Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

How to boost your home’s resale value

Posted By |

By Sia Hasan

Special to the Financial Independence Hub

While your house is your home, it is also a substantial investment that can increase tremendously in value over the years. Property value may increase through changes in market conditions in your hometown; it can also increase when you make strategic upgrades and improvements to the property and even through proper home maintenance steps over the years. Some improvement projects can pay off substantially, and these are the areas you may want to focus on initially for the best results.

Focus on Curb Appeal

If your goal of increasing property value is based on a desire to sell the property soon, curb appeal is a prime area on which to focus. Curb appeal is immediately visible to buyers who are browsing through online listings, and great curb appeal can entice them to continue to flip through your property’s online photos and request a tour. Curb appeal may be improved by fertilizing the lawn, mulching the flower beds, trimming the trees, adding new flowers to your space and more. If you have extra time and money, repainting or replacing your front door and decorating the patio are wonderful ideas to consider as well.

Upgrade the Kitchen

When a kitchen renovation project improves the style and function of the space, it can result in a considerable increase in property value. In fact, you may be able to recoup as much as 80 per cent or more of your costs to upgrade the kitchen through an increase in property value. Choose upgrades and a design that appeal to the masses for the best results, such as a neutral hue for counter tops rather than a bold colour. In addition, only make upgrades that are in line with your market. For example, avoid investing in high-end luxury appliances for a kitchen in a starter home. Continue Reading…

Which investments are best inside and outside RRSPs

Posted By |

As we stated in an earlier article on RRSPs (What you need to know to build a productive RRSP) your investments gain doubly in your RRSP. Instead of paying up to 50% of your profit to the government in taxes, you keep 100% of your money working for you.

When you lose, however, you take a double loss. You lose the money you’ve invested as well as the opportunity to have the money grow for years, or even decades, sheltered from taxes.

So don’t use it as a place to find out if you have a talent for stock trading.

Successful investors put only their safest investments in RRSPs. These investments have the greatest potential to increase in value over time and therefore benefit from the RRSP’s continuing protection from taxes.

If these investors indulge in penny stocks, stock options or short-term trading, they do so outside their RRSPs.

If you hold speculative investments like this in an RRSP and they drop, you lose more than the money you invested in them. You also lose the tax-deduction value of a loss outside your RRSP. Outside your RRSP, you can use capital losses to offset taxable capital gains in the current year, the three previous years, or any future year.

If you invest in mutual funds, you have another set of tax concerns. At the end of the year, mutual funds distribute any capital gains they have made during the year, after deducting any capital losses, to their unitholders. So, you may have to pay capital gains taxes on your mutual-fund holdings, even though you haven’t sold.

Continue Reading…

What to expect when applying for CPP

Posted By |

What should you expect when applying for CPP (Canada Pension Plan) benefits? As my latest Retired Money column for MoneySense explains, age 64 is not just the age the Beatles ask the question “Will you still need me, will you still feed me?”

It’s also the age when Service Canada can be expected to reach out to you with a letter to your home address, giving you details of how the Government of Canada will feed you with CPP benefits once you turn 65 (or as early as 60 should you choose reduced early benefits).

But fear not, Ottawa will also  still need you, in the form of taxable revenue: like Old Age Security, CPP benefits are fully taxable.

The full piece can be accessed by clicking on the highlighted headline: CPP application: Here’s what to expect during the process.

The piece’s focus is on the actual application process but does touch on the age-old topic of the optimal age to start receiving benefits: which can be anywhere between age 60 and 70. The Hub has tackled this several times in its almost three years of existence. Use the search engine to the right and enter CPP, or click here.

Try the Canadian Retirement Income Calculator

The piece also links to a useful web tool provided by Service Canada: the Canadian Retirement Income Calculator, which you can access by clicking on the highlighted text.

Continue Reading…

Underinvested in China? How to invest in the “New China” Economy

Posted By |
Highrises in Shanghai’s new Pudong financial district.

By Caroline Grimont

(Sponsor Content)

Investors are missing out on strong growth opportunities by being underinvested in China:  the world’s most populous country and second largest economy.

Since China slowed down from two decades of near double-digit growth, investors have become skeptical about investing in the country.

They worry about the country’s macro challenges; among them, a high leverage ratio resulting from a rapid buildup in debt over the past 10 years, excess capacity in industrial segments, an over-reliance on investment as a growth driver, and more recently, the risks of protectionism.[i]

In our view, these challenges are overstated. China has the capacity to overcome them and has taken a measured approach to sustain its growth, albeit at a slower pace.   The Chinese economy has grown almost ten-fold from US$ 1.2 trillion in 2000 to US$ 11.2 trillion in 2016, second in size only to the US.  Given the size of China’s economy now, a slower more sustainable rate of growth makes sense.

Our view is shared by Morgan Stanley, which states: “We expect China to avoid a financial shock and achieve high income status by 2027. Our view is that moving to higher value-added activities will propel the economy forward and drive the continued medium term outperformance of MSCI China versus MSCI EM, providing significant investment opportunities.”[ii]

China accounts for almost 50% of global economic growth

China remains one of the fastest growing economies in the world, with a forecasted growth rate of 6.5% in 2017 and 6% in 2018. On a global scale, China represents 15% of the world’s economy and accounts for close to 50% of global economic growth.

Continue Reading…

Alternative Investments for the Masses

Posted By |

Is it time for the average investor to look into alternative investments to the traditional balanced portfolio of stocks and bonds?

In a column in Thursday’s Globe & Mail Report on Business, I look at a relatively new mutual fund from Mackenzie Investments that gives both average and affluent investors a way to diversify their portfolios into alternative investments or asset classes.

You can find it by clicking on the highlighted headline: Alternative Investing for the Masses.

The Mackenzie Diversified Alternative Fund (“MDAF”) is positioned as a low-risk way to diversify beyond the typical “balanced” fund or balanced portfolio of stocks and bonds. As the article says, both traditional stocks and bonds appear pricey at this juncture, and studies show that putting up to 20% of a total portfolio can smooth returns. Indeed, many giant pension funds have far more than that, including such well known pensions as Ontario Teachers and OMERs.

Non-traditional asset classes seen as “alternatives” include private equity, infrastructure, emerging-market debt, limited partnerships and a host of other investments not easily accessed by the average investor. Pension funds can get their own direct access to alternatives but for individuals many were available only through “offering memorandums” available only to those considered sophisticated investors: with $1 million in investible assets or combined annual family income of $300,000.

Low entry point, liquid

By contrast, the Mackenzie fund can be purchased for as little as $500, like most mutual funds, and unlike many hedge funds, can be liquidated on demand like any other mutual fund.

The article goes into the fee issue: the A series has an Management Expense Ratio (MER) of 2.42% and the F series 1.25% (advisors will then tack on their own fee, typically another 1%). But affluent investors get a price break under the Mackenzie Private Wealth Solutions’ preferred-pricing program, with the basic management fee for household wealth in all Mackenzie funds tapering down from 0.8% to as little as 0.5% for $5 million dollar portfolios.