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MULTI INSURANCE Retirement & Financial Planning
Successful Investing through tax sheltered investments
By: Aleem Visram, HBA, MBA, IFIC
Multi Insurance Retirement & Financial Planning
(647)986-9163
MULTI INSURANCE Retirement & Financial Planning
AGENDA
Introduction & Background
Why worry about Retirement Planning?
Compounded Interest effect
Tax Deferred Savings
RRSPs vs. non-Registered Savings
RRSPs vs. TFSA
RESPs
Investment options
Mutual Funds
Segregated Funds
Investment Strategies
Risks to your retirement plan
Final tips
MULTI INSURANCE Retirement & Financial Planning
Multi Insurance Retirement and Financial Planning
Proven track record of success with 37 years in the business and over 1,000 clients
Aleem Visram has an MBA from the Richard Ivey School of Business and is certified by the Investment Funds Institute of Canada (IFIC)
Bahadur Visram is among the top performing financial advisors in Canada with Chartered Life Underwriter (CLU), Certified Financial Planner (CFP) and Chartered Financial Consultant (CHFC) designations
Independent Advisors that can deal with ALL Mutual Fund and Life Insurance companies licensed to do business in Canada
Will provide you with the best rates available in Canada
MULTI INSURANCE Retirement & Financial Planning
Multi Insurance Retirement & Financial Planning
Holistic approach to include a customized plan with a broad range of financial planning strategies to cover all your financial needs, including:
Retirement Planning – A solid plan can make the difference between a comfortable retirement and one that is inadequately financed. This
includes RRSP, RESPs, TFSAs and Mutual Funds.
Tax Planning – Looking for investment opportunities to help reduce
tax liabilities
Estate Planning – Ensuring that you have greater control of your
assets and preserve them from unnecessary legal and tax costs upon
death
Insurance- Ensuring that you and your family have adequate life,
critical illness and disability coverage to provide you with sufficient
funds in the event of an illness or death
MULTI INSURANCE Retirement & Financial Planning
Why do you need to worry about retirement planning now?
In 2011 over 59% of retired Canadians don‟t have enough
money for their retirement
The average Canadian over age 65 spends $51,000 per
year
Old Age Security and CPP only provide an average of
$13,272 per year
You need a gross pre-tax earnings of approximately
$90,000 per year to receive a net after tax income of
$51,000 per year
The CURRENT average life expectancy of a male is 83
years and a female is 85 years
If you live to the average Canadian age and spend the
average $51,000 per year, you will need $1.5 million to $2
million in retirement income
MULTI INSURANCE Retirement & Financial Planning
How do you save enough for retirement?
Imagine you have a twin and both of you are investors
You Your Twin
invest $2,000 a year invests $2,000 a year
at 10 per cent compounding at 10 per cent
compounding
annually for 10 years annually for 30 years
starting at age 25 starting at age 35
Who ends up with more?
MULTI INSURANCE Retirement & Financial Planning
Retirement
Starts investing Your twin
Stops investing Your twin
$361,887
$611,817
25 30 35 40 45 50 55 60 65
Start investing You
Stop investing You
Based on annual contributions of $2,000 and assuming a 10 per cent average annual compounding rate of return
Essential: start early, think long term
MULTI INSURANCE Retirement & Financial Planning
Avoid the Tax Man!
In Canada you pay taxes on your HIGHEST income first,
so the more money you make, the higher taxes you pay
Avoid paying high taxes through tax deferred savings
Income Income Taxes
Over $128,800 46%
$83,088-
$128,800
43%
$78,361- $83,088 39%
$75,550- $78,361 35%
$66,514- $75,550 33%
$41,544- $66,514 31%
$37,744- $41,544 24%
Up to $37,744 20%
MULTI INSURANCE Retirement & Financial Planning
Registered Retirement Savings Plan (RRSP)
A RRSP is a personal savings plan registered with the federal government
You can contribute 18% of your income each year (to a maximum of
$22,450) and receive up to $10,000 in tax refunds each year
Deduction room is based on previous year‟s earned income (2011 deduction
based on 2010 income) plus unused contribution room from previous year
less pension
Wide selection of investment options, such as mutual funds, stocks, bonds
and GICs
Flexible retirement options
Money grows on a tax-deferred basis with compounding interest until
withdrawn
If you die your RRSPs will be rolled over to your spouse tax free
Deadline to purchase RRSPs is February 29, 2012
An RRSP is the best tax deferred investment
MULTI INSURANCE Retirement & Financial Planning
Why should I invest in RRSPs?
An RRSP can help maintain your standard of living
Helps to ensure you have a comfortable retirement without having to worry about money
Tax Benefits:
Income tax is deferred until the money (and earnings) are
withdrawn at retirement.
Your money compounds annually with tax free growth
At retirement, your annual income (including money
withdrawn from your RRSP) will likely be lower than your
income today.
Therefore, you will be earning in a lower tax bracket, which
means that a smaller percentage of your income will go to
taxes.
MULTI INSURANCE Retirement & Financial Planning 10
Additional Benefits:
Home Buyers Plan (First Time Homebuyer)
Up to $25,000 can be borrowed from your RRSP to buy a home,
without counting the withdrawal as income
If you and your spouse each have RRSP, you can borrow up to
$50,000 between two of you if taking joint ownership
Must be repay loan (no interest) within 15 years.
Lifelong Education Plan
Allows you to withdraw a maximum of $20,000 for
education/tuition.
Must be repaid within 10 years.
Special RRSP Features
MULTI INSURANCE Retirement & Financial Planning
Savings program based on
a monthly contribution of $200
for 30 years at an annual rate
of 10 per cent into a Registered
Retirement Savings Plan
(RRSP)
10 years 20 years 30 years
$36,173 $41,310
$113,952
$153,139
$281,192
$455,865
Growth within an RRSP
Growth outside an RRSP
RRSP vs. Non RRSP
MULTI INSURANCE Retirement & Financial Planning
The Power of RRSPs and Compounded Interest
Example: Sabrina is 30 years old and makes $100,000 per year. She wants to retire
at age 65 and is wondering if she should invest in RRSPs for tax savings.
Tax Shelter vs. No Tax Shelter Investments
Item No RRSPs RRSPS
Gross Income 100,000$ 100,000$
Less: RRSP Contribution (18%) 18,000$
Taxable Income 100,000$ 82,000$
Tax (assume 40% Marginal Tax Rate) 40,000$ 32,800$
Net Earnings after Taxes 60,000$ 67,200$
Annual Income Tax Refund 7,200$
Net After Tax RRSP Contribution 10,800$
Tax Savings at Retirement (age 65) 252,000$
Contribution by Age 65 (after Tax Refund) 378,000$
RRSP Value at Age 65 (6% Compounded Interest) 2,126,176$
MULTI INSURANCE Retirement & Financial Planning
Spousal RRSPs
If there is an income discrepancy between you and your spouse, you can contribute to your spouse‟s RRSP (or common law partner) to reduce your tax liability
Strategy
Contribute to an RRSP for your spouse, and claim the deduction
yourself. Total contributions (to your own and spouse‟s plan) are still
subject to normal RRSP limits
Advantage
Spouse will ultimately be the one who reports the income for tax
purposes, when the funds are withdrawn on retirement or otherwise.
Overall, this would result in lower tax on the income. However, the
spousal RRSP belongs to the spouse or common law partner.
Note: There are attribution rules to avoid short term income-splitting
13
MULTI INSURANCE Retirement & Financial Planning
Spousal RRSPs
Example: Karim makes $100,000 and his wife Aliya makes $30,000.
Strategy
Karim buys a spousal RRSP contribution for $18,000 and gets a tax
break in his own high tax bracket
There cannot be any contribution to the Spousal plan for the following
2 years
Aliya can withdraw the money from the Spousal RRSP in the third year
and pay taxes in her own tax bracket, which is much lower than Karim‟s tax bracket, thereby saving on the withdrawal as well.
This is used when:
1. The family is planning on having a child and one of the spouses will not be working
2. If one of the spouses is in a lower income tax bracket
14
MULTI INSURANCE Retirement & Financial Planning 15
Can I withdraw from my RRSP?
Money invested in an RRSP is accessible at any time.
All withdrawals are taxable at that time.
You should generally not draw money from your RRSPs to
pay for ordinary living expenses, cars, furniture or those
sorts of items
RRIFs
At Age 71 at the latest, your RRSPs must be transferred to
Registered Retirement Income Funds (RRIFs) or some other
income plan
You must withdraw a minimum income each year from your
RRIF (increases every year) – only amount withdrawn in subject
to tax each year
MULTI INSURANCE Retirement & Financial Planning 16
Funding Your RRSP
Regular contributions are better than lump sum contributions
near the yearly deadline.
Allows the money to grow tax free longer
Provides for dollar cost averaging: consistent investment on a
monthly or quarterly basis avoids market fluctuations
What about taking out a loan?
If you invest your maximum allowable amount, you may be
entitled to a larger tax refund, which can be used to partly pay off
the loan.
What if I cannot contribute the maximum amount?
If you do not contribute to the maximum allowable amount, the unused contribution room is carried forward indefinitely.
This information can be found on your “Notice of Assessment” from the Canada Revenue Agency (CRA) or call 1-800-267-6999
MULTI INSURANCE Retirement & Financial Planning
Three Investing Scenarios
Three Individuals Contribute $13,500 annually at 6%
compounded annually
Individual Contribution Strategy Value in 35 Yrs
A January at the beginning of the
tax year $1,552,391
B December at the end of the tax
year $1,504,370
C $1,125 every month
$1,594,632
MULTI INSURANCE Retirement & Financial Planning
Is it better to pay down my debt or borrow money for an RRSP?
Pay Down extra to your debts
(mortgage, student loans, line
of credit)
$10,000 contribution on a debt
with a current rate of 3% -4% will
result in a savings of $300- $400
WHICH WOULD YOU PREFER:
$3,000- $4,000 each year or
$300- $400 each year?
Borrow Money for an RRSP
Get a line of credit for $10,000 at
a current rate of 3% to 4% will
cost $300 to $400
Using the $10,000 loan to invest in
RRSPs will result in an immediate
tax refund of $3,000- $4,000,
which is a 30% to 40% return on
the principal
Sara can use the tax refund to pay
back the loan or pay down her
mortgage
Sara‟s $10,000 RRSP contribution
will also grow tax deferred with
compounding interest
Example: Sara is wondering if she should borrow $10,000 from the bank to
contribute to her RRSPs, or use the money to pay down extra towards her debt.
MULTI INSURANCE Retirement & Financial Planning
Borrowing for an RRSP
The Benefits of Using a Loan to Contribute
Borrow $1,000 to contribute to your RSP $1,000
Return on $1000 RSP investment at 6%
for 1 year: $60
for 10 years: $791
for 40 years: $9,286
Repay loan over 12 months - total of
payments
$1,033
Loan interest paid over the 12 months $33
MULTI INSURANCE Retirement & Financial Planning
New in 2009 - TFSA
You can contribute $5,000 per person per year
Available for any Canadian Resident over 18
No taxes paid on any income/ dividends/ capital gains earned
Including 2012, cumulative contribution room is $20,000
The amount withdrawn can be put back in the TFSA at a later date
without reducing your contribution room.
Neither income earned in a TFSA nor withdrawals will affect your
eligibility for federal income-tested benefits and credits such as the
Canada Child Tax Benefit (CCTB), benefits from Employment
Insurance (EI), GST Credit, Guaranteed Income Supplement (GIS),
Old Age Security (OAS), or Working Income Tax benefit (WITB).
Contributions to a spouse‟s TFSA will be allowed and TFSA assets
can be transferred to a spouse upon death.
MULTI INSURANCE Retirement & Financial Planning
Invest in an RRSP and TFSA
TFSA RRSP
Are your contributions tax-deductible? No Yes
Will you pay tax if you withdraw your money?
No Taxed as ordinary income
Can withdrawn amounts be added to your contribution room for the following year?
Yes No
How much can you contribute? $5,000, regardless of
income level
Contribution room is based on your earned income, with a
maximum of $22,450 for 2011
Will withdrawals affect your eligibility for government benefits and credits such as Old Age Security or Guaranteed Income Supplement?
No Possibly – depending on your
income level
Do you have to close or convert your account at a particular age?
No, you can continue saving in a TFSA for as long as you want
Yes, an RRSP must be converted to a Registered
Retirement Income Fund (RRIF) or annuity at age 71
Where can you invest the money? A wide variety of investments, including mutual funds,
stocks, bonds and GICs
A TFSA AND AN RRSP ARE BOTH DESIGNED FOR TAX BENEFITS –
BUT THEY HAVE DIFFERENT ADVANTAGES
MULTI INSURANCE Retirement & Financial Planning
RESPs
Currently the average cost of post-secondary education is
approximately $20,355 per year, for a 4 year program cost of
over $80,000 per child
In 2016, that cost will increase to approximately $27,123 per
year, or over $100,000 for a 4-year post secondary education
per child
RESPs are Registered Retirement Savings Plans that provide
tax sheltered earnings and grants from the government
You can contribute up to $5,000 per child per year tax free
until the child reaches 18 years of age
Through the Canadian Educations Saving Grant (CESG), the
government provide a grant of $500-$800 (I.e. 20-26%) on the
first $2,500 in RESP contribution per year per child, to a
maximum lifetime grant of $7,200
MULTI INSURANCE Retirement & Financial Planning
RESPs
The money can be withdrawn tax free from an RESP and
used towards any expense related to the child‟s post
secondary education, including tuition, books,
accommodation
A Family RESP Plan is recommended if you have more
than one child, as the money can be combined to use for
either or both children, giving you increased flexibility
In the event the child does not attend post secondary
education, the money can be rolled over into an RRSP
without penalty (as long as there is RRSP contribution
room available)
MULTI INSURANCE Retirement & Financial Planning 24
What are my investment options?
Equities (Stocks)
Ownership in company, Share in company profits
Canadian or foreign, collect dividends
Fixed Income (Bonds)
Promise to repay debt, Receives interest
Government and Corporate
Money Market/GICs
Federal government debt, Short term, bank certificates
Segregated Funds
Mutual Funds
Exchange Traded Funds (ETFs)
MULTI INSURANCE Retirement & Financial Planning 25
What Do I Invest In? cont.
MULTI INSURANCE Retirement & Financial Planning 26
Determining Asset Allocation
This decision is yours based on a variety of factors including:
Your Age;
Time Horizon - when you want to retire;
Risk Tolerance;
How much money you will need in retirement
Young age/long time horizon + low liquidity requirements +
high risk tolerance = higher exposure to equities
MULTI INSURANCE Retirement & Financial Planning 27
Segregated Guaranteed Investment Funds (GIFs)
Currently provide guaranteed 5% annual rates of return for
lifetime (without compounding) irrespective of market rates
(as in a GIC)
Investments also have market resets every 3 years: if the
market rate is higher than the guaranteed 5% rate, you get
the higher return with no downside risk
Investments grow on a tax deferred basis until they are
withdrawn at retirement
Annual payout of 5-7% of the total fund value for life, which
is considered return of capital and dividends (lower taxable
gains for non-registered investments)
Upon death, the full remaining value transfers to your
beneficiary tax free
MULTI INSURANCE Retirement & Financial Planning 28
Segregated Guaranteed Investment Funds (GIFs)
MULTI INSURANCE Retirement & Financial Planning
Mutual Funds vs. Segregated Funds (Guaranteed Income Funds)
Seg Funds (GIFs) Mutual Funds
Maturity Guarantee YES NO
Death Benefit
Guarantee
YES NO
Ability to Reset
Guarantees
YES NO
Potential for Creditor
Protection
YES .. Some provinces
for bankruptcy only
Taxation Time weighted
distribution
Distribution to all
shareholders equally
Fund Distributions Reinvested in the
fund
Monthly, quarterly
annually
Client reporting Semi-annually Semi or quarterly
MULTI INSURANCE Retirement & Financial Planning
Original Investment 1,000,000
FMV drops 10% 3 yrs. later $900,000 (upon client’s death)
Non-Reg DSC Fee (5.0%) $50,000
Probate & Estate Fees*** $54,500
(5.45%)
Net Proceeds $795,500
Bypass Probate*
No Tax Implications
FMV + Top-Up
$1,000,000+
$1,000,000
minimum
Keep Seg Fund**
Collapse DSC Free
$1,000,000
minimum
•* Only if a beneficiary is named ** Assumes spouse/common-law partner is named as successor owner and annuitant. •*** Cost will vary from province to province and on the complexity of the estate.
Segregated Funds (GIFs)
100% Death Benefit Guarantee
• 100% of Deposit Value or
• Market Value or
• Previous Guarantee Reset Value
Segregated Funds- Guaranteed Income Funds (GIFs)
MULTI INSURANCE Retirement & Financial Planning 31
What are my Mutual Fund Options?
Types of Mutual Funds:
Money Market: low risk, low return
Fixed income: regular income stream, low risk
Growth/Equity: long term, based on stock
market performance
Balanced: reasonable returns, mix of products,
low to moderate risk
Specialty: specific to a geographic region or
industry, higher risk
MULTI INSURANCE Retirement & Financial Planning
Fixed Income lowers volatility in a portfolio … even with rising interest rates
BOND AND STOCK PORTFOLIOS (1941 – 1981)*
Source: Ibbotson Associates, FMRCo (MARE) as at September 30, 2009.
6% 8%
9%
11%
3%
14%
4%
5%
7%
10%
0%
2%
4%
6%
8%
10%
12%
14%
16%
100% Bonds 30% Stocks /
70% Bonds
50% Stocks /
50% Bonds
70% Stocks /
30% Bonds
100% Stocks
Tota
l Ret
urn
(%)
Avg. Return
Std. Dev.
MULTI INSURANCE Retirement & Financial Planning
30-Year Fixed Income Bull Run is Nearing its End What Got Us Here, Won‟t Get Us There
•Source: Bloomberg, as of December 31, 2011.
1
2
3
4
5
6
7
8
9
10
1995 1999 2003 2007 2011
Yie
ld (
%)
Govt. of Canada Bond 10 Yr Prov. of Ontario Bond 10 Yr Canadian Corp. Bond A 10 Yr
3.4%
3.0%
1.9%
MULTI INSURANCE Retirement & Financial Planning
Little Left After Tax & Inflation
1.9%
3.0%
3.4%
1.02%
1.6%
1.8%
Net of Interest Income
Tax
-1.9%
-1.3%
-1.1%
2.9%
2.9%
2.9%
46.4%
46.4%
46.4%
•Sources: PC Bond Research, Bank of Canada and Bloomberg, as of
December 31, 2011. – Assumes a marginal tax rate of 46.4% which is the
top rate for Ontario in 2011.
Gross Yield
Federal
Government
Bonds
Provincial
Government
Bonds
Corporate
Bonds
Net of Inflation
MULTI INSURANCE Retirement & Financial Planning
$200,000
$220,000
$240,000
$260,000
$280,000
$300,000
$320,000
$340,000
$360,000
Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11
Po
rtfo
lio
va
lue
Being overly conservative in the recovery?
Source: Datastream, September 30, 2011. Balanced portfolio 50% S&P/TSX Composite Index, 35% DEX Universe Bond Index, 15% DEX 91 day T-Bill. All bond portfolio consists of 100% DEX Universe Bond Index.
300,000
Remained invested in a balanced portfolio
Sold at low, invested 100% in bonds
Most are
somewhere
in-between
S&P/TSX
Trough
MULTI INSURANCE Retirement & Financial Planning 36
Diversification
Holding a wide variety of investments in a portfolio so that no single
investment can make or break overall performance
YOU CAN DIVERSIFY BY:
Asset class (equities, fixed income, cash)
Sector (industrials, financial services, energy, etc.)
Geography (Canada, U.S., Europe, Asia, emerging markets, etc.)
Company size (small, mid and large capitalizations)
MULTI INSURANCE Retirement & Financial Planning
Why diversify? No one can tell what
will happen
Diversification helps ensure that high returns from one part of your portfolio can compensate
for slower returns in another
By smoothing out the highs and the lows, diversification provides more consistent returns
Sales
Timee
•Sunglasses
•Umbrellas
MULTI INSURANCE Retirement & Financial Planning
•Foreign equity: MSCI EAFE Index
•Global equity: MSCI World Index
•Emerging markets equity: MSCI Emerging Markets Free Index
•U.S. equity: S&P 500 Index
•U.S. small cap. equity: Russell 2000 Index
•Canadian equity: S&P/TSX Composite Index
•Canadian small cap. equity: Nesbitt Burns Small Cap Index
•Canadian bond: DEX Universe Bond Index
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
U.S. equity
38.0%
Emerging markets
57.2%
Canadian bond
10.2%
U.S. small cap.
8.9%
Canadian bond
8.7%
Canadian small cap.
50.2%
Emerging markets
16.8%
Emerging markets
31.2%
Emerging markets:
32.1%
Emerging markets:
18.6%
Canadian bond
6.4%
Global equity
33.5%
Canadian equity
31.7%
Canadian equity
7.4%
Canadian bond
8.1%
Canadian small cap.
-4.9%
Emerging markets
27.8%
Canadian equity
14.5%
Canadian equity
24.1%
Foreign equity
25.9%
Canadian equity
9.8%
U.S. small cap
-17.9%
Foreign equity
28.8%
Foreign equity
20.0%
U.S. small cap.
0.4%
Emerging markets
3.8%
Emerging markets
-7.0%
Canadian equity
26.7%
Foreign equity
11.5%
Canadian small cap.
14.3%
Global equity
19.6%
Canadian bond
3.7%
U.S. equity
-23.3%
Canadian bond
9.2%
Global equity
18.1%
Canadian small cap.
0.4%
Canadian small cap.
1.1%
Canadian equity
-12.4%
U.S. small cap.
20.5%
U.S. small cap.
9.7%
Foreign equity
10.7%
U.S. small cap.
17.9%
Canadian small cap.
-1.4%
Global equity
-26.9%
U.S. small cap.
4.6%
Canadian small cap.
17.4%
U.S. equity
-5.9%
U.S. equity
-6.4%
Foreign equity
-16.8%
Foreign equity
13.4%
Canadian small cap.
7.4%
Global equity
6.7%
Canadian small cap.
17.6%
Foreign equity
-5.7%
Foreign equity
-29.8%
Canadian equity
-1.6%
U.S. small cap.
14.6%
Global equity
-10.2%
Global equity
-11.6%
Global equity
-20.7%
Global equity
8.9%
Canadian bond
7.1%
Canadian bond
6.5%
Canadian equity
17.4%
Global equity
-7.5%
Canadian equity
-33.0%
Canadian small cap.
-19.0%
U.S. equity
14.4%
Foreign equity
-11.2%
Canadian equity
-12.6%
U.S. small cap.
-21.3%
Canadian bond
6.6%
Global equity
6.4%
U.S. equity
2.4%
U.S. equity
15.4%
U.S. equity
-10.5%
Emerging
markets:
-41.4%
Emerging markets
-19.9%
Canadian bond
-1.1%
Emerging markets
-28.2%
Foreign equity
-16.5%
U.S. equity
-22.9%
U.S. equity
5.3%
U.S. equity
2.8%
U.S. small cap.
1.9%
Canadian bond
3.8%
U.S. small cap
-16.5%
Canadian small cap.
-46.6%
… or which asset class will lead
MULTI INSURANCE Retirement & Financial Planning
… or what region will lead
Canada U.S. U.K. Europe Japan Asia
1998 -1.58 38.01 23.48 43.16 15.60 2.16
1999 30.43 14.37 13.68 10.88 66.28 53.18
2000 19.04 -5.93 -9.74 -4.24 -30.39 -34.59
2001 -8.39 -6.35 -10.22 -17.50 -24.90 4.06
2002 -12.44 -22.91 -15.36 -21.12 -9.83 -10.17
2003 26.72 5.26 9.93 16.66 13.40 18.57
2004 14.48 2.81 12.21 12.76 7.96 9.03
2005 24.13 2.29 6.40 7.78 22.92 18.79
2006 17.26 15.35 32.59 34.90 1.66 31.69
2007 9.83 -10.53 -9.15 -0.38 -19.59 13.12
2008 -33.00 -23.29 -36.98 -31.26 -10.68 -37.94
LEADING REGION
•Source: Fidelity Management & Research Company as at December 31, 2008. Expressed in CDN$. Indices used: Canada: S&P/TSX Composite Index; U.S.: S&P 500 Index; U.K.: FTSE All Share Index; Europe: MSCI Europe ex-U.K. Index; Japan: TOPIX Index; Asia: MSCI AC Far East ex-Japan Index.
AVERAGE ANNUAL RETURNS (%)
MULTI INSURANCE Retirement & Financial Planning
Leading sectors change without warning
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Consumer Discr. 34.89 26.37 -20.53 -4.40 -23.25 13.55 6.59 -1.56 21.57 -17.25 -28.23
Consumer Staples 31.12 -20.38 15.91 -2.21 -3.93 -3.14 3.97 3.09 21.12 1.33 -5.47
Energy 12.27 15.64 11.11 -1.00 -7.09 4.47 19.20 25.43 18.73 11.12 -23.73
Financials 20.91 2.96 15.40 -11.32 -16.96 15.18 9.32 8.68 24.84 -21.31 -43.20
Health Care 46.34 -15.14 31.76 -7.58 -18.70 -1.07 -1.55 6.08 11.21 -11.04 -3.33
Industrials 15.45 21.23 2.94 -10.19 -23.09 14.42 10.86 9.01 19.42 -1.30 -29.86
Information Tech. 80.57 89.51 -39.43 -25.12 -39.33 22.44 -5.05 1.79 9.83 -1.70 -31.07
Materials 7.33 22.07 -9.03 1.46 -5.28 20.23 9.40 16.17 29.62 14.01 -38.53
Telecom 63.44 35.68 -38.42 -20.59 -29.41 3.84 9.29 -11.99 33.23 4.21 -17.14
Utilities 33.28 -17.73 28.99 -17.02 -16.41 6.61 19.79 10.45 37.30 4.21 -12.85
AVERAGE ANNUAL RETURNS (%) WORST PERFORMERS BEST PERFORMERS
•Source: Ibbotson. Annual returns by sector based on the MSCI World Index, as of December 31, 2008. Expressed in CDN$."
MULTI INSURANCE Retirement & Financial Planning
•Specialty Funds
Fidelity Small Cap America Fund– 2011 7.71%
Small- and mid-capitalization U.S. market
Concentrated portfolio (30-45 stocks) with below average volatility
Excellent performance: 1yr 7.71%; 3yr 19.09%; 5yr -0.49%, 10yr -0.01%
Fidelity Canadian Large Cap Fund- 2011 10.55%
and international mid- and large-capitalization companies
Fidelity Canada‟s oldest Fund with concentrated holdings (30-45 stocks)
Consistent top performer for over 10 years in the Canadian equity marketplace
Exceptional short and long term performance: 1yr 10.55% ; 5 yr. 7.40%; 10 yr. 9.01%
Fidelity Dividend Plus Fund – 2011 3.13%
aims to provide a high total investment return and competitive market yield by investing in dividend-paying equities incl. REITs.
Proven Manager track record, formerly known as Fidelity Income Trust Fund
“Get paid to wait” - monthly distributions paid
Solid performance on the upside and downside:1 yr. 3.13%; 3yr. 21.70%; 5yr. 8.16%
Fidelity Investment Top Funds
MULTI INSURANCE Retirement & Financial Planning
Fidelity Income Allocation Fund – 2011 7.22%
Neutral mix (30% equity, 70% fixed income, including US High Yield and US CMBS)
Managers have the ability to tactically move between asset classes (domestic equity, foreign equity, fixed income, cash)
Oversight management team to help with tactical decision making
Stellar short and long term performance: 1 yr. 7.22% ; 3 yr. 18.49%, 5 yr. 6.42%
•Canadian Fixed Income Balanced Fund
•Canadian Balanced Income
Fidelity Canadian Balanced Fund – 2011 -1.11%
Neutral mix (50% equity, 40% fixed income, 10% high yield bonds currency hedged)
Strategic asset allocation strategy which provides consistency when constructing as a core for a portfolio
Exceptional short and long term performance:1 yr. -1.11% ; 5yr. 3.78%; 10 yr. 6.34%
•Canadian Balanced Fund
Fidelity Monthly Income – 2011 6.18%
Neutral mix (30% Canadian equity, 30% Canadian fixed income, 10% U.S. high yield currency hedged, 10% U.S. CMBS
currency hedged, 20% Canadian income trusts)
Management team have the ability to tactically switch between asset classes
Consistent short and long term performance: 1 yr. 6.18% ; 3yr. 15.12%; 5yr. 5.07%
Fidelity Income and Balanced Funds
MULTI INSURANCE Retirement & Financial Planning
Franklin Templeton ALL STARS Period ending December 31, 2011
Fund Name Inception 1 Yr 3 Yrs 5 Yrs 10 Yrs S.I.
Bissett Canadian High Dividend Fund 11/24/2000 1.85 21.92 10.34 13.70 14.6
Bissett Microcap Fund 11/24/2000 9.55 37.20 7.30 17.72 17.33
Bissett Dividend Income Fund 11/24/2000 8.00 13.38 4.20 7.67 7.99
Templeton Global Bond Fund
6/18/20012
2.80 6.70 7.86 7.51 8.07
Templeton Emerging Markets Fund 09-20-1991 -19.91 18.00 0.70 11.80 6.51
MULTI INSURANCE Retirement & Financial Planning
Making and sticking to a plan is more difficult in times of high market volatility
Source: Westcore Funds / Denver Investment Advisors LLC, 1998.
Optimism
Excitement
Thrill
Euphoria
Anxiety
Denial
Fear
Desperation
Panic
Despondency
Depression
Hope
Relief
Optimism
Temporary setback,
I‟m a long term investor
Wow, I feel great
about this investment
•Maybe the markets
just aren‟t for me
POINT OF FINANCIAL RISK
POINT OF FINANCIAL OPPORTUNITY
Capitulation
MULTI INSURANCE Retirement & Financial Planning
Emotions: The Media Worried about market volatility and your investments?
MULTI INSURANCE Retirement & Financial Planning
Emotions: The Media What a difference a day makes!
MULTI INSURANCE Retirement & Financial Planning
Emotions: The media
•Source: Globe & Mail, August 19, 2011. •Source: Toronto Star, August 19, 2011.
Media headlines are influencing client decisions
MULTI INSURANCE Retirement & Financial Planning
Period Length of Bear Bear Decline
Apr 56–Jan 58 21 mos. -24%
Oct 73–Nov 74 13 mos. -33%
Jun 81–Jun 82 12 mos. -39%
Aug 87–Nov 87 3 mos. -25%
Apr 98–Sep 98 4 mos. -27%
Sep 00–Sep 01 14 mos. -38%
Jun 08–Mar 09 10 mos. -50%
Average 11 mos. -34%
Can we learn from the past? Absolutely!
•Source: FactSet and Morningstar Research, S&P/TSX as of July 31, 2011 (Bear Markets) and August 31, 2011 (Bull Markets)
S&P/TSX – Bull and Bear Markets – 1956 to 2011
Subsequent Period Length of Bull Bull Rise
Jan 58–Jul 59 19 mos. 46%
Dec 74–Aug 75 9 mos. 27%
Jul 82–Dec 83 18 mos. 99%
Dec 87–Jan 90 26 mos. 34%
Sep 98–Aug 00 24 mos. 109%
Oct 01–Apr 02 6 mos. 16%
Mar 09–Aug 11 30 mos. 69%
Average 19 mos. 57%
MULTI INSURANCE Retirement & Financial Planning 49
$88,227.63 or
9.1% annual
compound
return
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Oct-
83
Oct-
84
Oct-
85
Oct-
86
Oct-
87
Oct-
88
Oct-
89
Oct-
90
Oct-
91
Oct-
92
Oct-
93
Oct-
94
Oct-
95
Oct-
96
Oct-
97
Oct-
98
Oct-
99
Oct-
00
Oct-
01
Oct-
02
Oct-
03
Oct-
04
Oct-
05
Oct-
06
Oct-
07
Sept-
08
Value of $10,000 invested in S&P/TSX 25 years ended September 30, 2008
Crash of 1987
2000 - 2002
bear market
1998 market
crisis
2008 Global
financial crisis
Economic
Slowdown
Early 90’s
recession
Source PerTrac
Market behaviour: Staying the course produces healthy returns
MULTI INSURANCE Retirement & Financial Planning
Stay invested- It pays off
Average Annual Return Growth of $10,000
Fully Invested 9.1% $57,075
Missed 10 Best Days 5.8% $30,926
Missed 20 Best Days 3.7% $20,662
Missed 30 Best Days 1.8% $14,346
Missed 40 Best Days 0.2% $10,374
•Source: Bloomberg as of July 31, 2011.
S&P/TSX – 20 Years Ending July 31, 2011
MULTI INSURANCE Retirement & Financial Planning 51
13.2%
$1,193,792
3.7%
$206,812 3.0%
$180,611
US Inflation Average US Investor S&P 500 Index (US$)
Source: 2006 Dalbar Inc. (US) Research Report.
$1
00
,000
in
ve
stm
en
t o
ve
r 2
0 y
ea
rs
“While the S&P 500 returned 13.2%
over 20 years, the average investor
return was only 3.7%”
– Dalbar Inc.
Market timing is the #1 reason investor
returns pale in comparison
Investor misbehaviour:
Difficult to win by trying to time the market
MULTI INSURANCE Retirement & Financial Planning 52
-40%
-20%
0%
20%
40%
60%
80%
1-year 2-year 3-year 4-year 5-year 7-year 10-year
Best and worst 1-year returns
differ by more than 90%
No negative 7- or 10-year
periods in over 25 years.
An
nu
al c
om
po
un
de
d r
ollin
g p
eri
od
re
turn
s
Source: Pertrac, S&P/TSX Composite Index, 1983 to 2008.
S&P/TSX Composite Index performance over 25 years
Sound investor behaviour:
Long-term strategies limit worries
MULTI INSURANCE Retirement & Financial Planning 53
What happens when I die?
The value of your RRSP/TFSA is paid to the beneficiary you have designated.
The RRSP can be transferred to a surviving spouse on a
tax free basis. However, once the surviving spouse dies
the entire RRSP value is fully taxable as income to the
beneficiary or beneficiaries
If there is no beneficiary, the RRSP is paid out to your
estate. The beneficiary of the estate will have to pay taxes
on the full amount as taxable income.
For example, if you have $1 million in RRSPs, when you
and your spouse die, your beneficiary will need to pay
taxes on the $ 1 million, i.e. $480,000 in income taxes.
You can do estate planning by getting a joint last to die life
insurance policy to cover you in the event of death to
avoid your beneficiaries paying taxes on your estate.
MULTI INSURANCE Retirement & Financial Planning 54
Final Tips: Investing 10 Commandments
1. If you haven‟t started saving, start now. It‟s never too late to invest.
2. Invest early and often and take advantage of the „time value of money.‟
3. Choose mutual funds and put your money in the hands of professionals who
have the investment know-how to help you reach your goals and retirement.
4. Maximize your RRSP Contribution to take advantage of your single greatest
opportunity to defer taxes and save for retirement.
5. Don‟t be too cautious and choose all low-risk investments or too aggressive
and choose all risky investments. A diversified portfolio should include a
variety of assets to minimize risk and maximize return.
6. Think long-term instead of letting short-term market volatility sway your
investment decisions.
7. Take advantage of „dollar-cost averaging‟ with a pre-authorized chequeing
(PAC) withdrawal that spreads your mutual fund purchases over time through
manageable monthly contributions.
8. Use an RRSP loan to maximize your tax refund if you don‟t have savings.
9. Transfer your non-registered investments to an RRSP for tax savings.
10. Don‟t wait until the deadline to submit your RRSPs- its better not to be rushed!
MULTI INSURANCE Retirement & Financial Planning
Questions? Contact me for a free, no obligation consultation:
Aleem Visram, HBA, MBA, IFIC
Financial Consultant
Cell: (647) 986-9163
E-Mail: [email protected]
MULTI INSURANCE
Retirement & Financial Planning