contribution room as of January 1, 2018 will be $5,500 (at time of publication).

The penalty tax could have been avoided if the original TFSA issuer just transferred the funds to a new TFSA at the second institution, completed a direct transfer form, and filed that with CRA. But the investor needs to be proactive to ensure the right steps are taken and paperwork filed. My experience is that otherwise it will be assumed that the taxpayer is simply withdrawing the TFSA funds.

If You Have A Spouse Or Common-Law Partner, Designate Him Or Her As A Successor Holder To Your TFSA

“Successor holder” means that on your death, the TFSA can transfer directly to your spouse without tax



consequences. The TFSA will continue to exist and both the value and any subsequent income will continue to be sheltered. It should also not affect the receiving spouse’s TFSA contribution room. This is subject to provincial legislation so check out your province’s rules.

Again an example may help clarify. David, an Alberta resident, has $50,000 in his TFSA when he passes away. He has designated his wife Susan as successor holder. Therefore, on David’s death, Susan becomes the new holder of his $50,000 TFSA. The principal and any resulting income continue to accumulate tax-free as long as Susan maintains the TFSA. Susan can also make tax-free withdrawals from this account. If she has her own TFSA, she can maintain two separate TFSA accounts or transfer the TFSA that was previously David’s to her own account (on a tax-free basis).

If a successor holder designation is not in place, a surviving spouse or common-law partner can also designate an exempt contribution. This allows him or her to receive their deceased partner’s TFSA without affecting their own TFSA contribution room. However, there are time limits and paperwork so the successor holder designation is preferable.

Leaving A TFSA To Another Designated Beneficiary

The rules are not as generous if the TFSA is left to another beneficiary, i.e. son or daughter. The designated beneficiary can receive the proceeds from the TFSA tax-free, but all income earned after the holder’s death is taxable. The designated beneficiary can however contribute any amount received to their own TFSA as long as they have contribution room.

Investing Within A TFSAThe types of TFSA investments are generally the same

as those permitted as Registered Retirement Savings Plan (RRSP) investments. When TFSA’s were first introduced, the conventional wisdom was that they were best suited to interest-generating products such as money market funds, bonds or GICs. Although we all know that interest rate returns have been minimal over the last nine years, my research indicated that significant TFSA investments are still held in cash or money market funds.

No one has accumulated $1M in their TFSA without a lot of active trading (see below), but those who have invested in good dividend-paying securities have probably done reasonably well. Some argue that dividend-paying

investments are wasted in a TFSA because they lose the advantage of the dividend tax credit. That is true but in my view, investment growth, not income tax savings, is the priority. The dividend income is of course tax-free as are any capital gains from selling the securities. The downside is that any capital loss inside a TFSA is basically lost so it is wise to avoid any high-risk investments. CRA has indicated that they are looking at TFSAs with high dollar amounts and large numbers of trades. Their position is that frequently trading securities within a TFSA is essentially operating a stock-trading business. This is not allowed and could lead to substantial reassessments depending on how it plays out. It also bears mention that foreign dividends received in TFSAs are subject to withholding tax, unlike RRSPs. This means the withholding tax is lost so that is a definite consideration when deciding on asset allocation.

Because any income earned within the TFSA is non-taxable, any related investment management fees are non-deductible. Be careful here – some investment companies will deduct TFSA management fees out of the investor’s non-registered account. If these are deducted for tax purposes, the taxpayer is subject to reassessment.

TFSAs are a very important and effective financial planning tool. I hope the above will give you some ideas for using them to your best advantage.

David A. Townsend, C.A., C.F.P. has been providing accounting and tax services in Calgary since 1990. Clients include a wide variety of individuals, trusts, estates and private companies. For further information, check out www.datownsend.com



Readers Write

The Learning Curve And Historical Performance

Don Mackenzie

My investing career began in earnest in 2002 when I arranged a $100,000 homeowners’ line of credit to manage my portfolio. My retirement was

secure. I had a defined pension plan and a profitable rental property. On the negative side, I had no formal experience in finance, and my mathematical skills were rudimentary. I did not have the skills to evaluate company reports and found even analysts' explanations to be a challenge. My goals were modest. I reasoned that I could learn as I went along and that if I could come close to matching the TSX, I would earn just enough to make the exercise worthwhile. Canada's income tax structure would compensate me for my loan costs and reward me if my earnings came as dividends or capital gains. Theoretically, I could make money even if I just matched my loan rate. Realistically, many tests were to come first, with the lessons to follow soon afterwards. As a former teacher, this still strikes me as unfair, but it is obviously a key element of the learning curve.

I muddled along during the next five years, doing my best to pay attention and learn from my mistakes. In early 2007, I was ecstatic to realize that I had made almost $80,000. I couldn't even think of what to do with that 'surplus' money. Of course, I could buy a nice car, but that didn't seem very imaginative. The negative investing environment which immediately followed quickly revealed the flawed reasoning behind several of my early picks. My low point came in March of 2009 and coincided with the low points of the TSX and the SPX. I had lost 30% of my opening investment and had suffered a staggering 60% loss in a-year-and-a-half. The bank was not about to take my house, but I was not happy and was very glad I had not bought that car.

I needed to do a reassessment. One of my primary rules was always to remain fully invested. I kept that one

and added to it the idea that I should trade as little as possible. They were both good decisions. My portfolio went on to seriously beat the indexes and gained 56% in 2009 and 24% in 2010. By March of 2011, my portfolio had established a new high. During the three years [2008-2010] I bought only two stocks, sold none, but had ten bought out and delisted. I had let the market itself shift my holdings in a more conservative direction. My good performance was the result of keeping the stocks I already had and not because of clever trading.

I can recount these events with some precision because I am obsessive about reviewing past performance and decisions made. The time spent on this activity is many, many times the effort spent on researching new buys. I do, and I am sure others would, question the value of this ‘research’. Certainly, the insights I gleaned seem rather limited. However, these insights are necessarily on much firmer footing than any insights that I could gain by speculating in depth on the future. To think I could gain an edge by researching companies and predicting their future is simply ridiculous. If I can’t understand the results of my past decisions, I have absolutely no hope of predicting how current decisions will work out. Recognizing limitations is critical to investing success. Reviewing past performance and decisions helps me to recognize my limitations. My learning curve is much improved by taking note of how my decisions played out. To assist with that I have always subscribed to a portfolio tracker. For a few hundred dollars a year it allows me to keep a record of all of my trading activity and provides a backup for the records held in my on-line trading account. In addition, I keep an investing diary and a list of 'investing tidbits', maxims which have proven their worth. Taken together - records, diary, maxims – they have produced the filter which I use in every ongoing investment decision. The results have been good (five-year 22%) (14% since inception in 2002). As a result,



most decisions I make today are surprisingly simple. I am usually just deciding whether one stock, or another, belongs in my portfolio.

Of course, paying attention to your own experience is never enough. You must also pay attention to the market and daily news. This is probably my chief investment activity. Fortunately, much of what you need to know is not in dispute and is readily available. I like to think of it as “unsecret knowledge”. It is much more reliable than the secret tips many investment news letters want to sell you.

I don't know what performance I will be able to achieve going forward, but I do know the process and information I am going to rely on. I choose to continue to face the near-term uncertainty of investing in equities because that is where the money is. I encourage you to make your own investing life easier by setting up your own filters and establishing your own process.

To help with this, I hope in future articles to highlight choices which you can exercise to make your life easier and improve your performance.

A beginning then: a few tidbits which I think are critical to good performance. Do consider including them as part of your own process.

The number one problem for investors is an inability to sustain a constant strategy

Retail investors greedily invest at the end of bull runs and sell in panic at the tail end of bear crashes. They managed a pathetic 3.7% a year between 1985 and 2004 while the market achieved nearly 12%.1 My policy of always being fully invested neatly, and simply, avoids that problem.

Process is the key element of a sustainable strategy

(See systematic decision making2 at the end of this article.)

Process is more important than anything else. A set process protects you from being continually sidetracked by your emotions. A process set up to reject investment ideas will discourage you from trading and will promote your own tranquility. A sound process also reduces the effort needed to make decisions. 'Sound' is the key word here. If you discover your process has led you to make bad choices, you have to modify your process. Even the best established process cannot be left on auto-pilot. This

is so because the half-life of a public company has fallen to about a decade3 and other elements of the investing universe are always in flux.

You can't time the market

Here is one of those “unsecrets” everyone agrees on. The difficulty is that many investors don't realize when they are trying to do exactly that. When your buying or selling decision is primarily based on the ebb and flow of the market, you are guilty of trying to time the market. Momentum traders are guilty, as are sector rotation traders, and chartists. Financial institutions and advisors love the ebb and flow of the market. They like to point out (currently) more profitable sectors. They encourage you to trade to take advantage of the recognizable (in hindsight) patterns. This type of search for more profitable investments is, in fact, based on market timing. You, the retail investor, don’t have to play this zero sum game. You may not be a lucky player. Instead, ignore market volatility and allocate your capital only to those companies which generate wealth. This will take a lot of investment products off your screen and make life simpler. The money formerly syphoned off as trading costs to financial institutions should now show up in your account. Simple, really.

Don Mackenzie, Retired teacher (1998), Landlord (1993-2017). Set up investment portfolio in 2002; lifetime gains 14.5%/yr. to Dec. 2017. Resides in St. Catharines, Ontario. Email: [email protected]

1 Why The Average Investor's Investment Return Is So Low https://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/

2 Systematic Decision Making Are You Trying Too Hard? https://papers.ssrn.com/sol3/papers.cfm?abstract_id=248167 Special Note: A copy of this article sits on my desktop. It is compulsory reading, if you want to succeed. Authoritative and clear, it is difficult to believe it has been downloaded fewer than 400 times since it was written in 2014. This is the single most important article on decision making I have ever read.

3 Why Half of the S&P 500 Companies Will Be Replaced in the Next Decade. https://www.inc.com/ilan-mochari/innosight-sp-500-new-companies.html



https://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/

https://www.forbes.com/sites/advisor/2014/04/24/why-the-average-investors-investment-return-is-so-low/

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=248167


Canada's Independent Voice On Personal Finance

Is Pet Health Insurance A Good Investment?

Gail Bebee

If your pet suffered an accident or fell ill, the vet bills for the required treatment could be very high. The price tag to treat our neighbour’s dog, Milo, after he was hit by a car was over $8,000.

My friend Jack’s Labrador retriever developed Addison’s disease in middle age and required a costly injection every three weeks for the rest of her life. Over the dog’s lifetime, the vet bill topped $30,000.

Pet care bills are unpredictable, and potentially a great stressor for the family budget. One way to manage these costs is to buy pet health insurance, also known as pet medical insurance. This insurance helps pay for veterinary bills due to unexpected illnesses or injuries. Coverage is available for dogs and cats.

Similar to buying any type of insurance, it is important to research your options and comparison shop before you sign up.

To start your search, talk to fellow pet owners about their experience with pet insurance, ask your veterinarian for advice, read the reviews at consumer websites such as

http://www.petinsurancereview.com and consumersadvocate.org:

https://www.consumersadvocate.org/pet-insurance-canada/best-pet-insurance-canada

and check out the websites of several pet insurance companies.

Based on your research, pick out a few insurers for further consideration. You will want to investigate the following areas.

1. What Is Covered?Most pet insurance companies offer three or four plans

ranging from basic to premium. The specific health issues and pet health care expenses covered vary by plan.

The basic plan often covers accidents only (the

cheapest option). Given the high cost of treating unexpected illnesses such as cancer, a policy that covers both circumstances is likely your best choice.

Check the policy wording to confirm that the coverage includes the illnesses and treatment expenses you want insured.

2. What Is Excluded?Every pet insurance policy has its own set of exclusions.

Read the wording of this section of the policy carefully to ensure that what you need covered is not excluded.

Pre-existing conditions are never covered, but definitions vary by company, with some being more restrictive than others. This exclusion is a good reason to start insurance coverage while your pet is young and health condition-free.

Other exclusions could include:

• Some breeds, and some health conditions e.g. hip dysplasia.

• Certain treatments such as alternative therapies or flea and parasite control.

• Administrative expenses and sales taxes.

• Vet examination fees.

• Dental work.

3. What Are The Limitations?

Some premium pet insurance plans offer unlimited coverage, but most plans have dollar limits on coverage such as total claims per lifetime, per year, or per incident.

The amount of coverage you buy should be sufficient to pay the cost to treat common types of accidents, and any health conditions associated with your pet’s breed.


http://www.petinsurancereview.com





Ask your vet for guidance on the coverage level she recommends for your particular pet.

Other possible policy limitations include:

• A waiting period after sign up before the insurance coverage begins.

• Restrictions on policy renewal if your pet develops a chronic condition.

• Reduction in payout if claims are frequent.

• Pet age limit for enrollment.

4. What Special Features And Optional Coverage Are Available?

Some insurers offer special features. For example, a premium discount may be available if you insure multiple pets, or buy the insurance online.

Coverage for routine and preventive care (wellness) and other expenses and conditions which are excluded from standard policies e.g., pregnancy, may be available for an additional fee.

5. How Much Will The Insurance Pay?Pet insurance is designed to pay a certain percentage

of a claim, with the policy holder paying the remainder. This co-payment typically ranges from 10% to 30%.

A policy will specify an annual deductible i.e., the amount of eligible claims the policy holder must pay every year before the insurance company begins to pay. The deductible could range from zero to $1000 or more. Some companies increase the deductible as your pet ages.

6. How Good Is The Customer Service?These attributes are indicative of good customer

service:

• Claims are not routinely rejected for questionable reasons.

• The claims filing process is easy and claims are paid promptly.

• The time limit for submitting claims is reasonable.

• Customer support is available when you need it.

7. What Are Your Obligations?All pet insurance policies set out obligations for the

pet owner. Typically, the owner must provide proper maintenance and preventive care for his pet, such as

taking the pet to the vet for an annual check-up and ensuring vaccinations are up-to-date.

Unless you fulfill the specified pet owner obligations on an ongoing basis, your claims will likely be denied.

8. What Will The Insurance Cost?

Pet insurance premiums are based on pet breed and age, the cost of veterinary care where you live, and the policy features and benefits. Premiums vary widely and increase with pet age. You must request a quote from each insurance company to ascertain the premium for your pet.

To provide some pricing context, here are two recent quotes from a major pet insurance company. The monthly premium for a mid-level policy ($15,000 annual coverage, $250 annual deductible, 20% co-payment) for Max, a one-year-old black Labrador retriever living in Toronto, is $82 ($72.14 plus taxes). A similar policy for Alice, a one-year-old mixed breed cat, costs $36 ($32.17 plus tax).

If you think pet health insurance has too many caveats and/or is too pricy, there is an alternative: self-insure by setting up and contributing regularly to a dedicated pet health care account. You can use the funds to pay all emergency vet bills, not just those that meet insurance policy definitions, and there are no claims forms to complete.

If Max’s owner saved $82 per month in a pet care savings account earning 2%, it would hold $5,200 after 5 years, and $10,900 after 10 years. If the amount saved increased comparable to the expected annual increase for insurance, the dollars available to pay vet bills would be even larger. In the above example, if the savings rate increased by 10% annually, there would be $6,300 in the account after 5 years and $17,100 after 10 years. Use this calculator to crunch your own numbers. http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

Vet bills for your pet’s unexpected accidents and illnesses can be expensive. Pet insurance can help cover these costs. However, do your homework before buying this insurance because it is not suitable or cost effective in all cases.

Gail Bebee is the author of No Hype-The Straight Goods on Investing Your Money. Visit www.gailbebee.com.


http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php


Family Wealth Planning

Seniors And Home Modification Tax Benefits

Ed Arbuckle

Isuspect that most people would like to live in their own apartment or home as they grow older in surroundings that are familiar and comfortable to them. Further, the cost to the public purse of

personal residence occupancy is significantly less than accommodation in publicly funded facilities. We are all living longer so anything that can be done to promote independent living is a winning proposition in terms of cost to the public purse, enjoyment of life for ageing seniors and even better mental health.

But there is a cost to this. Residences may require modifications to meet declining health problems which many on modest fixed incomes cannot afford. This article explores tax benefits that are available to help seniors make ends meet and stay where they are – at home. The article reviews six tax incentives and some of their shortcomings. Both landlords and individuals occupying owned or rental accommodation can receive these tax incentives to varying degrees.

An overview of the important conditions and constraints of each of them is outlined below.

Rental Property Incentives

• Disability-related modifications to buildings

• Disability-specific device or equipment

Dwelling Improvement Incentives

• Alterations or renovations to dwellings (medical expense)

• Driveway modifications (medical expense)

• Incremental construction costs of a principal place of residence (medical expense)

• The Home Accessibility tax credit - starting in 2016

The rental property incentives give landlords a tax deduction for disability-related modifications to their properties or for the purchase of certain equipment that assists the disability of the tenants. The dwelling improvement incentives allow taxpayers with disabilities and, in some cases, other family members, to claim non-refundable tax credits. However, if little or no tax is payable by an individual, these tax credits are of little or no value since they can only reduce taxes already payable - a reality for many seniors living on modest fixed incomes. Also, there is no ability to carry unused tax credits over to other years if the outlay in a single year is substantial, which is often the case for dwelling modifications.

Modifications To Rental Properties

Anyone who rents residential property is deriving income from business or property under the Income Tax Act. As landlords, they are allowed to deduct operating expenses incurred to earn their rental income. However, a tax deduction is usually not allowed for capital improvements except as depreciation expense.

The Income Tax Act makes an exception to the non-deductibility of capital improvements by allowing a deduction to landlords for disability-related modifications to buildings. The provision reads in part as follows:

An amount paid by the taxpayer in the year for prescribed renovations or alterations to a building used by the taxpayer primarily for the purpose of gaining or producing income… to enable individuals who have a mobility impairment to gain access to the building or to be mobile within it.

The prescribed renovations and alterations allowed are as follows.



• Interior and exterior ramps

• Hand-activated door opener

• Modifications to a bathroom, elevator or doorway to accommodate use by a person in a wheelchair.

Since such outlays are fully deductible, this should encourage landlords to upgrade their buildings to provide better access to individuals with physical disabilities. This is certainly a need in an ever-increasing population of seniors.

Cost Of Equipment – Rental PropertiesA second provision allows landlords to deduct certain

equipment costs that would otherwise be a capital cost, and again, not deductible. Some of these costs are deductible against rental income if they are for disability-related equipment. Regulations of the Income Tax Act restrict such costs to the following.

• Elevator indicators to assist audio or sight impairments

• Visual fire alarm indicator and listening device

• Disability-specific computer or hardware attachment

The list of allowable equipment costs is short, but at least it’s a start. Landlords should press the government to expand such deductible expenses as growing technology becomes a reality in our ever-changing computer driven society.

Alterations To DwellingsQualifying alterations to a home (rented or owned)

are described in the Income Tax Act as follows.

For reasonable expenses relating to renovations or alterations to a dwelling of the patient who lacks normal physical development or has a severe and prolonged mobility impairment, to enable the patient to gain access to, or to be mobile or functional within, the dwelling, provided that such expenses

• (i) are not of a type that would typically be expected to increase the value of the dwelling, and

• (ii) are of a type that would not normally be incurred by persons who have normal physical development or who do not have a severe and prolonged mobility impairment;

I have paraphrased the applicable section of the Income Tax Act to be as precise as possible. The wording is complex and the detailed provisions can be restrictive. For more detailed information, readers should look at Income Tax Folio S1-F1-C1, Medical Expense Tax Credit.

Driveway ModificationsThis provision allows certain driveway alterations to

be claimed as a medical expense. A deduction is allowed for reasonable expenses relating to alterations to the driveway of the principal place of residence of the patient who has a severe and prolonged mobility impairment, to facilitate the patient’s access to a bus.

Construction Of A New Dwelling

The same general rules that apply to alterations to dwellings discussed earlier also apply to the construction of a new dwelling. The new dwelling rules only apply to the incremental construction costs related to disability. Further, this credit only applies to the patient’s principal place of residence and therefore would not apply to a vacation property or other seasonal residence. It would also not seem to apply where the outlay is made to a new home in contemplation of needed alterations in the future.

For both an existing or new premise improvement, the outlay cannot add value to the property so such things as swimming pools and hot tubs would not be allowed the tax credit. This seems to be an unwarranted restriction if all other conditions are met.

CRA gives examples of costs that will be allowed as follows.

• Outdoor and indoor ramps

• Enlargement of halls and doorways

• Lowering of cabinets

• Payments to an architect

There is no need to qualify for the disability tax credit in order to claim the alterations or new dwelling tax credits.

Home Accessibility Tax Credit

The Home Accessibility Tax Credit first became available in 2016. This tax credit is in addition to the medical expense tax credit if it is also available and therefore the combination of the two credits could effectively double the total credit from about 20% to 40% (or more depending on the province) of qualifying expenses. The Home Accessibility tax credit is only available to individuals who are under 65 and qualify for the Disability Tax Credit, but DTC eligibility is not required at age 65 and older. The tax credit can be claimed



by a qualifying individual who incurred the cost or by an eligible individual. An eligible individual includes certain family members.

• Spouse or common-law partner of a qualifying individual

• Other family members if the qualifying individual is age 65 or older

• Others who could claim the disability tax credit under certain conditions

Taxpayers should consult the T1 Tax Guide at line 398 for a detailed explanation of the definition of eligible individuals because it is far too complex to explain in this article.

If you live in a condominium or co-operative housing, you can claim your share of expenses for common area costs. Detailed supporting documentation may be requested by Canada Revenue Agency so be prepared for that. The total Home Accessibility amount is limited to $10,000 a year. This seems to be an unusually restrictive limitation for home renovations that often can cost thousands of dollars.

Medical Expenses

As indicated earlier, alterations to dwellings, driveway modifications, home construction costs and construction of a new dwelling are all deemed to be medical expenses under the Income Tax Act. Since medical expenses do not qualify for a tax credit until paid, taxpayers may want to stage their medical tax credits by payment over a few years if they can work out a financing arrangement with contractors and suppliers.

Constraints of Home Modification Tax Benefits

As was said at the beginning of this article, most seniors want to stay in their homes, so tax credits are important to them to offset their reduced disposable income. Non-refundable tax credit provisions seem to fall short for the following reasons.

• Non-refundable tax credits are of little benefit to many seniors with modest incomes. It would be better public policy if these credits were refundable instead of non-refundable - perhaps with a cap on income that qualifies for the credit. In that way, they would take into consideration an individual’s ability to pay for much needed added cost of living at home for a senior.

• Unused medical expenses, unlike donations for example, cannot be carried forward over to other years. This seems particularly unfair for home modifications which are often incurred in large amounts in a single year. Donations which are discretionary expenses get much better tax treatment than medical expenses which are non-discretionary.

• Wouldn’t it be a good idea to allow individuals to use some of their RRSP/RRIF funds to make home renovations?

• Donations get a non-refundable tax credit of about 45% whereas medical expenses only get a tax credit of about 20%. It would seem that the situation should be exactly the opposite because medical expenses are necessities of life, whereas donations are discretionary and still get a higher credit amount.

• In general, home modification tax incentives are not very generous for those with modest incomes who have paid taxes all of their lives and in their senior years have little income to spare beyond their day to day needs.

Summing Up

The home modification tax benefits are both modest and complex. These very limited tax benefits do not encourage seniors to plan ahead so they can stay in their own dwelling. It behooves the government to be less restrictive in allowing these tax benefits even at the risk of some loss of tax revenue. And reducing complexity would also be helpful.

NOTE:I was assisted in writing this article by Sue Lantz, Managing Director of Collaborative Aging.

Ed Arbuckle, J.E. Arbuckle Financial Services Inc.Phone:519-884-7087 Email: [email protected]: www.personalwealthstrategies.netWeb: www.thefamilyguide.ca



http://www.personalwealthstrategies.net

32 z Canadian MoneySaver z https://www.canadianmoneysaver.ca z NOVEMBER/DECEMBER 2017

Q I am a retiree who is struggling to find low risk investments that provide returns that are both stable and attractive. The returns advertised by Mortgage Investment Corporations (MICs) are very attractive at around 7%. Are MICs a low risk investment for retirees? Can they be relied on to provide a steady monthly income? What are the risks inherent in investments in MICs? Will rising interest rates impact the expected investment returns from MICs?

CMS Reader

A We presume you are referencing mortgage pools offered for sale.

The main risk is liquidity and housing. A collapse in housing would hurt these investments, as would a spike in interest rates. They are in no way guaranteed. Liquidity (reselling) can be a problem, but it depends on the issue.

We would consider them a medium risk, alternative investment.

You own a pool of mortgages: if underwriting standards weaken there could be losses on the assets.

We do not recommend investments, but you may want to look at some REITs instead. They offer similar returns but in a far more liquid market-traded security.

CANADIAN MONEYSAVER

Q Can a daughter claim her mother as eligible dependant (equivalent to spouse)? The daughter is married but has sponsored her husband to join her. Her ex-husband has never lived in Canada. The daughter has no children (recently married).

CMS Reader

A Yes, based on the facts above, the daughter may claim the “amount for an eligible dependent” in respect of her mother. However, the daughter may have to provide evidence to the Canada Revenue Agency (CRA) that she is neither supporting, nor being supported by her husband while he remains outside of Canada,

You must accompany your inquiry with your Membership Number (ID) and telephone number or e-mail to have your question reviewed. Inquiries are responded to directly and the Q&A may be published here later. Hundreds of Q&As are found on www.CanadianMoneySaver.ca

should CRA ask. She will be considered separated from her husband for the purposes of being able to claim the eligible dependent credit in respect of her mother.

Beginning with the year the husband begins living with his wife and her mother, his wife will no longer be able to claim the “amount for an eligible dependent” in respect of her mother. She may, instead, be able to claim the “spouse amount” in respect of her husband, if he is residing with her and making less than $12,000/year as a new immigrant.

CHAD SAIKALEY, CPA, CA, TEP, TAX PARTNER, TAX AND ADVISORY SERVICES

Q The majority of our investments are in Registered accounts RSP and RIF. At age 65 now I am considering moving some or all of the registered investments to Cash accounts and TFSA accounts (where there is some room). All investments are in 5i model portfolio stocks for 4 /12 years now. Our focus is income with some growth.

Can the transfers be IN KIND and if so how does the taxation work?

Could we have some discussion and recommendations on how to approach this and achieve this goal before mandatory conversion and withdrawals at age 72.

CMS Reader

A It looks like some institutions will allow you to make in-kind RRSP transfers to your open account – you would need to talk to your particular financial institution. In terms of taxation, you will be taxed on the value of the shares you withdraw at that time as income, just as if you’d withdrawn a cash amount equal to the value of the shares you’ve switched from your RRSP to your open account at the time of transfer.

When deciding how much and what to withdraw, I suggest reviewing my three articles on early RRSP withdrawal, which are either already published in the magazine or which will be coming out in the new year. There are a lot of different considerations at play


http://www.CanadianMoneySaver.ca

Canadian MoneySaver z https://www.canadianmoneysaver.ca z NOVEMBER/DECEMBER 2017 z 33

regarding how much and when, so it really comes down to the specifics of each particular client. Some of the biggest factors to consider are:

• Whether investments inside your RRSP that would generate more tax efficient income if owned personally, such as those producing return of capital, capital gains or eligible dividends (assuming this won’t put you in the OAS clawback zone) or which you could own in your TFSA instead. If you are transferring out interest-payers into an open account, you don’t save on future income payments, and there is a stronger case towards keeping your money inside your plan so it can at least continue to compound tax-free;

• On a related note to the last point, what use would you make of the money if owned personally? Although I’ve assumed so far that it would be invested or used in the same way as it was inside your RRSP, that may not be the case. You might be ultimately using the money to pay down debt, fund up a child’s TFSA, RESP or RDSP, help them buy a house or even to pay for life insurance or long term care insurance on yourself. For these alternatives, you would need to look at the potential rate of return on those options compared to leaving things well enough alone and compare.

• How likely is it for your RRSPs to outlive you, as the tax bill on RRIFs and RRSPs at death can be a killer (pun intended). If you are likely to outlive your account, this is a factor in favour of pulling more out early, particularly if there is a big different between your current tax bracket and the one that would apply at death if you had a large taxable income that year, such as if having to declare all your remaining RRSP or RRIF dollars at that time;

• Your current marginal tax rate and your expected tax rate down the road both at age 71 and, if you are in a couple, after one of you passes on and the remaining RRSPs / RRIFs are taxed in just the one remaining pair of hands. A lot of times, both members of a couple can avoid the clawback and stay in a relatively sane tax bracket while both are globe trotting and enjoying their retirement, but things often change when it’s time to start planning for just one;

• How much non-RRSP cash do you have? You have a lot more flexibility regarding the use of your money when it is outside of RRSPs and this often is great for peace of mind. It also helps reduce the chances of having to pay a lot of tax if you have to sell assets to pay for personal expenses, as the cost of pulling out a lot of money from RRSPs during the same year can be brutal. A large TFSA and non-registered portfolio can make this far easier to accomplish in a tax efficient way. I see this approach as particularly useful for people who worry about having to pay for private assisted living rather than those dealing with one-time expenses, that could managed with a line of credit that allows them to spread out their RRSP or RRIF withdrawals over many years.

Anyway, if you decide that early withdrawals make sense for you, I generally like making a series of withdrawals over multiple years in order to minimize taxes rather than a large lump sum withdrawal. You might consider deferring your OAS pension until age 70 if you would be pulling out enough money each year to generate a clawback. I would also approach the strategy as a couple and plan around both spouses potentially tapping into their RRSPs early if this allows you to get money out more cheaply. If over 65, you might convert at least part of your RRSP to a RRIF so up to 50% can be taxed in each spouse’s hands if it makes sense to just draw from one registered plan. Along those lines, you might have more flexibility if you pull money first from the older spouse’s plans first since they have to be converted into a RRIF first. That might allow you to minimize the tax hit when you do have to convert the remaining RRSP to a RRIF since the money in the younger spouse’s RRSP wouldn’t have to be withdrawn until s/he also was 72.

I hope this helps, although there are a few ifs, ands and buts to consider since I don’t know many of the personal details of your situation. As the old cliché reminds us, the devil is in the details.

COLIN S. RITCHIE, BA.H. LL.B., CFP, CLU, TEP AND FMA



This column offers excerpts from published and online sources to provide other viewpoints.

TOP PICKS FOR THE FIRST QUARTER OF 2018

BAYLIN TECHNOLOGIES INC. • Daniel Kim• BYL continues to focus on the large BSA opportunity (US$8–US$40B TAM). The company’s recently hired BSA and small cell antenna industry expert is accelerating product qualifications and sales leads. Small cell antenna shipments have started and are expected to increase in 2018. This first customer win is a multi-year, multi-million-dollar opportunity.

• BYL has been benefitting from growth in all divisions. The stock trades at a discount to its peers at 4.5x 2018e EBITDA vs. 10.3x. Upside for next year includes the BSA ramp-up as well as continued benefits from an Asia-Pacific customer.

FIRAN TECHNOLOGY GROUP CORP. • Daniel Kim• FTG is facing robust demand, with above parity book-to-bill and rising throughput, as well as strong accretion from assets (30% EBITDA contribution). Key growth segments for 2018 are defense, simulators and single-aisle aircrafts. The latter segment will benefit with market share gains from both Airbus and Boeing.

• The stock has been under pressure lately and it is trading at a deep discount to its peers (4.7x 2018e EBITDA vs. PCB peers at 7.7x and Aerospace peers at 10.9x), providing a great buying opportunity, particularly ahead of Q4 results, which will show a full-quarter benefit higher volumes at PCT in a seasonally stronger quarter..

MARTINREA INTERNATIONAL INC. • J. Marvin Wolff• MRE continues to show increasing operating margins as it executes its improved efficiency operating systems, and also benefits from improved pricing on new mandates both within the steel and aluminum areas. The company has high confidence in the continued margin improvement.

• Management increased its targeted margins to 9% by 2020, up from 8%. MRE also made a strategic investment in the graphene space through NanoXplore Inc. (GRA-T, $2.35 TP, Buy) The two companies plan to co-develop graphene- enhanced plastics for the

automotive space as the drive to light-weight vehicles continues.

PROFOUND MEDICAL CORP. • Rahul SarugaserHaving enrolled 80 patients in the Pivotal/Phase III trial to date, management expects to complete enrolment by end of Q4/17, or early Q1/18 at the latest. Once complete, PRN expects to share a schedule of when it will be publishing interim data from the trial.

We then project that PRN will publish its first interim data by the end of Q1/18, or early Q2/18, at which point we should get our first glimpse into TULSA-PRO’s efficacy and safety profile. Positive data should yield a valuation upward of $5.00/sh.

PROMETIC LIFE SCIENCES INC. • Rahul Sarugaser• With a PDUFA date of April 14, 2018 in hand, we expect the FDA to approve the BLA for plasminogen deficiency in Q1/18. This should be a highly catalytic event for PLI, as the company will then be able to begin marketing plasminogen.

• Concurrent with the FDA approval, we speculate the company is likely to receive a priority review voucher (PRV) worth >$125M. Based on these timelines and anticipated revenue, we see PLI on track toward being cash flow positive in 2019.

SHOPIFY INC. • Kevin KrishnaratneShopify is in the very early stages of disrupting retail, with ~500K customers on its platform, revenue growing ~75% and gross profits up ~80%. Trends should continue to benefit from recent initiatives, such as Shipping, International Payments and new channel launches.

Our view is that estimates are very conservative, with multiple ways for Shopify to beat and raise guidance. In turn, our current US$130.00 target, which is based on 10.5x 2018e/2019e EV/Sales, likely also has room for upward revisions on the back of earnings events and new product releases.

Source: Paradigm Capital Inc.



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0 –

11.7

2) d

ivid

ed b

y (1

00 –

31.

15)

is a

ppro

xim

atel

y 1.

2822

. The

refo

re, a

sto

ck w

ith

a Ca

nadi

an d

ivid

end

yiel

d of

5.0

% h

as a

n eq

uiva

lent

inte

rest

retu

rn o

f 5.0

x 1

.282

2,

whi

ch is

app

roxi

mat

ely

6.41

%.



TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF J

ANU

ARY

9, 2

018

Fund

Nam

e1

Mon

th

Retu

rn

(mth

-end

)

3 M

onth

Re

turn

(m

th-e

nd)

6 M

onth

Re

turn

(m

th-e

nd)

YTD

Ret

urn

(mth

-end

)1

Year

Ret

urn

(mth

-end

)3

Year

Ret

urn

(mth

-end

)5

Year

Ret

urn

(mth

-end

)10

Yea

r Re

turn

(m

th-e

nd)

15 Y

ear

Retu

rn

(mth

-end

)

Yiel

d 12

M

oM

ERM

gmt

Fee

Tota

l Ass

ets

($M

il)

SECT

OR

EQU

ITY

TD S

cien

ce &

Tec

hnol

ogy

- F

-3.1

87.

0211

.20

37.4

037

.40

26.3

032

.64

19.7

114

.58

0.00

1.35

1.25

839.

11TD

Sci

ence

& T

echn

olog

y -

A-3

.28

6.66

10.3

935

.39

35.3

924

.50

30.7

618

.00

12.9

70.

002.

802.

2583

9.11

Fide

lity

Glob

al T

echn

olog

y Se

ries

O-1

.66

10.5

913

.65

30.1

330

.13

26.5

429

.40

15.0

412

.89

0.00

--

179.

67Fi

delit

y Gl

obal

Tec

hnol

ogy

Sr F

-1.7

510

.27

12.9

928

.60

28.6

025

.04

27.8

013

.57

11.3

70.

001.

210.

8517

9.67

Fide

lity

Glob

al T

echn

olog

y Cl

F-1

.76

10.2

712

.99

28.5

928

.59

25.0

627

.78

13.5

111

.23

0.00

1.23

0.85

35.9

0CI

Sig

natu

re G

lbl S

ci &

Tec

h Cr

p Cl

F-4

.37

5.66

14.5

435

.03

35.0

320

.99

25.8

317

.04

12.1

00.

831.

311.

0023

5.68

TD H

ealt

h Sc

ienc

es -

F-2

.99

2.22

3.36

19.0

019

.00

11.3

325

.75

17.1

213

.21

0.00

1.37

1.25

778.

27TD

Sci

ence

& T

echn

olog

y -

I-0

.73

5.88

13.8

944

.58

44.5

821

.12

24.7

815

.16

14.6

7-

2.82

2.25

669.

71RB

C Gl

obal

Tec

hnol

ogy

Sr F

-2.6

48.

3313

.50

29.2

829

.28

18.6

423

.39

11.8

88.

940.

001.

020.

7510

2.77

RBC

Glob

al T

echn

olog

y Sr

D-2

.66

8.26

13.3

628

.96

28.9

618

.33

23.0

711

.58

-0.

001.

261.

0010

2.77

Rena

issa

nce

Glob

al H

ealt

h Ca

re C

lass

F-2

.91

-0.4

0-4

.68

6.70

6.70

7.49

21.1

112

.44

9.95

0.00

1.81

1.50

589.

84N

BI S

cien

ce a

nd T

echn

olog

y A

-3.3

55.

479.

4226

.55

26.5

518

.24

20.9

110

.79

8.20

0.00

2.48

2.00

74.5

8CI

Sig

natu

re G

lbl S

ci &

Tec

h Cr

p Cl

F-1

.81

4.89

18.1

044

.31

44.3

117

.88

20.0

314

.31

13.8

0-

1.31

1.00

188.

10In

vest

ors

Glob

al S

cien

ce &

Tec

h Cl

B-1

.77

10.1

013

.37

27.5

027

.50

17.3

819

.85

6.28

5.15

0.08

2.87

2.00

19.7

9Fi

delit

y Gl

obal

Hea

lth

Care

Ser

ies

O-2

.52

3.57

0.38

13.5

413

.54

8.52

19.7

511

.98

8.92

0.00

--

109.

89Re

nais

sanc

e Gl

obal

Hea

lth

Care

-3.0

2-0

.77

-5.3

55.

315.

316.

1419

.57

11.0

28.

620.

003.

022.

5058

9.84

Inve

stor

s Gl

obal

Sci

ence

& T

ech

C-1

.74

10.2

713

.56

27.4

827

.48

16.6

218

.66

5.47

4.74

0.00

2.96

2.00

110.

96Fi

delit

y Gl

obal

Hea

lth

Care

Cl A

-2.7

22.

93-0

.87

10.7

110

.71

5.79

16.7

19.

065.

920.

002.

572.

0016

.29

Mid

dlef

ield

Glo

bal A

gric

ultu

re C

lass

F-0

.74

5.14

8.38

11.9

311

.93

8.16

10.3

2-

-0.

001.

331.

007.

99CI

Glo

bal H

ealt

h Sc

ienc

es C

orp

Cl F

0.19

-2.1

22.

5015

.02

15.0

2-2

.09

9.69

8.98

12.4

8-

1.33

1.00

180.

26

CAN

AD

IAN

FIX

ED I

NCO

ME

Caps

tone

Mor

tgag

e Po

ol I

0.72

2.24

4.43

8.27

9.06

9.03

9.43

--

8.67

--

106.

64Se

ntry

Can

adia

n Bo

nd I

-0.4

51.

900.

544.

444.

443.

674.

32-

-2.

360.

17-

28.6

3Dy

nam

ic T

otal

Ret

urn

Bond

Cl S

er I

-0.6

81.

480.

933.

653.

653.

884.

30-

-0.

000.

130.

7530

1.80

Rena

issa

nce

Corp

orat

e Bo

nd C

l F P

rem

-0.2

41.

470.

674.

244.

243.

903.

99-

-4.

090.

440.

5049

66.7

5Ca

nso

Corp

orat

e Bo

nd C

lass

C-0

.34

1.45

0.22

2.77

2.77

2.79

3.96

6.09

-2.

36-

0.40

198.

47Be

utel

Goo

dman

Cor

p/Pr

ovin

cial

Act

v Bd

I-0

.37

2.26

0.46

2.84

2.84

4.72

3.96

5.62

-2.

550.

05-

53.1

8Su

n Li

fe M

FS C

anad

ian

Bond

I-0

.27

2.25

0.53

3.24

3.24

3.26

3.91

--

3.33

0.05

-13

3.38

RBC

Bond

Ser

ies

O-0

.45

2.27

0.44

3.42

3.42

3.57

3.90

5.48

-3.

200.

03-

1845

5.21

imax

x Ca

nadi

an B

ond

Clas

s I

-0.4

91.

970.

203.

493.

493.

183.

835.

975.

843.

160.

37-

59.7

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&N

Enh

ance

d To

tal R

etur

n Bo

nd S

erie

s O

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32.

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302.

912.

913.

253.

73-

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04-

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64.1

4AG

F Fi

xed

Inco

me

Plus

Ser

ies

Q-0

.41

1.57

0.10

3.02

3.02

2.87

3.71

--

3.40

-0.

7013

27.6

2Qu

adru

s Co

rpor

ate

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(Po

rtic

o) N

-0.3

31.

860.

573.

513.

513.

343.

70-

-3.

37-

-26

2.88

Scot

ia P

riva

te I

ncom

e Po

ol-0

.53

1.80

0.23

1.62

1.62

1.82

3.57

7.00

8.34

2.17

0.03

-51

7.24

TD C

anad

ian

Core

Plu

s Bo

nd -

O-0

.44

2.05

0.20

2.50

2.50

2.99

3.53

--

3.11

0.00

-14

186.

22U

nite

d Ca

nadi

an F

ixed

Inc

ome

Corp

Cl W

-0.4

31.

350.

302.

362.

363.

093.

474.

94-

0.00

0.19

-83

2.75

Fide

lity

Cana

dian

Bon

d Se

ries

O-0

.34

2.22

0.52

3.24

3.24

3.01

3.39

5.15

5.43

3.24

--

1076

4.59

Leit

h W

heel

er C

ore

Bond

A-0

.40

1.97

0.24

2.71

2.71

2.86

3.34

4.61

-2.

98-

-19

3.32

Inve

sco

Cana

dian

Bon

d I

-0.1

82.

510.

843.

513.

513.

083.

324.

885.

223.

09-

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3.47

Fran

klin

Bis

sett

Cor

e Pl

us B

ond

F-0

.30

2.39

0.63

3.73

3.73

3.00

3.25

4.46

4.51

3.99

0.79

0.70

2177

.14

Cano

e Bo

nd A

dvan

tage

Cla

ss F

-0.5

41.

87-0

.11

3.87

3.87

2.82

3.15

--

2.84

1.10

0.85

87.8

4



TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF J

ANU

ARY

9, 2

018

Fund

Nam

e1

Mon

th

Retu

rn

(mth

-end

)

3 M

onth

Re

turn

(m

th-e

nd)

6 M

onth

Re

turn

(m

th-e

nd)

YTD

Ret

urn

(mth

-end

)1

Year

Ret

urn

(mth

-end

)3

Year

Ret

urn

(mth

-end

)5

Year

Ret

urn

(mth

-end

)10

Yea

r Re

turn

(m

th-e

nd)

15 Y

ear

Retu

rn

(mth

-end

)

Yiel

d 12

M

oM

ERM

gmt

Fee

Tota

l Ass

ets

($M

il)

CAN

AD

IAN

FO

CUSE

D S

MA

LL/M

ID C

AP

EQU

ITY

Pend

er S

mal

l Cap

Opp

ortu

niti

es F

1.74

3.35

1.58

9.59

9.59

14.7

320

.41

--

0.00

1.50

1.00

189.

64Fi

delit

y Sp

ecia

l Sit

uati

ons

Seri

es F

0.41

8.16

14.6

621

.12

21.1

216

.56

20.2

513

.52

-0.

001.

110.

8518

85.4

9Se

ntry

Sm

all/

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Cap

Inc

ome

I0.

301.

784.

7210

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10.9

910

.08

16.6

8-

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860.

10-

1840

.88

CI C

ambr

idge

Can

adia

n Gr

owth

Com

s Cl

F1.

571.

053.

585.

845.

848.

0715

.81

--

0.00

1.33

1.00

593.

72Se

ntry

Sm

all/

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Cap

Inc

ome

F0.

191.

484.

089.

659.

658.

7615

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14.2

1-

2.08

1.32

1.00

1840

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Sent

ry S

mal

l/M

id C

ap I

ncom

e B

0.08

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312

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742.

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s M

id C

ap C

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M)

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0-

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08-

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.47

Dyna

mic

Rea

l Est

ate

& I

nfra

s In

com

e F

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72.

663.

0812

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12.3

110

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11.4

5-

-5.

35-

1.00

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29Ex

empl

ar L

eade

rs S

erie

s F

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15.

985.

8310

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10.8

98.

7811

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6.37

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001.

600.

8039

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Fide

lity

Grea

ter C

anad

a Cl

ass

Sr A

-0.7

63.

591.

30-0

.76

-0.7

67.

2111

.29

--

0.00

2.55

2.00

62.1

6CI

Can

-Am

Sm

all C

ap C

orpo

rate

Cla

ss F

1.19

3.51

3.56

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1812

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0.76

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1.00

229.

82Re

dwoo

d Ta

ctic

al E

quit

y Se

ries

F4.

149.

2712

.39

8.83

8.83

6.80

9.00

1.57

-0.

002.

811.

5015

.45

Chou

RRS

P Cl

ass

F3.

6417

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17.8

822

.66

22.6

61.

417.

855.

58-

3.83

1.38

1.00

79.1

8St

eady

hand

Sm

all C

ap E

quit

y6.

5712

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16.7

818

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18.4

05.

496.

515.

94-

0.19

1.78

1.78

60.5

1Go

odw

ood

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tal

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4.46

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2.66

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14.

780.

003.

781.

906.

53Tr

imar

k Ca

nadi

an S

mal

l Com

pani

es I

-0.3

06.

868.

09-5

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-5.0

2-2

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6.40

--

0.00

--

181.

02Ga

lileo

Gro

wth

and

Inc

ome

F0.

862.

8626

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12.8

012

.80

13.8

56.

170.

81-

0.00

2.06

0.95

4.08

ABC

Fully

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aged

-0.4

45.

226.

7916

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16.7

59.

175.

192.

654.

330.

00-

2.00

46.8

7In

vest

ors

Cana

dian

Sm

all C

ap G

row

th A

1.61

4.34

1.92

5.68

5.68

5.92

4.54

1.79

-0.

002.

762.

0014

9.41

Spro

tt C

anad

ian

Equi

ty S

erie

s F

0.81

2.50

6.55

-1.8

7-1

.87

-5.7

5-1

1.90

-8.7

2-

0.00

2.34

1.50

62.3

4

CH

ART

NO

TES

For

info

rmat

ion

on t

he c

ateg

ory

defi

niti

ons,

ple

ase

visi

t ht

tp:/

/ww

w.c

ifsc

.org

/en/

inde

x.ph

p. F

ront

loa

d fu

nds

(Frn

t) c

harg

e a

fee

to i

nves

tors

whe

n un

its

are

purc

hase

d; d

efer

red

load

fund

s (D

ef)

char

ge a

fee

whe

n un

its

are

rede

emed

. Fro

nt lo

ads

may

be

redu

ced

(in

per c

ent

term

s) a

s th

e si

ze o

f the

inve

stm

ent

incr

ease

s;

defe

rred

load

s m

ay d

ecre

ase

as t

he t

ime

elap

sed

betw

een

purc

hase

and

rede

mpt

ion

leng

then

s. S

ome

fund

s ha

ve e

ithe

r a fr

ont

load

or a

def

erre

d lo

ad (

FnDf

). O

ther

s

have

no

load

fee

(Non

e). D

efer

red

sale

s ch

arge

s al

so k

now

n as

a b

ack-

end

load

, the

se d

efer

red

char

ges

typi

cally

go

dow

n ea

ch y

ear y

ou h

old

the

fund

, unt

il ev

entu

ally

they

reac

h ze

ro. D

efer

red

sale

s ch

arge

s gi

ve in

vest

ors

an in

cent

ive

to b

uy a

nd h

old,

as

wel

l as

a w

ay t

o av

oid

som

e sa

les

char

ges.

n Y

ear R

etur

n -

The

aver

age

annu

al

com

poun

d (a

nnua

lized

) ra

te o

f ret

urn

the

fund

has

per

form

ed o

ver t

he la

st “

n” y

ears

. It

assu

mes

rein

vest

men

t of

any

div

iden

d or

inte

rest

inco

me.

1 Y

ear R

etur

n (Y

r

endi

ng D

ecYY

) -

An a

nnua

l ret

urn

is t

he fu

nd o

r por

tfol

io re

turn

, for

any

12-

mon

th p

erio

d, in

clud

ing

rein

vest

ed d

istr

ibut

ions

. Tax

Eff

icie

ncy

- Ca

lcul

ated

by

divi

ding

the

fund

’s t

ax-a

djus

ted

retu

rn (

pre-

liqui

dati

on)

by it

s pr

e-ta

x re

turn

, and

can

onl

y be

cal

cula

ted

whe

n bo

th p

re-t

ax r

etur

ns a

nd t

ax-a

djus

ted

retu

rns

are

posi

tive

.

Dist

ribu

tion

Fre

quen

cy -

The

inte

rval

at w

hich

regu

lar c

apit

al o

r inc

ome

divi

dend

s ar

e di

stri

bute

d to

fund

uni

thol

ders

. Yea

r end

Qua

rtile

s - T

he q

uart

iles

(1 to

4)

give

the

indi

vidu

al fu

nd it

s po

siti

on re

lati

ve t

o al

l oth

ers

in t

he fu

nd t

ype

cate

gory

. For

exa

mpl

e, if

the

fund

’s q

uart

ile v

alue

is “

1” fo

r the

Dec

201

0 ye

aren

d, t

his

mea

ns

the

fund

’s ra

te o

f ret

urn

for t

he 1

2 m

onth

s en

ding

Dec

31,

201

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Specialty ETFsTOP EXCHANGE TRADED FUNDS RANKED BY FIVE-YEAR RETURNS AS OF JANUARY 9, 2018 Fund Name Ticker Mkt Tot Return

YTD(Current)

Mkt Tot Ret 1 Mo

(Current)

Mkt Tot Ret 3 Mo (Current)

Mkt Tot Ret 12 Mo

(Current)

Mkt Tot Ret 3 Yr

(Current)

Mkt Tot Ret 5 Yr

(Current)

Mkt Tot Ret urn Since Incept

(Current)

BMO S&P 500 ETF (CAD) ZSP 13.55 -1.41 7.46 13.55 13.91 21.03 20.65

iShares S&P/TSX Capped Info Tech ETF XIT 17.08 0.38 3.23 17.08 11.55 20.97 2.61

Vanguard S&P 500 ETF VFV 13.67 -1.51 7.58 13.67 13.93 20.92 20.71

iShares Japan Fundamental ETF CADH Adv CJP.A 15.38 5.44 10.47 15.38 7.81 20.64 -1.46

Horizons S&P 500 ETF HXS 13.60 -1.48 7.54 13.60 13.90 20.36 17.21

iShares NASDAQ 100 ETF (CAD-Hedged) XQQ 31.86 0.44 7.22 31.86 14.96 20.24 16.62

iShares Edge MSCI Min Vol USA ETF XMU 10.95 -2.30 6.11 10.95 13.74 20.19 17.88

PowerShares QQQ ETF QQC.F 31.94 0.57 7.36 31.94 15.00 20.08 18.34

BMO NASDAQ 100 Equity Hedged to CAD ETF ZQQ 31.51 0.50 7.30 31.51 15.12 20.08 17.61

iShares US Fundamental ETF Comm CLU.C 7.58 -0.73 7.22 7.58 11.77 19.80 17.23

BMO Eq Wght US HlthCare Hdgd to CAD ETF ZUH 25.34 -0.65 3.45 25.34 8.32 19.70 -

iShares US Fundamental ETF Adv CLU.B 8.81 1.17 11.66 8.81 10.52 19.06 16.49

First Asset TecGntsCovCallETF Comm(CADH) TXF 33.64 -0.06 7.02 33.64 16.40 18.94 16.19

iShares S&P/TSX Capped Cnsmr Stpls ETF XST 6.95 0.02 4.86 6.95 8.75 18.49 17.19

BMO China Equity ETF ZCH 37.66 0.68 4.62 37.66 14.58 17.73 9.20

BMO Eq Weight US Banks Hedged to CAD ETF ZUB 16.97 1.99 8.61 16.97 13.33 17.31 -

iShares Japan Fundamental ETF CADH Comm CJP 21.34 2.22 9.41 21.34 9.86 16.95 -0.75

iShares MSCI World ETF XWD 14.42 -1.39 6.10 14.42 11.84 16.75 12.69

iShares Global Water ETF Comm CWW 18.16 -3.01 5.24 18.16 12.40 16.72 6.82

iShares Global Water ETF Adv CWW.A 19.55 -0.48 7.82 19.55 12.27 16.44 6.17

BMO India Equity ETF ZID 34.21 1.84 13.39 34.21 13.24 16.38 7.95

First Asset Mstar NatlBk Québec ETF Comm QXM 15.66 1.73 5.93 15.66 9.37 16.25 14.81

iShares Edge MSCI Min Vol Global ETF XMW 10.20 -2.12 5.34 10.20 11.58 15.85 14.49

Horizons Active Global Dividend ETF Comm HAZ 12.50 -1.04 6.81 12.50 11.04 15.57 -

BMO Dow Jones Ind Avg Hdgd to CAD ETF ZDJ 27.14 2.06 11.26 27.14 13.07 15.56 -

Vanguard S&P 500 ETF CAD-H VSP 21.05 1.11 6.89 21.05 10.29 15.41 15.52

BMO S&P 500 ETF (USD) ZSP.U 21.42 1.24 6.93 21.42 10.69 15.39 15.64

BMO S&P 500 Hedged to CAD ETF ZUE 21.02 1.30 6.86 21.02 10.39 15.31 -

iShares Core S&P 500 ETF (CAD-Hedged) XSP 20.71 1.03 6.66 20.71 10.47 15.26 3.82

iShares Equal Weight Banc&Lfco ETF Comm CEW 12.06 0.28 5.45 12.06 11.38 15.07 8.95

Vanguard US Total Market ETF CAD-H VUS 20.28 1.00 6.23 20.28 9.93 15.01 14.75

iShares Global Healthcare ETF CADH XHC 16.84 -0.33 0.68 16.84 6.20 14.95 14.49

BMO Low Volatility Canadian Equity ETF ZLB 11.06 -0.42 3.50 11.06 8.85 14.85 14.76

iShares US Dividend Grwrs ETF CADH Comm CUD 14.67 0.98 6.50 14.67 10.11 14.62 14.72

PowerShares FTSE RAFI US Fundamental ETF PXU.F 14.90 1.88 6.90 14.90 8.28 14.40 13.93

BetaPro S&P/TSX 60 2x Daily Bull ETF HXU 15.76 1.94 9.20 15.76 9.45 14.23 3.81

iShares Equal Weight Banc&Lfco ETF Adv CEW.A 10.17 -0.29 5.01 10.17 10.24 14.19 8.01

iShares US Fundamental ETF (CAD-H) Comm CLU 14.82 1.91 6.59 14.82 8.25 14.14 6.37

PowerShares S&P 500 Low Vol ETF - CAD H ULV.F 16.98 -0.16 5.46 16.98 9.58 14.03 8.71

BMO Equal Weight Banks ETF ZEB 14.26 1.20 6.87 14.26 11.97 13.99 12.65

©2018 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial advisor which cannot be verified by Morningstar, (3) may not be copied or redistributed,(4) do not constitute investment advice offered by Morningstar, (5)are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supple-mental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent,and disclosure statement.


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FEBRUARY 2018 ISSUE: The Novice Chart Reader. M … · John Hyslop Hamilton john.hyslop@sympatico .ca Matthew Moore Kincardine/Port Elgin 519-371-6592 Irving Freilich Kingston 613-544-3257