READ, RECOGNIZE AND RUN · 2018-06-02 · iShares S&P/TSX Cdn. Div Aristocrats CDZ CDN. DIVIDEND $24.53 886 $21,733.58 19.5% iShares S&P/TSX Global Gold XGD CDN. EQUITY $14.28 471

Independent Financial Advice For Everyday Use - Since 1981

MONEYCANADIAN CANADIANMONEYSAVER.CA

SAVER

PM40

0354

85 R

0990

4

$4.95

Parents Supporting Children: A Voluntary Act Or Legal Obligation? Steve Benmor P.26

Planning For RRSPs Beyond TodayBecky Wong P.34

DIVIDEND & COMPANY NEWS • ETFS • TOP FUNDS • DRIPS • ASK THE EXPERTS

Unpacking The Perils Of Travel Insurance

Policy Gremlins

READ, RECOGNIZE AND RUN

JUNE 2016

Bruce Cappon P.11

Switch to a

Digital Subscription

only $19.99 per year+tax

A Webinar presented by Matt McCall

Date: Thursday, October 6, 2016Time: 11am to 12:30pm est

Cost: $3.00 cad

The US Stock Market

For more information and to register please go to www.canadianmoneysaver.ca/events

Matt McCall is the founder of Penn Financial Group, an investment advisory group serving individual and institutional clients from coast to coast. He is the author of two best-selling books, The Next Great Bull Market and The Swing Trader’s Bible. As a regular guest on Fox News Channel, Fox Business Network, CNN, and GBTV he has appeared in over 1000 TV segments in the last five years. He also writes for the International Business Times, The Blaze, Benzinga, and Index Universe.

http://www.canadianmoneysaver.ca/events

JUNE 2016

EDITOR-IN-CHIEF - Peter HodsonMANAGING EDITOR: Lana SanicharCONTRIBUTING EDITORSEd 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, David Stanley, John Stephenson, Brian Tang, Angelo Vicere, Becky Wong.

MEMBERSHIP RATES - All rates for Canadian residents are printed on the inside back cover. Non-residents of Canada may purchase the online edition only – at $24.95 for one year’s service.

Canadian MoneySaver (CMS) is published by The Canadian Money Saver Inc., 55 King Street West, Suite 700, Kitchener, ON N2G 4W1 Tel: 519-772-7632. Office hours: 9:30 am to 1:30 pm EST Website: http://www.canadianmoneysaver.ca E-mail: [email protected]

PRIVACY POLICY - CMS may make its members’ mailing list or e-mail addresses available to carefully screened com-panies or organizations offering products or services that may be of interest to you. If you prefer not to receive these of-fers, send us your mailing label with “Do Not Rent” written on it. (Required statement. We do not rent addresses.)

Canadian MoneySaver publishes monthly with three double issues (July/Aug, Nov/Dec and March/April). Canadian MoneySaver is an independent, totally membership-funded magazine.

The information contained in Canadian MoneySaver is obtained from sources believed to be reliable. However, we cannot represent that it is accurate or complete. The views expressed are those of the writers and not necessarily those of The Canadian Money Saver Inc. Neither the information nor any opinion expressed constitutes a solicitation by us for the purchase or sale of any securities or commodities. Canadian MoneySaver is distributed with the explicit understanding that Canadian MoneySaver, its publisher or writers cannot be held responsible for errors or omissions. Shareholders of The Canadian Money Saver Inc, editors and contributors may at times have positions in mentioned investments/securities.

Copyright © 2015. All rights reserved.

No reproduction, transmission or publication of any of the contents of Canadian MoneySaver is permitted without the express prior consent of the copyright owner. To obtain permission to use any part of Canadian MoneySaver, contact Peter Hodson.

® – Canadian MoneySaver is a Registered Canadian Trade Mark of The Canadian Money Saver Inc. Printed in Canada ISSN: 0713-3286

We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund of the Department of Canadian Heritage.

Canada Post Publication No. 40035485

JUNE 2016, Volume 35, Number 8

REGULAR FEATURES Shareclubs 4

Sharing With You 4

Dividend & Company News 5

Model ETF Portfolio 5

Coming Events 17

Point Of View 22

Money Digest 36

Canadian DRIPs with SPPs 37

Ask The Experts 38

Top Funds 40

Canadian ETFs 42

SPECIAL FEATURES

How to Get More Money Out of Your Defined Benefit Pension Plan Rino Racanelli 6

Active Investing And The Scientific Method Warren MacKenzie 8

Travel Insurance: Beware Of Policy Gremlins a.k.a. The Fine Print - Part 1 Bruce Cappon 11

A Strategy For Retired Seniors Confused By The New Realities Hedley Dimock 13

A Voice From Beyond The Grave - Part 1: Providing Guidance To the People Listed In Your Will And Related Documents Colin Ritchie 16

Snap! A Solution For The Canadian Investor David Ensor 18

Haven’t Properly Surrendered Your Green Card?-The IRS May Soon Ask If Your Us Tax Filings Are Up To Date Ed Arbuckle 24

Parents Supporting Children: A Voluntary Act Or Legal Obligation? Steve Benmor 26

Banking On The Financial Sector Benj Gallander 27

Why You Should Avoid Equity-Linked GICs Andrew Hepburn 28

Keys To Successful Investing Part 2: Di-Worsifying, Value Traps, And Cabooses! Scott A. Hanson 30

What You Should Know About The Clawback Eileen Reppenhagen 32

Planning For RRSPs Beyond Today Becky Wong 34

http://www.canadianmoneysaver.ca

mailto:[email protected]

Over at our sister c o m p a n y, 5 i Research Inc.,

we have now answered more than 44,000 investment questions for Members since 2012. We have seen a lot of different types of enquiries, that’s for sure.

Recently, a question keeps popping up again and again. It goes along the lines of, ‘Company XYZ has put itself up for sale. How do I really know it is for sale, and not just a move designed to prop up the share price?’

This question really refers to the whole issue of corporate and director responsibilities, so we thought we would address these issues.

First, and you may not be aware of this fact, a director of a public company can be personally liable if he or she breaches their fiduciary duties. Many directors are wealthy, but they are effectively putting their personal wealth on the line when they sign up for a directorship. Lawsuits on misbehavior can extend from the company to the directors’ own bank accounts.

When I became a director of Sprott Inc., I had to have multiple meetings and phone calls to lawyers so I knew what was about to be involved. I was given giant manuals on my new corporate responsibility and obligations. I had to sign documents showing that I understood the personal liability issues.

So, bottom line, we do not think many companies would put out fake press releases or other news simply ‘to prop up their stock’. Sure, there are promotional press releases and not all boards of directors are honest, or even competent. But we think, for the most part, directors do at least what they ‘think’ is right for shareholders. For a company to say that it has been approached on a takeover when it has not been would open up a whole can of liabilities to the directors.

Thus, we think it is mostly safe to believe companies regarding such material news. As a tangent, when you see directors resign from a company en masse, it is one of the biggest red flags you can get—directors are bailing from a company so they do not get sued.

Certainly, if more than one director leaves in a very short period for unexplained reasons, you might want to take a very hard look at the company you own, and perhaps not keep it much longer.

Sharing With You ShareClubs

4 z Canadian MoneySaver z https://www.canadianmoneysaver.ca z JUNE 2016

You may join any of the listed ShareClubs by contacting your local volunteer. Like-minded members get together to share financial information. No cost. No obligation. Just an inquiring mind.

The agenda for each group is shared by all group members, i.e. it is not just the responsibility of the contact person. ShareClubs are unlike investment clubs because they are meant to share investing information only.

Contact MoneySaver and volunteer to start a ShareClub in your area. When ShareClubs are filled, they are delisted.

VOLUNTEER REGION CONTACT

ONTARIO

Blake Hoo Ajax/Pickering [email protected] Attobelli Bolton 905-857-6527Ken Kyer Cornwall [email protected] Piccoli Georgetown [email protected] Prescott Guelph [email protected] Thai Hamilton [email protected] Matthew Moore Kincardine/Port Elgin 519-371-6592Francis Savage Kingston [email protected] Gerson Kitchener-Waterloo [email protected] Gauld London 519-657-4393Dipen Parekh Milton 647-745-2420Paul Drummond Mitchell 519-348-9724Linda Sopoco Delfin Mississauga 905-858-5555Mark Nizio Newmarket [email protected] Matsdorf North York I [email protected] Pun North York II [email protected] Hogenhout Orangeville 519-942-0220Tom Loftus Oshawa 905-725-1979Andre Albert Ottawa 613-741-2828Volunteer needed Peterborough [email protected] Mintha Port Hope 905-885-8659John Mills Scarborough 416-267-7993Jeff Danby St. George 519-753-7414Gary Poxleitner Sudbury [email protected] Zhang Toronto-Central [email protected]/Susan Marrier Thunder Bay 807-768-5321Henry Lamasz Unionville/Markham [email protected]

ALBERTA, BRITISH COLUMBIA

William Wood Calgary SE, AB [email protected] Tremblay Fort McMurray, AB [email protected] Lum N. Edmonton, AB [email protected] V. Kelowna/Okanagan, BC [email protected] Hicks New Westminster, BC 778-875-2615Brian Pearson Prince George, BC [email protected] Karefoe Queen Charlotte Is., BC [email protected] Lines Salmon Arm, BC [email protected] & Vic Parks Salt Spring Island, BC [email protected] Groom Sidney, BC [email protected] Beaton South Delta, BC www.tlshareclub.comBob Lee Ctrl. Vancouver , BC [email protected] Gibb Victoria, BC [email protected] Page Victoria/Sanich, BC [email protected]

NEW BRUNSWICK

John Richards Fredricton [email protected]

NOVA SCOTIA

Bill Macgregor Halifax 902-717-8153

PEI

Frank Driscoll Charlottetown 902-569-3601

PeterPeter Hodson
























http://www.tlshareclub.com





https://www.canadianmoneysaver.ca

Canadian MoneySaver z https://www.canadianmoneysaver.ca z JUNE 2016 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.

• AutoCanada (ACQ) cuts dividend by 60%; stock rises 14% on the news

• CI Financial (CIX) raises dividend by 5%

• Telus (T) raises dividend by 4.5%

• A&W Royalties (AW.UN) boosts distribution by 4%

• Keg Royalties (KEG.UN) increases distribution by 2.9%

• Loblaw (L) boosts dividend by 4%

Canadian MoneySaver MODEL ETF PORTFOLIOETF SYMBOL CATEGORY PRICE # OF

UNITSTOTAL % OF

PORTFOLIO

iShares 1-5 Year Laddered Corporate Bond CBO FIXED INCOME $19.10 506 $9,664.60 8.7%

iShares DEX Universe Bond XBB FIXED INCOME $31.67 166 $5,257.22 4.7%

iShares S&P/TSX Canadian Preferreds CPD FIXED INCOME $12.51 460 $5,754.60 5.2%

iShares S&P/TSX Capped Composite XIC CDN. EQUITY $22.14 980 $21,697.20 19.5%

iShares S&P/TSX Cdn. Div Aristocrats CDZ CDN. DIVIDEND $24.53 886 $21,733.58 19.5%

iShares S&P/TSX Global Gold XGD CDN. EQUITY $14.28 471 $6,725.88 6.0%

Vanguard FTSE Emerging Markets Index VEE EMERGING MARKET $26.35 194 $5,111.90 4.6%

SPDR EURO STOXX 50 FEZ GLOBAL EQUITY $34.10 144 $4,910.40 5.6%

SPDR S&P 500 SPY US EQUITY $206.33 33 $6,808.92 7.7%

Vanguard Div. Appreciation Index VIG US DIVIDEND $80.98 83 $6,721.34 7.6%

iShares Russell 2000 Growth IWO US GROWTH $134.07 69 $9,250.83 10.5%

Exchange rate 1.26

US Prices converted to C$ $110,836.25 Total Cash $3,123.41

Starting Value October 18, 2013 $100,000 Gain(Loss) $13,959.66 Gain(Loss)% 13.96%

Prices are at market close on April 29, 2016

*Individual prices and distributions are not converted to CAD

**Total portfolio value, total distributions, '$ Gain' and '% Gain' reflect USD values converted to CAD

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.

Returns are before transaction costs.

Please direct portfolio questions to [email protected]

• Domtar (DTC) boosts dividend by 3.8%

• Cineplex (CGX) raises dividend by 3.8%

• Trimac (TMA) gets privatization offer at $6.25 per share

• Bell Canada (BCE) to buy Manitoba Telecom (MBT) for $40 per share

• Open Text (OTC) boosts dividend by 15%

• Jean Coutu (PJC.A) boosts dividend by 9%

• Canadian Pacific (CP) boosts dividend by 43%




Insurance Products

How to Get More Money Out of Your Defined Benefit Pension PlanRino Racanelli

I f you’re one of the lucky Canadians whose employer has a defined benefit (DB) pension plan, then you should be looking at something called pension matching before you decide to

take your pension.

Pension matching is about getting the most retirement income by shopping your DB pension plan to insurance companies that can match or beat the amount of pension income you will receive under your current plan. In other words, you are saying to the insurance company, “Give me your best life annuity income rate and I will consider switching the commuted value of my DB pension to your company.”

Pension matching works well for employees of private corporations whose company may be having some financial trouble and can’t afford to pay the amount of pension income promised. Public corporations rarely have this problem since they have something called the power of taxation (which means if they can’t fund their high-paying DB pension plans, they’ll simply go the Canadian taxpayer to get more money). Private corporations don’t have this option. They rely solely on their financial stability, earnings, savings, and profit margin to fund the pensions.

Before you decide to pension match your DB plan, you want to comply with the “not materially different rule.”

The Income Tax Act allows the transfer to a life annuity on a tax-free basis as long as the life annuity is “not materially different” from the terms provided in your current DB plan. Not materially different implies that the benefits received from your DB pension plan (such as guaranteed periods, joint and survivor options, indexing/inflation protection, and so forth), should not completely differ from those offered under the DB plan. The term not “materially different” also suggests that the

life annuity income can differ from the pension income, but not by much.

If the possibility exists that a Canadian insurer can take your pension and stay within the “not materially different” requirement, then this is your chance to shop the pension market and possibly receive a lump sum payment. You can simply call the company directly or use an insurance broker specializing in DB pension plans.

For example, Mr. X has a DB pension plan with a commuted value of $738,000. The DB plan promises to pay him $4,000/month for life. Mr. X is concerned about his employer meeting their obligation to fund his DB pension plan now and in the future. He decides to shop his pension to a highly rated insurance company for two reasons.

The first reason is that the insurance company has more financial stability than his current employer.

The second is to find out whether the insurance company can match his DB payment while requiring less of the commuted value. If that’s the case, then he may be able to receive a lump sum of cash.

After Mr. X shops the market, he finds an insurance company that requires only $720,000 to match the $4,000/month DB plan income. The $720,000 value is transferred directly to the life insurance company to buy the life annuity. Mr. X then pockets the remaining $18,000 in cash which is taxable in the year he receives it.

Picking up an extra $18,000 in cash, although fully taxable, is a bonus. In my 23-year career I have seen much larger cash payments being handed out. Two companies immediately come to mind: Hydro One and General Motors. One particular case involved a male employee whose DB pension plan promised him a monthly income amount of $7,000 at age 65. The pension had



MoneyTip

Tax Saving Tip

As a general rule: At death, all capital assets of the deceased are taxed at their fair market value as of the day before death. Here are two not-well-known exceptions to this “deemed disposition” rule that can save 20-25% of tax related to their exemption.

The exception to this rule is the case where you leave your partner/spouse your assets and rather than paying tax on their fair market value immediately before death, your partner can elect to use their purchase cost or value on acquiring the assets instead, and thus have no capital gains to report. This keeps all of the assets intact, avoids having to sell some to pay the tax, and depending on your marginal tax rate defers paying likely 20% or more of their taxable capital gains.

This second exception to the “deemed disposition” rule is when the deceased person has named their

spouse/partner as the Successor Account Holder for their Tax Free Savings Account. This allows their TFSA to be rolled over to the successor tax-free and all future income from the holdings starting at that time remains tax-free. If the surviving spouse/partner is not officially named as the “successor”, the TFSA goes to the beneficiaries or estate tax-free but all future income and increase in value is taxed. This important tax saving exemption can quickly nullify the impact of the tax costs of no more income splitting at death for the surviving partner. And it suggests maximizing both TFSAs and partners registering each other as successor account holders.

Hedley Dimock MA, Ed.D, Guelph, ON [email protected]

a commuted value of $2,300,000. After shopping the annuity market, a highly rated insurance company offered him the same guaranteed monthly income for life, yet required a commuted value of only $2,000,000. The difference of $300,000 was given to him as a taxable lump sum payment.

Note: The above examples assume other benefits (survivor benefits, guarantee periods, indexing etc…) are the same for the life annuity and the DB plan. This increases the likelihood that the Canada Revenue Agency (CRA) will agree that the life annuity benefits are not different from the DB benefits. You must consult with your insurance specialist and your tax advisor. The CRA may regard the life annuity income to be “materially different” from the DB plan income since the other benefits mentioned are not available.

The Future of Defined Benefit Plans

In the public sector, DB plans are still commonplace. In the private sector, DB plans are becoming less common as employers prefer to offer defined contribution (DC) plans to reduce their ongoing pension liabilities.

The number one reason DB plans are avoided today is because it sets a promised amount of retirement income employees will receive at a later date, regardless of investment performance. Since employers are responsible for this retirement income, it becomes quite risky to them and their employee if they cannot fully fund the promised monthly income benefit.

Retirees or soon-to-be retirees of private corporations often fail to understand that their DB pension plans are not guaranteed. If the employer cannot afford to pay and fund the plan any longer, then the plan could be wound down and contributions stopped. Worst-case scenario would be if the employer goes bankrupt (and the DB plan isn’t fully funded), their employees may end up with less monthly retirement income than they expected.

Rino Racanelli is an independent insurance advisor in Toronto, ON. He can be reached by phone 416-880-8552 and by email [email protected]. Or you can visit his website www.BackToBackAnnuities.com"




http://www.BackToBackAnnuities.com


Using Wealth Wisely

Active Investing And The Scientific Method

Warren MacKenzie

R ecently I observed a wealthy individual choose an indexing investment strategy which I expect will underperform the actively managed alternative he was

considering by about 1% to 2% per annum. Over the next 20 years, this could mean $10 million in lost income and capital accumulation. This got me thinking about the difference between two methods of decision-making: the “scientific method” used in medicine and other sciences, and the “emotional method” which is frequently used to make investment decisions.

One of the tenets of the scientific method is to develop a hypothesis about something and then set out a method to test the hypothesis to see if it’s true. One way to determine if the hypothesis is true is to identify the things that cannot happen if it is true. For example, if the hypothesis is that the application of a new flame retardant paint will prevent fires, the hypothesis is proved wrong if the material burns just as quickly with or without the paint.

If an investor were to use the scientific method to test the theory that index investing is always the best strategy, an important step would be to identify any conditions that, if they exist, would mean that the theory cannot be true. For example, if one could find a group of active managers who beat the benchmark indexes over a period of 10 years, then the theory is wrong. Yet the wealthy individual I mentioned above did not use the scientific method to reach his decision and he didn’t consider any facts that would prove his theory wrong. He made what I believe was the wrong decision based on gut instinct and emotion. So, I asked myself: why do otherwise logical investors behave in this way?

I concluded that investors make the wrong decisions for various reasons. They may be tired of the decision-making process and just want to get it over with. They

may be unwilling to do the hard work of examining different strategies. They may lack confidence they’ll be able to make the right decision even if they have all the facts. They may discount the advice of the advisor if they suspect that he or she has a conflict of interest.

When investors start heading down one path, they also don’t want to complicate their life by considering other alternatives. They’ll often ignore any facts that may contradict what they believe or have been taught (i.e. confirmation bias).

In this case, the individual chose a passive portfolio of index funds and ETFs. The alternative was a portfolio of active managers with a 10-year track record of beating a passive composite benchmark—and the qualitative and quantitative attributes that support an expectation of future long-term outperformance. His decision was based on a recent New York Times article and some general comments by Warren Buffett. He refused to consider any facts that contradicted his understanding of the benefits of the strategy he was leaning towards.

The New York Times article reported that over ten years, no active manager had consistently beaten a passive index. People who did not understand the article took it to mean that no manager has outperformed the index over 10 years. What the report actually said was that no manager had beaten the index each and every year for 10 years in a row. An investment manager might have had an average annual return of 12% compared to the index of 10%, but if there was one year out of the 10 that it underperformed the index, then the writer felt correct in saying that no manager could consistently (in every single year) beat the index. The reality is that any reasonable person would choose an investment that earned an average of 12% (with lower volatility) compared to an investment that averaged 10% with higher volatility, even if one year out of 10 the chosen investment underperforms the index.



Investors should know that there is a reasonable explanation for Warren Buffett’s suggestion that a passive portfolio is best for most investors. Buffett is considered to be the greatest investor of all time. He is an active investor who seeks out companies he believes are undervalued. He obviously believes that an active investing strategy works if one can exercise a skillful and disciplined approach. I think Buffet’s reason for recommending passive investments may simply be that for the average investor, this is the best strategy.

As Buffett suggests, investors are generally better off with index funds for a number of reasons:

• Most financial advisors who try to pick stocks will underperform a passive index;

• Retail mutual funds generally underperform the index;

• Retail mutual fund fees are high and not fully disclosed;

• Most investors don’t follow a disciplined rebalancing strategy;

• Investors don’t receive performance reports that compare actual results with the appropriate benchmarks, reports that would thereby enable them to make wise decisions;

• Investment mandates are not rebalanced to enable the investor to mostly be in the proper asset and to be able to “buy low and sell high”; and,

• Most investors don’t know how to determine if the performance of different money managers is based on luck or skill.

With all these negatives, investors are usually better off with a cheap passive investment portfolio.

We all know that there are exceptions to most common-sense rules. If the rule is true most of the time, it’s wise to follow the advice. It’s even better if you’re wise enough to know when you can make an exception to the general rule.

With investing, the general rule is to use index funds or ETFs unless you have reason to believe that you have access to managers who have a long-term history of outperforming compared to the index. Some financial professionals who adhere to the fiduciary standard and who put client’s interest first are able to tilt the odds of success in clients’ favour by:

• Designing “goals-based” portfolios which are designed to achieve goals while taking no

more risk than is necessary;

• Avoiding the conflict of interest that exists when professional investment managers pass judgment of their own performance;

• Proactively negotiating low fees on the client’s behalf;

• Using their experience to select “best in class/most appropriate” investment managers for each different investment mandate;

• Using a well-researched rebalancing method to rebalance the portfolio when the asset mix is sufficiently out of whack; and,

• Delivering performance reports which compare results to the proper benchmarks.

So, if the person wants advice and has enough capital to work with a qualified financial professional, I think that based on the hard evidence Buffet would agree that in these cases the active approach is better.

Investors should also be confident enough to ask for an explanation of any facts that seem to contradict the theory they want to believe. If you see a black swan you should question the common belief that all swans are white. And, when you see a portfolio of active investment managers who have (after all fees) beaten the composite benchmark over the last 10 years, you should question the statement that no managers can consistently beat a passive benchmark.

Why would investors ignore clear and incontrovertible facts that contradict the solution they’re leaning toward? Part of the reason may be that they simply do not believe these “facts” and they’re not willing to investigate to find out if they are true. To examine any contradictory facts they may have to restart the whole decision making process—and investors just don’t want to do this. Also, they’ve not calculated the long-term cost of underperformance (which in this case was over $10 million). At this point it seems that any decision is better than the uncertainty they’ve been going through.

In this case, by not questioning contradictory facts, the individual didn’t understand that when Buffett talks about how mutual fund managers usually underperform the index, he’s talking about high-fee retail mutual funds, not truly active “institutional funds” where the fee may be lower than the fee for an ETF. I believe Buffett would also have a different view in cases where the institutional funds are chosen by portfolio managers who have conducted extensive due diligence and who understand the investment strategy employed by the active managers.



MoneyTip

Sensible investing starts with being brave enough to trust your common sense and to question facts that contradict your preliminary conclusions.

Bottom line? In all walks of life it takes courage to address facts which contradict our pet theories. No one likes to be proven wrong and by examining the facts we may prove ourselves to be wrong. Ignoring any facts that contradict our beliefs will save time and mental energy; however, if we question contradictory facts we’ll get a

better understanding of the situation and we’ll usually make better investment decisions.

Warren MacKenzie, CPA, CA, CIMA is a Principal and Stewardship Counsellor with HighView Financial Group. HighView is an experienced boutique investment counselling firm, dedicated to developing sustainable wealth solutions for Canadian families and foundations. Email: [email protected] Tel: 416.640.0550

Despite concerns of weak energy prices and the potential contagion on banks and the Canadian economy, foreign investors seem more sanguine about prospects for the S&P/TSX. Canaccord Genuity North American Portfolio Strategist Martin Roberge points out that foreign investors have bought $3.1 billion in Canadian stocks in February. Following such a sizeable inflow, Roberge says that on a one-year rolling basis, net foreign flows have decisively turned the corner and the recovery is corroborating the equity rally this year. Roberge gives us 8 reasons why the S&P/TSX and its high-resource content should continue to shine among world stock markets this year:

1) A play on resource cyclicals - Among Developed Markets (DM) equity markets, the S&P/TSX index comes second in terms of combined weighting for the energy and material sectors (32%). These two sectors are prime beneficiaries of a weaker US$, stronger commodity prices and better EM growth;

2) Geared toward Emerging Market (EM) growth prospects - 74% of world economic growth in 2016 is accounted for by EMs. Since the Fed softened its tightening bias in March, US$ depreciation has jolted commodity prices and revived forward EM growth prospects as stronger EM currencies are now allowing EM central banks to pursue monetary reflation and other pro-growth policies;

3) Reflation has gone global - The most bullish development for EM risk assets this year is the decline in inflation among EM countries. This is putting even more pressure on EM central banks to cut rates,

hence reflation going global. The message from EM PMIs and debt spreads is clear, EM and commodity fundamentals could get better before they get worse gain;

4) China mini recovery - China has been the first EM country to implement measures to boost growth. These measures are now bearing fruit. New projects started and real estate activity have picked momentum, a net positive for commodity consumption;

5) The latecycle inflation trade - Resource cyclicals usually shine later in the economic cycle when inflation momentum turns positive but not enough for the Fed to apply the brakes. These episodes are characterized by sharp recoveries following routs in commodity prices. 1987, 1999 and 2007 were late-cycle inflation years through which resource cyclicals outperformed;

6) Value takes over growth - Growth has outperformed value since 2009. However, the overvaluation of growth stocks (as a group) combined with US$ depreciation is such that 2016 could be a year for value. Roberge notes that resources lead markets when value outperforms growth;

7) Inexpensive valuation - Contrary to widespread perceptions, the S&P/TSX is not expensive when a composite valuation gauge is used to account for commodity-cycle peaks and troughs. Roberge says that despite their recent rally, resource cyclicals remain dirt cheap; and

Oh, Canada! Will This Be The Year Your Home Country Bias Works In Your Favour?

continued on page 25...



Policy Gremlins on first reading may appear as innocuous little words. In reality they have the uncanny ability to mask, obscure, and otherwise camouflage their true meaning.

They can morph at the time of claim becoming miraculously transparent while shattering an insured's expectation to a right to coverage.

The purpose of this article is to assist travel insurance shoppers in identifying these creatures. Differentiating policies at the point of sale is key to minimizing the risk of a subsequent claim denial.

Generally, policies with a higher concentration of Gremlins, may lower the premium but enhance the risk of being side-swiped by a rescinded policy.

How often have you heard the admonishment to those who bought insurance but ended up footing their own medical bills: “they should have read the fine print”. That’s not good enough. I subscribe to the three R’s principle: Read, Recognize and Run (if need be).

Favourite Gremlin Haunts:

Let’s start with the medical questionnaire. This is one of the favourite Gremlins haunts.

The penalty for even a trivial non-eligibility related misrepresentation or inaccuracy with most (but not all) insurers can be as if no coverage was purchased. The consumer will likely be responsible for paying their own medical bills.

Essentially, issuance of a policy/certificate is limited, denoting approval of the consumers’ right to pay premiums; whether or not insurance coverage has been in force will be determined in the unlikely event a claim is submitted.

The final word rests with the insurance provider not you and not your physician. It’s the insurer who has the sole discretion to determine whether there are grounds to

Travel Insurance Advice

Travel Insurance: Beware Of Policy Gremlins a.k.a. The Fine Print - Part 1

Bruce Cappon

declare the contract null and void; their customers may have purchased the insurance with the utmost good faith and due diligence. Yet, through no fault of their own, ran afoul of a particular insurer’s unclear interpretation of what constitutes a “material misrepresentation”.

What’s a “Material Fact”?:

“Material fact” is a significant Gremlin phrase, found in both the policy document and in the declaration agreed to by their customer. Its importance may easily be overlooked when bundled in a sentence commencing with: “fraudulent”, “dishonest”, “untruthful” followed by: “inaccurate”, “incomplete” or “failure to disclose a material fact”. So what exactly is a “material fact”? Is it precisely defined in the policy definition section? Generally not! Just how likely is it that respondents could be snared by this clause?

Bear in mind that the clause does not state that the policy can be rescinded where the respondent made a statement with reckless regard for the truth or for act(s) of intentional deception.

The Travel Health Insurance Association’s (THIA) advice to Canadians to take the purchase of travel insurance very seriously is well founded. The concern I share, particularly among many senior/snowbirds, is whether there is sufficient reciprocal legislation putting the onus on insurers to do likewise. Evidently there is an individual travel Insurance Health survey commissioned by THIA1 indicating that 18% of respondents have inadvertently provided inaccurate health information on travel Health Insurance forms – something that can void an insurance policy.

Based on my anecdotal experience, I found that this percentage could be as high as 50%, particularly when insurance is purchased online or by telephone with little advice and guidance.



The following are categorized Gremlin-loaded murky medical questions:

The Time Warp Question:

I’ve found over 50% of respondents could make an inadvertent error on this one…It’s a biggy!

Question: In the 5 years (author’s note: could be any timeframe) prior to departure, have you been diagnosed, hospitalized, treated with the following medical conditions)…?

Answer: The majority of respondents who were originally diagnosed with their medical condition perhaps 6, 10, 20 years or more than the specified 5-year timeframe, would answer “No” to this question even if still being treated in the last 5 years. But the accurate response is “Yes”.

I can’t count the number of times that I interviewed seasoned Snowbirds who were shocked to learn that they had been misanswering this type of question for years. Fortunately, they had no claim.

➥ Tip: Even if you were diagnosed over 5 years earlier, if you have been treated (by medication or other means) within the prior 5 years, be sure to answer “Yes”.

The Guessing Game Question:

Example:

A. Do you have a moderately severe or a severe valve stenosis?

B. Do you have a heart condition? Even if, as recommended by the insurer, you would have consulted your doctor in advance, the correct response would be subject to the interpretation by the claims examiner. This particular definition of the “heart condition” included a list of specific heart conditions but added to that list carotid artery occlusion or disorders of the blood vessels. Typically, the latter would be included under cardiovascular conditions not heart.

➥ Tip: Demand precise definitions of each of the medical conditions, period.

Tip Of The Iceberg Question:

Question: In the last 24 months (author’s note: or any other timeframe) have you been treated for any gastro-intestinal conditions including but not limited to: cancer, bowel disorder, Chrohn’s disease, irritable bowel syndrome?

➥ Tip: Demand a finite list. Words like “including”

or “but not limited to” or “any” are Gremlin words. You’ve got to be concerned about the number of hidden conditions that lurk beneath the surface and may only be clarified at the time of claim – that’s too late!

Back To Birth Question:

The question may say “ever” or may not even state any timeframe at all, which de facto means “ever” i.e. back to birth!

Question: Have you ever had two of the following three conditions: diabetes, stroke, any heart condition? Note, for the purpose of this medical questionnaire, “ever had” means you have been diagnosed prescribed medication or taken prescription medication for this condition.

➥ Tip: It’s unwise answering this type of question especially if it is linked to very general medical conditions which could be easily overlooked (until in the claim examiner’s hands).

The Catch-All, Cast-A-Big-Net Question:

Question: In the last 12 months, have you had surgery or required medical treatment or taken any prescription medication for any other medical condition?

➥ Tip: You’ve got to be kidding! What if you neglected to remember you consulted your doctor for a stubbed toe, flu, bronchitis, etc. 10 months ago!

The Numbers Game:

Question: How many medications do you take to treat____________?

➥ Tip: Heads up! Recently drug companies have manufactured combo/dual meds for treatment of: blood pressure, diabetes, lung disorders, etc. Most consumers would not consider or know how many medications were in a pill. Clarify with the insurer whether they mean number of pills or total meds including dual prescriptions.

What’s the solution? Article to be continued in the next edtion of Canadian MoneySaver.

1 Report shows that travel health insurance saved Canadians more than S138 million – THIA – November 25th, 2014 http://www.thiaonline.com/cgi/page.cgi/article.html/Latest News/Report shows that travel health insurance saved Canadians more than 138 million

Bruce Cappon, Travel Insurance specialist, President, First Rate Insurance Inc., Ottawa, ON (800) 884-2126, [email protected], www.firstrateinsurance.com


http://www


http://www.firstrateinsurance.com


Wealth Creation and Preservation

A Strategy For Retired Seniors Confused By The New Realities

A s a retired senior pushing 90 years old, I am perhaps the eldest Canadian MoneySaver writer—and am more confused about my investing future than at any time during

its 58-year career. Never has the stock market been more volatile with globalization impacting the market almost every day (with China out in front). The focus is shifting to alternative energy and climate control as well as “cloud” computing, artificial intelligence, biodata and who owns the intellectual properties to control these developments is too much. When our new government plans to spend billions of dollars on new projects creating a crippling debt, I have become highly motivated to write this article.

The question for us seniors is: “What should we do to protect our financial plan for retirement and its hard-earned lifestyle?” The media is overloaded with experts telling us all kinds of contradictory things but as usual they supply no results of their wealth-creation success. While past results are not a clear prediction for the future, we’d all rather go with Warren Buffett than my stock-broker neighbor who went bankrupt. A brief summary of my wealth creation therefore seems in order. At age 50 we were worth a million on a taxable income of less than fifty thousand dollars. I did not lose any money during the 2007-9 recession: two stocks raised dividends and two lowered them. And I have beaten the Toronto Stock Exchange every year for the past five or more years, usually by a couple of percent.

The strategy I am describing here is focused on wealth creation and preservation as have all of my MoneySaver articles over the past two decades. It is not concerned with going along with the crowd, buying up the flavour of the month, picking the next big winners or being restricted to totally safe fixed income investments. Here the focus is sticking with what we know and earning more than the

Hedley Dimock

average return that increases each year exceeding that of inflation. What we know still makes sense for financing our retirement and present lifestyle and likely providing a bit of a nest egg for the emergency situations of old age.

Investment BalanceAccording to a survey I saw early this year, most

Canadians are holding about 60% of their wealth in cash or its equivalent. That seems a bit high and I would have guessed maybe it would be that much in their house or condo. In any case it could be an indicator of the concern and confusion around what to do with your money given all the new realities mentioned. Either is a poor place to start in balancing your investments as neither will produce the monthly income you need to maintain your retired lifestyle. Increasing taxes on your house/condo, and new costs for hydro, garbage, and water could make you house-rich and income-poor in ten years. If this sounds like you then it is time to start building up an investment portfolio of stocks and bonds or consider downsizing to reduce the cost of your accommodation and provide the money from the sale of the house/condo to start the stock/bond portfolio.

The balance of the equity and fixed income in the portfolio is a matter of opinion and as one size does not fit all we will discuss it further under Safety and Wealth Creation. The important point here is to assess its weaknesses and strengths. I think this is the least worst plan you can put together to manage your remaining retirement years.

Investment SafetyThe safest investments that provide almost complete

safety and get a small amount of interest are laddered Guaranteed Investment Certificates. If you have $25,000



owned for 58 years. When purchased it was virtually a government-controlled monopoly making and operating land line dial-up telephones for millions of Canadians. The move to push-button phones, battery-operated portable phones, cell phones and answering machines was only partly done by Bell but their professional managers did what was needed to stay in the game and pay my dividends and increase them regularly at an 8% average for the past ten years. Even as a TSX exchange-traded fund has gone down -5.5% for the year to mid-March 2016, Bell is up 14.7% in value with a 5% dividend increase. Now Bell owns things like the CTV television channel. Management has done a good job for us.

The other thing we ask ourselves, using what we know, is: does this company not only have the management competence to stay in the game but also the product or program required to keep ahead if times get tough? Are Enercare clients likely to stop paying to rent their water heater? Of course, the energy to run the heater will likely come from a renewable source and the heater itself may be reinvented as a small insert on the hot water pipe but yes, they will still pay their rent on time.

Investment Allocation And Diversity

The holdings of our retirement financial plan need to provide safety and a modestly increasing income to deal with inflation and the 50-50 likelihood of significant medical and institutional costs of old age. And we don’t want all of our eggs to be in one basket. We need to allocate our holdings to have some diversity in type of holding such as stocks, bonds, G.I.C.s, income trusts, real estate, etc., and focus of product such as banks, utilities, electronics, real estate, precious metals, etc. As the global economy is now impacting Canada considerably and the U.S. is buying over half of our exports, we need to consider diversification of our Canadian stocks.

Again we stick with what we know, balancing the type and focus of our holdings that avoid mutual funds preferring stocks and exchange traded funds. We avoid the popular junk bonds of the 2008 recession and choose guaranteed bonds and G.I.C.s. instead. Our product focus is a bit restricted as we stick with banks, utilities, real estate and telecom equities that will beat the TSX. The need to buy global stocks is an advertising ploy as they have done poorly in the past.1 Almost every one of our blue-chip stocks is doing some or most of its business internationally.

to invest, you could buy $5,000 worth for each of the next five years. Thus each future year you buy one new certificate for five years. They are guaranteed by the Canadian Deposit Insurance Corporation up to $100,000 in each account. In my experience, the interest rate has usually been enough to cover inflation, and the laddering helps to even out the highs and lows over the five years.

As you can see, the more of your total wealth that you hold in these G.I.C. investments, the safer you are, but as your total capital remains the same and the less able you are to keep up with compounding inflation, your purchasing power can dwindle by 40% of its value in 15 years. The percent of your wealth to hold in this fixed income is your first big compromise with this strategy, and determines your lifestyle. A reasonable place to start thinking is half fixed income and half equity for wealth creation.

Wealth CreationThis strategy starts off by selecting reasonably safe

stocks that typically beat the Toronto Stock Exchange. They are blue chip stocks: large, well-known companies, listed with the top 500 Canadian stocks on the exchange. They also pay a moderate dividend of about 3.5% to 4.5% that is eligible for reduced tax treatment. Most important of all, they have a track record of increasing their dividend every (or almost every) year. The average dividend increase has been 10% for the past five years and 9% for the past 10 years. This has meant the dividend has doubled in the past eight years and this has driven the stock’s value up enough to beat the TSX and usually by a couple of percent. This factor is called “the magic of compound interest” and is a key component upon which this strategy is built. During my 58 years of investing it has easily handled the inflation of our lifestyle (including the double digit inflation of the previous Trudeau government) and created a large nest egg for our retirement.

While this strategy has been very successful in the past, how is that helping us deal with these new realities that are confounding us right now? Well, we are using what we know again and hiring professional managers to do that at no extra cost for us. I am talking about the blue-chip companies we have invested in which are unlikely to invent or create the new applications that we can’t imagine (pigs that can fly?) but after these things are created our companies will buy up enough of them at a good price to keep paying and increasing our dividends each year.

For example take Bell Canada, a dull stock for widows and orphans that was the first I bought and now



The Bank of Nova Scotia has international exposure, TD Bank has more banks in the U.S. than Canada, and over half of Manulife’s business is global. Why would we pay extra to the investment industry to invest in their products and try to deal with fees, exchange rates, foreign language rules, politics, taxation, and accounting methods? Worst of all, we would also lose our Canadian tax cuts on the foreign dividends by not converting them and running them through our Canadian company.

Wealth PreservationWe have covered the major considerations for creating

safe and hopefully increasing wealth for the rest of our retirement and now it is part of our strategy to look at keeping as much as allowed by reducing our taxes. The first suggestion that you are probably not going to like is either do your own tax returns or go over your taxes with your consultant for two or three years starting now. This will maximize the need to divide, differentiate and defer your taxes, saving up to 50% on your taxes.2

The real return of our investments includes our expenses in managing them, such as bank and brokerage fees, tax return costs, mutual fund built-in management costs. Inflation can easily whisk away another 2.5%-3.5%. Not knowing the tax rates or how to defer taxes can easily reduce your real return. If you are a senior who does not know how much can be made in Canadian dividends tax-free or at what income capital gains are taxed less than dividends or how single survivors can still split their incomes, you would benefit by reading my tax article. Checking the pros and cons of your RRSP/RIF with the newer Tax Free Saving Accounts could also save you taxes and money as during the 2008 recession I heard a lot of discontent about the mandatory withdrawals of RIFs taxed at top rates and no reductions for dividends or capital gains and their losses.

Summary1. “The future ain’t what it used to be” (Yogi Berra)

and is especially confusing, complex and upsetting for retired seniors.

2. Sitting on our wealth in cash or low-paying investments is self-defeating—maybe you need to stop procrastinating and move forward now.

3. A good way to move forward is to “go with what we know”, accept the new realities and invest half our wealth in solid productive Canadian stocks.

4. We know of blue-chip Canadian stocks that have been very successfully for decades that pay moderate dividends, 3.5% to 4.5% and raise these dividends every year now averaging 6% to 8%.

5. These companies do a great deal of business all over the world and can best manage our globalization needs.

6. Our concerns for safe investments are guaranteed by the government with laddered G.I.C.s.

7. Our strategy includes a way to balance and diversify our investments using Canadian stocks.

8. You could try to become involved enough in the taxation of your wealth to maximize the use of dividing, differentiating, and deferring information to reduce your income taxes by perhaps 50%.

Comments and questions welcome.

Hedley Dimock, Guelph, ON. MA, Ed.D , Author. [email protected]

1. A third quarter BMO newsletter of 2015 reported that emerging market averages compared to the S and P 500 lost 14% over the past year and over 12% in the past five years, and -.5% in ten years. International stocks lost compared to the S and P 500 for every period from one year to 30 years.

2 See my article “ Reducing Income Tax by 50%”, MoneySaver, June, 2013.

Canadian MoneySaver FORUMS!

Are you looking for single share DRIPs, information on taxes, equities, or just savings in general?

Join our forums to get in contact with other like-minded Canadian MoneySaver subscribers.

Visit the forum link at www.canadianmoneysaver.ca/forums


http://www.canadianmoneysaver.ca/forums



Legal And Big Picture Planning

A Voice From Beyond The Grave - Part 1Providing Guidance To the People Listed In Your Will And Related Documents

Most people quite rightly feel pretty good about finally signing their Wills and related documents such as Powers of Attorney and Representation

Agreements. They have taken a huge step toward making sure the right people get the right assets at the right time, that the right people are empowered to make the appropriate decisions, and that their healthcare choices are clear, all the while hopefully ensuring that those left behind are still able to sit across the table from each other at family gatherings without needless bloodshed. On the other hand, as I generally point out in my egregiously long reporting letters after the fact, their work may not be quite done.

Although the Will may be the most important piece in their estate plan, there are a bunch of extra actions the “will-maker” (a fancy new term now used in B.C. to describe a person who signs a Will) can take to bump up the chances of success while reducing the ibuprofen intake of their trustees, guardians, representatives and attorneys along the way. This is information many people may not have considered. Accordingly, I plan on spending the next two articles telling you exactly what I mean. Today’s missive will focus on guardians and trustees while my next installment will cover everything else.

Guiding The GuardiansTo begin with, I suggest thinking of your Will as a

skeleton that provides the basic framework for what we lawyer types like to call your “testamentary wishes.” It spells out who is to get what and on what terms, often naming people like trustees and guardians to implement your wishes. No matter how well your Will is drafted, however, I believe that most of the time there are a lot of steps you can take yourself to put flesh on this skeleton. For example, although you’ve chosen who will be responsible for driving your kids to hockey practice if

Colin Ritchie

you’re not around to do it yourself, your Will probably doesn’t provide much guidance regarding what values, activities and lifestyle choices you want them to nurture in your children. Along these lines, here are just some of the issues you might want to address from beyond the grave — although I suspect that sometimes a list of general principles (such as encouraging your children to explore culture and music) might be more useful in some cases than specific decrees (such as compelling your kids to take violin lessons even if they hate it and would rather dance instead):

• Are there certain hobbies or sports you want to ensure your kids pursue, such as music, swimming lessons, team sports or art?

• Are there any cultural or religious matters you would like your kids to continue, such as going to church or learning your native tongue?

• Are things like a summer job, doing volunteer work, travel or spending vacations with your relatives (and which ones) things to mention?

• Dating?

• Do you feel strongly about such things like limiting time in front of the TV, computer or cell phone, ensuring your kids learn the basics about cooking, cleaning and personal finance (my own favourite), or making sure your kids eat organic or stay away from food out of vending machines?

Tutoring The TrusteesMoreover, even if you’ve clarified that your kids

are to spend their summers volunteering to assist the less fortunate, subsist on an organic diet, or have their electronic time limited to precisely two hours per month (assuming, of course, that they have the time to do this after devoting most of their spare time to learning interpretive dance and playing the ukulele), there may

LIND

A M

ACKI

E PH

OTOG

RAPH

Y



still be a glaring hole in your directions. Although the people caring for your kids might know precisely what you have in mind, there could still be big problems if the trustees aren’t aware of this vision and as a result aren’t willing to fund it. As well, even if your instructions to your guardians are enough to give your trustees guidance to handle the money side of things while your kids are minors, there are a panoply of additional money issues that may need to be resolved when your kids are old enough to vote, shave and drink microbrews. Here are just some of the things you could address in a letter to your trustees:

• Whether you want your trustee to fund your kids’ world travels at some point: If your answer is yes, when and for how long? Some parents encourage their kids to see the world after high school, while others want their kids to keep their noses to the grindstone until after university; others still might want to prioritize other expenditures, such as saving for a first home. Also, even if you are in favour of your children spending some time abroad, you might not be so keen if this journey lasts two years rather than the three or six months you’d originally envisioned. Also, do you contemplate your children living out of a knapsack and staying at youth hostels, going 5-star all the way, or something in the middle?

• Should your trustee buy your young ones a car or do they need to save for it themselves? Do they get new wheels when they turn 16 or only when going off to university? Do they get something fresh from the showroom or merely something “new to them”? If you have a strong environmental bent, would

you be happiest if they are parking a hybrid in the driveway or perhaps just a bicycle?

• What sort of guardian expenses are reasonable to you? Most parents do not want their kids’ guardians to suffer economically for taking on this role, but how this plays out is certainly open to interpretation. Noting that the person managing the money and the people managing your kids are often not one and the same, guidance given now means fewer awkward conversations later. For example, should your trustee pay for your guardians to go on vacation with your kids, or pay rent if your guardians have to buy a bigger home to house your offspring?

• What standard of living do you wish your children to enjoy? Do you want them to have to struggle a bit so that they learn to budget, work hard to build a career, and know what it’s like to take on a mortgage, or would you rather they want for nothing?

• Do you prefer that the trustee continue writing big cheques even if a child shows no intention of going to school or building a career, or reduce or cut off payments under such circumstances?

ConclusionIntrigued by what you’ve read so far? In that case, make

an appointment to check out the second installment in this series in the next edition of Canadian MoneySaver!

Colin S. Ritchie, LL.B., CFP, CLU 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.com.

Coming EventsEVENT/TOPIC PRESENTER DATE TIME

Webinar: The U.S. Stock MarketCost: $3.00 (+TAX)

Matt McCall October 6, 2016 11am-12:30pm EST

Webinar: Tax Changes and the Benefits of Annuitizing Before 2017Annuities are a simple, guaranteed investment and are increasing in popularity simply because they are beneficial for retirees who need a safe, guaranteed income they can never out-live.Bill C-43, which introduced changes to the exemption test on non-registered annuities, takes effect on Jan 1, 2017. With this new law the tax Canadians pay on this popular option is going up.

Cost: $3.00 (+TAX)

Rino Racanelli October 20, 2016 1pm EST

Please go to www.canadianmoneysaver.ca/events for more information and to register.

http://www.colinsritchie.com


http://www.canadianmoneysaver.ca/events


Managing Risk

Snap! A Solution For The Canadian Investor

In my previous article (It ought to be a Snap! CMS May 2016), I made the case that there ought to by now to be a product available for Canadians that was specifically tailored to their need to be

able to plan comprehensively for their financial futures, and, at the same time, intuitive, flexible and fast, setting out a range of factors that they need assistance with.

As the astute readers of CMS will have gathered, this was not, in fact, a “cry in the dark”, but rather a “teaser” because, by happenstance and good fortune, I have finally found a product that I believe truly fits the bill.

I was recently introduced to Pawel Brzeminski, the founder and CEO of Snap Projections (snapprojections.com), who has created what I believe is a remarkably effective, scaleable tool specifically designed for helping Canadians to make better and more completely informed financial decisions over the longer term. I should emphasize that I have no financial interest in Pawel’s business.

There is much debate about the extent to which individuals should be responsible for their own financial planning (the “DIY” approach), or whether, for most people, the process is such a complex one that it requires specialized advice; and, if the latter, what form that advice should take, who should provide it, and how it should be paid for. Ultimately the answer to these questions must be whatever is appropriate and affordable for the individual.

In the case of Snap Projections, the firm enters into partnerships with a whole range of financial advisors, including individual planners, mid-sized advisory firms, portfolio managers, two large Canadian banks and a number of so-called “robo-advisors”. A key aim is to make the tools and capabilities which Snap Projections provides available to as broad a range of individuals as possible, but with the benefit of the involvement of and advice from a trusted financial advisor.

David Ensor

The thinking behind this is that it is the partnership between an unbiased expert and the individual, in which the advisor educates and informs (but does not persuade or cajole) his or her client, helping him/her to arrive at the most optimal decision for that individual, is most effective. Furthermore, the decision-making tools should be provided in an easy-to-use and flexible form, providing reports that are clear, easily understood and that provide guidance on logical steps a client can take to achieve their realistic goals. And all this should done in more or less “real time”, enabling more efficient use of the time available for strategic thinking and the development of scenarios that are relevant to the client and their needs.

So, What Exactly Is Snap Projections?

For online subscribers to CMS, here is an embedded link to an introductory video presentation (snapprojections.com/cms/). Otherwise readers should go to the website listed above to view it.

It is important to understand that the tools have been developed by Canadians for Canadians (and so, not some “afterthought” from a non-Canadian financial combine), and take into account, for example, an individual’s specific province or territory of residence. The software and algorithms are constantly updated to take account of changes in federal and other relevant jurisdictions’ tax and financial legislation, so that the results provide a realistic, not hypothetical, view of a client’s current and future position, based upon then current legislation and rules.

The client and advisor are presented with a series of forms and drop-down tables—firstly to input basic background information such as age, place of residence, current salary (and/or other sources), assets and liabilities [see Figure 1];



Figure 1.

Figure 2.

and, secondly, to start making assumptions that are important and relevant to the client, such as expected retirement age, lifespan (note that Snap Projections can run scenarios beyond age 100), expectations for future returns on investments, inflation rates, desired or optimal asset mix, “down-sizing”, and so on [see Figures 2 and 3].

Once the necessary inputs have been made, the algorithm is run (in real time, as it is hosted on Snap Projections’ servers) and an initial output table is produced [see Figures 4 and 5], providing both a time series that can be reviewed [Figure 4] and a summary table [Figure 5].

I would call this the Base Case, which forms the starting point, if necessary, for amending a s sumpt ions and making adjustments to generate further cases, in the process increasing both the client’s and the advisor’s understanding of the key factors that have the most impact on helping the client meet their goals.

Once the final scenarios have been run, the advisor is able to produce an easily understood report [Figure 6] for the client to review and follow up with further questions, or to use as the basis for taking the steps necessary to start implementing their plans and working towards their goals.

This article serves as an overview of Snap Projections’ capabilities. The key points to understand are:

» It is specifically designed for Canadians;

» It is holistic and intended



Figure 3.

Figure 4.

Figure 5.



MoneyTip

Figure 6.to encompass as wide a range of circumstances and scenarios as practicable;

» Its use is intuitive;

» Results are provided in real time and can easily be adjusted and updated;

» It is unbiased (i.e., it is not designed to promote any particular outcome or investment mix); and,

» It can be used to plan far into the future (beyond age 100).

Obviously, providing an overview is all very well, but you may be asking how Snap Projections works in practice. In my next article, I shall, therefore, provide a worked example of the tool in action. In the meantime, I encourage CMS readers to view the website and video presentation.

David Ensor,Risk Management [email protected]

Six Fees Smart People Don't Pay

Overdraft fees are assessed when you draw a balance below zero. The solution, besides knowing how much money is in an account, is in having a good backup. Find a bank where you will have both a checking and savings account, with the savings account acting as an overdraft backup to your checking account. Many online banks offer this for free, which is crucial in avoiding any fees.

Convenience fees are surcharges added to a bill when you pay with a credit card. This happens most often in situations where the payee only accepts

cash and checks, which have no processing fees. Since credit cards assess a fee on all transactions, payees are looking to pass that fee to the customer.

Partial payment fees on large annual and semi-annual payments, such as for automobile insurance, let you split up the charge over several months in return for paying a slightly higher total amount. This partial payment fee isn't explicitly listed; the installment payments are simply higher.

ATM surcharge fees occur when you use an ATM that isn't owned by your bank, The bank that owns

continued on page 29...




••• POINT OF VIEW •••

Donald Trump and Cross-Border Migrationby Robert Keats, CFP (US and Canada), RFP (Canada), MSFP, best-selling author and contributing editor

There has been great interest in the US 2016 presidential election process by Canadians particularly with all the headlines of US

notables and others stating categorically in the news media that if Donald Trump is elected president they are moving to Canada. From my position as a dual Canadian/US citizen living in the US with a large niche financial planning firm assisting Americans moving to Canada and Canadians moving to the US I would like to utilize this new column to give my unique Point of View. I will try to deal with the factual information involved in the cross-border movement and because this is politics I will discuss only briefly what I see in the politics of the situation.

How practical is it for any American actually move to Canada? The short answer is not very unless you are extremely wealthy and can qualify for the $10 million net worth permanent residence card from Canadian Immigration Services(CIS) or you have a job offer and have a very high educational/professional background in a profession where there is a Canadian job shortage. Having opened an office in Calgary over three years ago and completing an exasperating process to transfer one of my key highly qualified people from Phoenix, who is a US citizen, to run the office it took us months and thousands of dollars in immigration legal work along with substantial hassle from the CIS to get even a one-year visa. Even then my employee was still turned away when he arrived at the Canadian border with his two young sons because the very protectionist Canadian customs and immigration service personnel were of the opinion he might be taking a Canadian job rather than creating many Canadian jobs as was the plan. On the flip side, moving a Canadian from the Calgary office to the Phoenix office does not even require hiring an immigration attorney or cost anything and the US visa awarded to a qualified person takes about 30 minutes to receive at the border/airport. The key reason for this is the US follows the North American Free Trade Agreement provisions to allow

ease of business between the two countries whereas Canada largely ignores the free-trade agreement to which it signed in favour of protectionism. So unless an American has these high net worth attributes noted above or a close family relationship to sponsor them Canada is not very friendly at all to Americans.

In addition, as most Canadians are aware, Americans have very little understanding of Canada, not only immigration issues but also tax and cost-of-living differentials between the two countries. Consequently, if they get through the Canadian red tape thrown at them by the CIS they may be largely deterred from moving once they learn that on average their income tax rates will double, particularly on the high income individuals, and the cost of living will increase by about 30%. This is all unfortunate, politically speaking, as the other day I heard Al Sharpton and Whoopee Goldberg, amongst a long list of Hollywood types, say they moving to Canada if the Donald was elected. Now that Donald is the Republican candidate for November election these two and many others may need help moving to Canada and many Americans are willing to pay their moving expenses and hope they will not be deterred by the higher taxes are cost-of-living once they come to realize that.

The National Post recently published an article on one of Canada’s billionaires, Murray Edwards, leaving Canada to get tax relief from the recent Canadian federal and provincial tax increases costing him several millions of additional taxes annually over and above the enormous amount he was already paying (Murray has since stated it was for personal reasons he left Canada not just for tax reduction). This is a trend that Canadians may want to be concerned about at all levels of government as it is much more widespread than even The National Post article implied. I personally have had more calls from my book, A Canadians Best Tax Haven: the US, in the past six months than I have since the first edition of the book was published four years ago. Almost all of the

The views expressed in this column are solely those of the author and do not in any way represent the views Canadian MoneySaver Magazine.



calls come from high net worth Canadian business owners and investors seeking to move to the US. They are pursuing relief from the Canadian federal and provincial governments decisions to raise taxes in order to implement more government programs and to stay elected, claiming that the rich are somehow evil and deserve to be taxed out of existence. These individuals feel like Canada has let them down as they have worked a lifetime building businesses, creating jobs and making Canada one of the best countries in the world to live and now all of a sudden they are the targeted scapegoats for most any of the ills of the country perceived or otherwise or that they are somehow stealing from the oppressed middle-class. These people are voting with their feet with numerous very easy to obtain US visas and green cards to cut their taxes by a minimum of two thirds or more by becoming US residents. They could literally move a few kilometers from say Vancouver to Washington state and save hundreds of thousands of dollars of taxes annually. How these tax savings come about are explained in detail in the 11th edition of Canadian best seller, The Border Guide, published April 2016.

However, here are a few examples:

• Tax on interest can drop from Canadian average of 54% to 0% on US municipal bonds

• Tax on RRSPs and pensions can drop from 54% to a recoverable 15% in the US

• Tax on Canadian dividends from closely held Canadian companies can drop from 35-45% to 5%

• Tax on US dividends drop from a maximum of 48-54% in Canada to a maximum of 20% or less in the US

• Taxes on capital gains drop from around 27% to 15%-20%

• Taxes on employment income, rental income or royalties are going to be taxed for most people

at about half rates in the US relative to Canadian rates unless this income exceeds the top US bracket which starts at about C$625,000 then the savings is about one third.

Both of my books show examples that with planning these tax rates can be much lower while avoiding things like the Canadian deemed disposition tax on exit from Canada and plenty of analysis to show that US estate taxes are less for most people than Canadian estate/deemed disposition taxes. The bottom line is the attitude of the Canadian governments to tax the rich out of existence by redistributing the wealth is in effect causing a huge migration of a great number of these high net worth extremely hard-working Canadians out of Canada as taxpaying residents.

This ability for Canadians to move to the US or Americans to move to Canada whatever the reason is a very important freedom that we share in North America and one that should not be taken for granted. If the respective governments take heed with this small part of the population who have worked hard to obtain high incomes and pay over half of the taxes of their respective countries for the population, they need to cherish them and work with them to make their countries better with more jobs and better standard of living for all rather than vilifying them as being the cause of certain often perceived social ills that the government sells to the majority of the population.

Donald Trump may not be elected US President but he has made this election cycle one of the most interesting that I can recall in my lifetime including increasing cross-border awareness that people can move to Canada if they hate him or move to the US if they love him. Clearly, it is not always about the money that encourages people to take up roots, it is often ones chosen lifestyle which dominates and rightly so. Let’s respect these individual rights to choose which side of the border they decide on to lie their heads and as financial planners or other professionals help them make it efficiently through this major lifestyle change. ◆



Tax Matters

Haven’t Properly Surrendered Your Green Card?-The IRS May Soon Ask If Your US Tax Filings Are Up To Date

US citizens living in Canada who have not kept current with their US tax-filing obligations should know that the IRS

has significantly increased their tax surveillance and is looking for them. Recent laws under the US Foreign Account Tax Compliance Act (FATCA) rules guarantee that sooner or later Canadian banks and other financial Institutions will ask their clients if they are a US taxpayer based on any one of the following reasons:

• They are a US citizen;

• They reside in the United States;

• They were born in the United States or under certain situations were born outside the US with one or more US citizen parents;

• They have been lawful permanent residents of the United States, having continuously lived there at one time for eight or more years (or part years) as a green card holder prior to permanently leaving the US.

Once the IRS has the information from Canadian financial institutions via CRA, they will contact you to see if you have been filing, and will perhaps arrange with CRA to take some of your account distributions.

Green Card HoldersThis article zeroes in on green card holders mentioned

in the last point above. It will not define the term because, if you ever have been a green card in order to be a lawful permanent resident of the United States, you will know what that’s about. Essentially, you must have a green card to live in the United States on a long-term basis.

Many Canadians have lived in the United States to work, go to school or for other reasons. Many often return to Canada and don’t properly turn in their green

Ed Arbuckle

card to Homeland Security. Furthermore, it is unlikely that they officially notify the IRS of their US departure in the prescribed way. Both actions must happen in order that Canadians can get out of the US tax net.

US Citizen Or Green Card Holder – Both Must File

You can be living outside the United States and be a US taxpayer for two main reasons. Either you are a US citizen or you are defined as a US long-term resident. You are as a long-term resident for US tax purposes if you have ever been a lawful permanent resident of the United States (green card holder) for more than seven continuous years ending with the year that your US residency ended.

The problem is that you will continue to be a US taxpayer once you qualify as a US long-term resident until you take two actions to end that status. It doesn’t matter if your green card has expired or that you mailed it back because you must do it in a specific way and you must also file form 8854 with the IRS.

FATCANow comes the possibility of the IRS finding you

through letters sent from Canadian financial institutions –something we have already seen. Canadian financial Institutions may send a letter to you if their records show any indication that you are a US taxpayer (born in US, have bank accounts there, have lived there, etc.). If the person does not reply, we have also seen letters say that the bank will notify CRA that they believe that you are a US taxpayer and CRA will notify the IRS. Of course the IRS will then send you a letter in due course asking you for your explanation for not filing and ask CRA to do a US tax withholding. US penalties could also apply for not filing US tax forms of up to $10,000 per form.



MoneyTip

Now To Fix The ProblemObviously you want to fix this as quickly as possible to

avoid the IRS getting to you before you get to them. The process is complex and space does not allow a complete explanation. Generally, here’s what you need to do:

1. Properly abandon your green card to Homeland Security.

2. Make a streamlined voluntary disclosure for five years to bring US tax filings up to date.

3. File form 8854 (Initial and Annual Explanation Statement) with the IRS to officially expatriate with a final tax return.

Your tax expatriation will not be recognized until both steps one and three have been completed, and you can’t complete step three unless you do step two so don’t delay getting at it. It’s a long process.

Filing Past Due ReturnsIn order to expatriate, you must be able to swear on

form 8854 that you have complied with all of your tax return filing obligations (income tax returns, gift tax returns, etc.) for the five preceding tax years so you will need to get them up to date before you do anything.

Because you are a US taxpayer after leaving the United States, you will need to do a streamlined filing—a form of voluntary disclosure to the IRS—because you need to clear up your past filing obligations even if no tax is payable. That’s where the filing of tax returns and related schedules for three years and FBAR returns to provide details of non US investments for six years come into play.

You actually need to file five previous years of tax returns so you meet the 8854 rules for expatriation as noted above. Supporting forms are required to provide details about such things as mutual funds, Canadian pension plans, TFSAs, RESPs, reliance on tax treaties and so on.

The IRS has many excellent information packages and form instructions on line but they are difficult to understand and they are constantly changing as the law and official interpretation changes—much more frequently than in Canada, we might add.

Summing UpMany US citizens have dragged their feet on becoming

US-tax-compliant but this will eventually catch up to them. Remember that under the green card rules, your tax filing obligations go back to the time that you left the US—maybe 30 years ag—and only streamlined filing or another voluntary disclosure program gets you out of this. Streamlined filing is not available to some snowbirds so you may need to find a different way to make a voluntary disclosure. Surrendering your green card properly and filing form 8854 are both necessary to complete the process. This is no walk in the park so get at it.

For those who continue to delay in attending to this matter I am afraid to say that your decision will not have a happy outcome.

J. E. Arbuckle Financial Services Inc. 30 Dupont St. E., Suite 205, Waterloo, Ontario N2J 2G9 Phone: 519-884-7087 Fax: 519-884-5741 Email: [email protected] www.personalwealthstrategies.net

8) Balanced C$ risk - Foreign investors shunned Canadian equities last year due to C$ risk tied to lower oil prices. The oil downtrend has now reversed. Roberge believes the upside on the C$ is capped at PPP ~81 cents with good support ~75 cents. While some investors may believe it is too late to buy deep cyclicals owing to the strong returns YTD, Roberge notes that excluding China’s go-go years (2000-10)

relative resources rallies occur once a decade. On average, they last ~23 months and outperform the S&P/TSX by 43%. We are three months into this rally, resources are up 18% vs. the market and valuations are still depressed. CANADIANS FAVOUR DOMESTIC EQUITY - According to the International Monetary Fund, Canadian investors hold about 60% of their equities in domestic stocks.

Source: Cannacord Genuity

...continued from page 10Oh, Canada!



http://www.personalwealthstrategies.net


Family Law

Parents Supporting Children: A Voluntary Act Or Legal Obligation?

W hen parents are together, they can decide to stop supporting their child when he or she turns 18. But if they separate, one parent can force the

other parent to pay child support under Ontario law, namely, the Child Support Guidelines.

When parents are together, they can decide on what, if any, extra-curricular activities to enroll their child in. But if they separate, one parent can force the other parent to pay a part of the cost under Ontario law.

When parents are together, they can insist that their child fund his or her university costs through employment and loans. But if they separate, one parent can force the other parent to cover part of the cost of university including tuition, residence and meals under Ontario law.

When a parent makes a will, that parent can decide to not leave anything to his or her minor child upon his or her death. But if the parents separate before death, the surviving parent can force the estate of the deceased parent to pay child support under the dependent’s relief provisions of Ontario’s Succession Law Reform Act.

When a parent makes a will, that parent can decide to not leave anything to his or her adult child upon his death. But can the adult child challenge that will and seek a payout from his or her parent's estate anyhow?

Steve Benmor

That was the question posed to the Ontario Court of Appeal in the case of Verch Estate v. Weckwerth, 2014 ONCA 338 (CanLII). The adult children of George Verch discovered that they had been written out of their father's will and took legal action to collect a share of the estate. They argued that their father had a "moral obligation" to provide for them in his will. The main thrust of

their legal argument was that "a competent testator’s autonomous distribution of his or her property, as reflected in a properly executed will, may be displaced or set aside by the courts in the exercise of their discretion based on a parent’s moral obligation to provide on death for his or her independent, adult children."

The highest court refused to accept this proposition and dismissed the appeal.

The interplay of family law and estate law provides a fascinating glimpse into the evolution of societal norms regarding a parent's

financial responsibility for children, as reflected by statute and case law.

Steve Benmor is certified as a specialist in family law by the Law Society of Upper Canada and also serves as a private divorce mediator and arbitrator for high net worth families. Steve can be reached at [email protected]

The interplay

of family law and

estate law provides a

fascinating glimpse

into the evolution

of societal norms




The Uncommon Investor

Banking On The Financial Sector

R egular followers know that since the recession I have been a heavy investor in U.S. banks. That has paid off beautifully with both Fidelity Southern (LION –

Nasdaq) and VIST Financial, which was taken over by Tompkins Financial (TMP – NYSE), being sold for huge gains. Plus there were dividends to boot!

Though it is harder to find bargains in the financial sector now, United Security Bancshares (USBI – Nasdaq) was added to the President’s Portfolio in December at $8.32 USD. Once again the initial sell target is miles away, set at a lofty $23.44. Worth noting is that the stock has traded north of $33, and unlike many banks that diluted shareholders during the downturn, the share count remains a diminutive six million.

Located in Alabama, USBI is the holding company for First US Bank, which has 19 bank branches and 24 acceptance loan company offices. During the recession, the bank floundered as evidenced by the stock price, which dipped to just under $4.00 during the heart of tax loss selling season. To help ensure survival, the $1.08 annual dividend was eliminated, but reinstated at a penny per quarter in 2014. That tally has since doubled and it is likely that further increases are in store. That should help to push up the stock price.

Though net income was down from $3.5 million to $2.6 million for the year ending December 31, 2015, by many other metrics the corporation was doing much better. Net loans increased 30 percent from a year ago, while non-performing loans dropped. The book value increased to $12.65, well above the current stock price of $8.18. Capitalization ratios, a key metric for banks, were excellent on all counts.

United Security Bancshares is a thin trader. That did not stop insiders from padding their holdings in the

Benj Gallander

last six months of 2015, as they upped their position to around 8 percent of the shares outstanding.

I also continue to own a number of other American banks. Investors wanting a bigger, more mainstream financial might want to look at Bank of America (BAC – NYSE). Now that it appears the vast majority of the litigation is behind this behemoth, the bottom line has improved dramatically. In addition, the enterprise has a huge share buyback going on and is likely to continue to increase its dividends that were $0.64 a share quarterly when the recession hit. At that point, the company cut them to a penny a quarter, and then notched them up to a nickel a share in 2014. Further increases are likely in store. Meanwhile, the corporation is trading at about 60 percent of book value.

Along with the aforementioned, there are four other banking stocks in my portfolio. These are Bank of Commerce Holdings (BOCH – Nasdaq) out of Redding, California; Cascade Bancorp (CACB – Nasdaq) headquartered in Bend, Oregon; First United Bank (FUNC – Nasdaq) from Oakland, Maryland; and Macatawa Bank (MCBC – Nasdaq), which is based in Holland, Michigan These four have nine, 37, 25 and 26 branches respectively, so all are on the small side but geographically dispersed. While BOCH and MCBC pay dividends, which are growing, FUNC and CACB do not. Worth noting is that prior to the recession, FUNC paid $0.80 a year, and the dividend is likely to be reestablished before the end of 2017. Typically, that pushes up a stock price. CACB will also likely resume payments, although it would not be surprising if it takes longer to reestablish the payout and the bumps will likely be more muted.

One of the keys to Contra the Heard’s success (21.6 percent annualized return over the past 15 years) has been investing in out-of-favour sectors. The U.S. banking field was a perfect example. Though not full of the bargains of



a few years ago, deals are still to be found, and as interest rates rise, the bottom lines of all of these enterprises should be enhanced. They will also be helped if the U.S. economy continues to perk up.

Every stock here has the potential for a minimum 100 percent return based on historical trading prices, and a number of them could exceed that handily. With such

huge potential and dividends while waiting, I am very comfortable holding for the long term on these positions, while hoping that a short game or two might surprise me.

Benj Gallander, MBA, Co-editor of "Contra the Heard", Toronto, ON (416) 354-2458, [email protected], www.contratheheard.com

Investment Strategies

Why You Should Avoid Equity-Linked GICs

Y ears ago, a clever banker must have come to a realization: many investors want equity-like returns but are not comfortable putting their capital at risk. In other words, they want the

reward of the stock market but the presumed stability of a safe fixed income product.

And so, the equity-linked guaranteed investment certificate was born. Sometimes called market-linked GICs, these products would appear, as one commentator put it, to allow investors to have their cake and eat it too.

With an equity-linked GIC, your initial investment is fully guaranteed by the bank. What this means is that at the end of the term (typically three or five years), you will at least get your money back. This aspect of the product is designed to give people peace of mind. It appeals to those who are risk-averse and nervous about the stock market.

At the same time, equity-linked GICs offer the potential for significantly higher returns than traditional GICs. The way they do this is by tying the return to the performance of a specified market index. For example, an equity-linked GIC that is tied to financial stocks in Canada will do well if those equities rise during the product’s term.

Andrew Hepburn

The hybrid nature of these GICs is their selling point, and it’s one that banks in Canada heavily market. Take the Royal Bank, for example. Speaking of their Canadian Market-Linked GICs, their website says these “offer the best of both worlds – the security of a GIC and the growth potential of the equity markets.”

So, should investors buy equity-linked GICs?

There are reasons to be cautious. The devil is always in the details, as the saying goes, and it’s important to note that these products aren’t the free lunch everyone would love to have.

For one thing, depending on the particular GIC in question, an investor may end up making no money by the end of the term. Some banks will offer a minimum return, such as 1.00% over three years, but this is pretty negligible. Others simply say you’re only guaranteed to get your principal back.

There are two big downsides to only having your initial investment returned to you. For one thing, a dollar invested today is worth more than a dollar three years from now, due to the effects of inflation. Put another way, the real, inflation-adjusted return of an equity-linked GIC


http://www.contratheheard.com



MoneyTip

can actually be negative. Furthermore, by not making any money over a three- or five-year term, an investor suffers what’s called an opportunity cost; that is, the foregone benefit of having been invested in something else. Even a traditional GIC would have been a better bet if your equity-linked one yields nothing.

It’s easy to understand how an equity-linked GIC can end up backfiring on an investor: if the stock market, or at least the market sector to which the GIC is tied, stays flat or declines over the product’s term, an investor will make little or no return.

Second, equity-linked GICs (as the banks themselves fully admit) are not the same as equity investments in a few important respects. For one thing, an individual who buys one of these GICs is not entitled to dividend payments from the underlying companies in an index. Because dividends are a crucial source of equity returns over time, this omission is important.

In addition, banks usually (though not always) limit how much you can make by owning an equity-linked GIC. This is done in two ways. One way is to specify what’s known as a participation factor. For instance, if the participation factor is 60% (which means if a market index rises 10% over 3 years), the equity-linked GIC will return 6% over that same time frame. Another way banks cap the potential rewards is by setting a maximum return. With the TD Security Plus GIC, to use one example,

investors’ gains are capped at 8.88% over the whole three-year period.

Finally, it’s worthwhile to keep in mind that equity-linked GICs are not particularly tax-efficient. Where capital gains from equities are treated favourably by the CRA, any return from an equity-linked GIC is considered to be interest income. Thus, the entirety of the return is taxed at an individual’s marginal tax rate.

The bottom line is that most investors, if they want equity-like returns, should have some sort of direct exposure. It should be long term in nature and part of a balanced portfolio. (I would note, however, that the stock market in my opinion is currently overvalued. Being overweight in equities is not something that strikes me as a good idea at the moment.)

Nevertheless, if you want the maximum possible gains associated with stocks, be they dividends or capital gains, you’ll get them from purchasing equities or index funds yourself, not via equity-linked GICs. They’re well-marketed and appeal simultaneously to our greed and our fear. Still, most investors are probably best taking a pass.

Andrew Hepburn is a freelance writer in Toronto, specializing in economic and financial issues. From 2006 to 2009 he was a Research Associate with Sprott Asset Management focusing on commodity markets. He is a Queen's University. graduate. [email protected]

the ATM will charge you a fee to use the ATM, and your bank will charge you for using another bank's ATM! This double whammy can get very expensive, especially if you make it routine.

Foreign transaction fees occur when you use your credit cards outside your domicile country, as there may be a foreign transaction fee associated with each charge. The fee is a percentage added to the charge and ranges anywhere from 2% to 3%. You can avoid this by using a credit card that doesn't charge you a foreign transaction fee, considered a valuable credit card perk for heavy travelers.

Shipping fees: You can save a lot of money buying online as long as you don't pay it all back with shipping fees. Smart shoppers find ways to get free shipping, whether it's joining a program like Amazon Prime, looking for a coupon, or just buying enough to get over a dollar amount for free shipping.

Source: Business Insider

http://www.businessinsider.com/fees-smart-people-dont-pay-2016-2

Six Fees Smart People Don't Pay ...continued from page 21







Y ou may recall, in my prior article, I shared my thoughts about tuning out the short-term gyrations in the stock market. In this, and future articles, I would like to

share with you some principles regarding diversification, market-timing, key factors of winning stocks, as well as buying and selling principles that MoneySaver readers may find helpful.

Don’t “Di-Worsify” This term was coined by Peter Lynch in his must-read

investor manifesto, One Up on Wall Street (2000) and as past manager of the hugely prosperous Fidelity Magellan Fund. Applied to your investments, ‘di-worseification’ means putting too many assets with similar correlations into a portfolio, resulting in an ‘averaging effect’. Buying more stocks for your portfolio that have similar characteristics or mediocre fundamentals could actually increase your risk while at the same time stunting your returns. You can’t “diversify away” overall market risk or fluctuations. The only way you can do that is to control the proportion of the more “risky assets” in your portfolio, like stocks. Without wading through the muck of ‘modern portfolio theory’, if you want fewer day-to-day fluctuations in your portfolio, you need to lower the proportion of stocks in your portfolio. That might seem like a simplification to some of you econometric and financial theorists and aficionados because, in theory, it is also possible to reduce risk by combining various negatively or un-correlated assets (e.g. stocks, bonds, real estate, derivatives, precious metals, and so on). When it comes to this stuff, I like the wizen words of Mark Twain from A Connecticut Yankee in King Arthur’s Court: “How empty is theory in the presence of fact?”

There is a plethora of studies on the subject of optimal number of individual securities needed to be properly

Keys To Successful Investing Part 2: Di-Worsifying, Value Traps, And Cabooses! Scott A. Hanson

diversified and I don’t intend for this to be an academic dissertation. So, as a general rule of thumb, eight to a maximum of 20 well-selected individual securities representing various industries and sectors appears to be optimal with the qualification that exchange traded funds, closed-ended funds and other ‘baskets’ of securities, can reduce that number even further. Just make sure you don’t buy a stock solely for the purpose of diversification. The fundamentals must be strong (more to come on that subject).

On the issue of diversification, Warren Buffett has been known to say, “Keep all of your eggs in one basket, but watch that basket closely.” In his 1993 letter to Berkshire Hathaway shareholders, he wrote: “If you are a know-something investor, able to understand business economics and to find five to ten sensibly priced companies that possess important long-term competitive advantages, conventional diversification makes no sense for you. It is apt simply to hurt your results and increase your risk. I cannot understand why an investor of that sort elects to put money into a business that is his 20th favorite rather than simply adding that money to his top choices — the businesses he understands best and that present the least risk, along with the greatest profit potential.”

Danger: Value Trap Ahead!Too often I’ve seen investors base their stock decisions

on a juicy yield, a great but as-of-yet unproven technology, a hot momentum stock, or a litany of other ‘stories’. I’d be disingenuous if I said that I’ve never been a victim of these types of stories, however I’ve grown up a lot over the past 20 or so years in the market and have tried to steer clear of them for a long, long time. A common example of the classical value trap for yield-starved Canadian investors is a stock with a too-good-to-be-true yield. I’d rather buy

Investing Fundamentals



a stock of a company enjoying robust underlying profit growth with a paltry 1% dividend than one with stagnant or declining earnings per share and an unsustainably high 10% yield. The latter is more than likely to be a value / yield ‘trap’ and see a dividend cut on top of a declining stock price.

Another common value trap is a company trading at a super low price-to-earnings ratio (P/E). Unless the ‘E’ is rising, that ‘cheap’ stock’s price (‘P’) can languish for many years. To be a good value, fundamental value must be increasing. This is inherently why it’s difficult to determine if there is “value” in commodities such as gold, metals and energy because commodities themselves have no earnings or dividends to measure value by, and thus why it’s so difficult to determine the value in commodity-producing stocks. Caveat Emptor: It is far more important to prevent losses than to make large gains! Here’s some rudimentary math that bears repeating: A 50% loss requires an asymmetrically larger 100% gain just to break even. Buffett says it well, “You only have to do a very few things right in your life so long as you don’t do too many things wrong.” By focusing on companies with steadily rising earnings and reasonable valuations, you will go far in preventing those outsized losses that are nearly impossible to recoup.

Fundamentals Drive Technicals, Not Vice Versa!

Technical analysis is a tool to identify trends in marketable securities in order to get clues as to future direction, but it’s a bit like fire, which can provide warmth and cook your food but can also seriously burn you. Knowledge in the wrong hands can be dangerous. I wouldn’t want to guess as to how many tens of thousands of stock charts I’ve surveyed over the past two decades, and there is one very clear deduction I can make…what determines a stock’s direction is growth (or lack thereof ) in a company’s underlying value (i.e., profits). Business fundamentals are the ‘engine’ and the long-term trend is the ‘caboose’. The caboose (trend) is pulled by the engine (fundamentals). A general rule is to buy stocks that are moving from “lower left to upper right” and to sell stocks that are moving from “upper left to lower right”. However, other than shorter-term, market driven fluctuations, the stocks moving from lower left to upper right are the ones with improving fundamentals, thus dragging the stock price higher. Although fundamental analysis dictates ‘what to buy,’ technical analysis, when used properly, can help in the ‘when to buy’ entry point aspect of investing.

Key: Focus On Growth In Earnings Per Share

When it comes to the market, in general, there are many factors that drive its short- and long-term direction: currency, inflation, employment, gross domestic product, retail sales, mass psychology, valuations, bond yields, market breadth, EMOTIONS and so on. However, when it comes to individual companies over longer periods of time, the critical factor is EARNINGS. If earnings aren’t growing, the stock price isn’t rising and perhaps decreasing, so you MUST pay attention to earnings. Some investors think they can outsmart the market and get in ahead of the crowd by purchasing languishing stocks that they believe are about to see an improvement in their business and earnings. My word to them: “Good luck!” I’d rather miss out on the first part of a move higher but have the assurance (insurance) that the business is improving and earnings are growing. In my practice, there’s a name for so-called “deep values” and that is “frustration”. Buy something that appears cheap and watch it get cheaper and cheaper until most of your hair has either grayed or been pulled out. The road to investing is strewn with those who have made the mistake of trying to outsmart the market.

If you want to be profitable in stocks, own companies that demonstrate strong earnings characteristics. If ever there were a ‘karma’ of stock investing, growth in earnings per share is it. Over longer periods of time the market efficiently rewards companies with consistently growing earnings and punishes those with flat, falling or inconsistent earnings. I will devote my next installment to this critical issue.

Now that we’ve identified profitability and earnings as the key driver of stock prices and trends, I would like to use the next few installments to share with you how I do my research to uncover those earnings gems. Again, stay tuned!

Scott A. Hanson, CFP, FMA, CIM, FCSI, is an Investment Advisor with CIBC Wood Gundy in Barrie, Ontario. He and his clients may own securities mentioned in this column.

The views of Scott do not necessarily reflect those of CIBC World Markets Inc.

CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.



TaxDetective®

What You Should Know About The Clawback

”Federal benefit programs get clawed back to support persons with a disability.”

Why It’s News?In fall 2015, the Office of the Auditor General (OAG)

came out with a report on how, for many years, those who applied for CPP Disability (called CPP-D) would be denied coverage at first application. If a person insisted and persisted, there was a process to ask for a review of the denial, and eventually people would often receive approval after going through a tribunal.

In BC, the provincial disability benefits program can claw back any amounts paid on other benefit or income plans. This reduces the cost of PWD for the province. They are pushing everyone on PWD to apply or re-apply for CPP-D if they qualify (and alternatively for CPP early, at age 60), likely in response to the potential for approval of CPP-D claims displayed by the OAG’s report last fall.

Here’s How It WorksThe person with a disability is approved for CPP-D,

or CPP early at 60. Funds are paid to the province. The person receives their “welfare” or PWD amount instead, which is higher than the CPP-D or the CPP, sometimes by just a few cents. At tax time, that person receives a T4 from CPP for funds clawed back, and a T4 for social welfare benefits. If it’s not higher, they should be cut off PWD and get their money straight from CPP.

What upsets people is that they paid those CPP premiums out of their paycheque. They don’t believe the province has a right to claw those back. Understandably, they are upset.

Eileen Reppenhagen

PWD Benefits Are Social Welfare Social welfare isn’t taxable, and it’s based on a test for

means, needs and income. The amount, if you qualify for it, is included in the calculation of net income, and deducted again below to calculate taxable income.

Why Can Other Income Be Clawed Back?

Any time you are paid by an insurance program, that program has the right to subrogation of other amounts to offset its costs. That isn’t a word you’ve heard before? Rather than paying you the difference, and you having to tell them what that is, they take your money, and issue you the whole thing as one lump sum. It’s more expedient. You are only entitled to social welfare if you don’t have other income, means of supporting yourself, and you have needs that aren’t being met.

Note the federal website says this amount (CPP) isn’t for medications and devices, but you can still contact the province for coverage for those.

When Does Social Welfare Stop? If you live to age 65 (or between 60 and 64 in certain

circumstances), OAS and GIS can significantly increase your income. I’ve often said it’s a bit like winning a lottery—if you manage to live long enough, you get the same as anyone else in Canada who has lived here long enough and hasn’t saved for retirement. A single person with no CPP income can receive OAS and GIS of $1344/mo.

If you earn less CPP because you started collecting earlier than age 65, you will be entitled to more GIS. I haven’t examined it closely enough to determine if it’s



dollar for dollar, but maybe someone else has. Richard Shillington is an expert on this topic and has written about it for Canadian MoneySaver.

Click here to learn about OAS and GIS payments. http://www.esdc.gc.ca/en/cpp/oas/payments.page? The problem is not everyone will qualify for OAS or for the GIS. Click here for information about eligibility. http://www.esdc.gc.ca/en/cpp/oas/gis/eligibility.page. Note information about refugees and immigration.

There Are Two More Programs Besides Cpp, Oas, Gis, Cpp-D:1) Allowance for aged 60 to 64.

Remember, these amounts—the GIS and the Allowance—are similar to PWD, in that they are not taxable, but are included in the calculation of net income before being deducted to arrive at taxable income on your tax return. And yes, they are clawed back by the province, and may reduce or eliminate your claim for PWD.

There’s an upside to no longer being covered under the provincial plan. You’re no longer under the income, means and needs testing scheme that social workers utilize to terrorize you for your entitlement to a monthly stipend. On the other hand, should you be receiving the Allowance from 60 to 64, and have lost your spouse, and find another spouse, cohabit, or end up in jail, you could lose that benefit.

2) Survivor’s Pension if your spouse has died.

Many people don’t know about and never apply for these benefits. The federal government has admitted many people qualify but haven’t applied. It’s something that’s known, discussed often and I don’t know what’s been done to address the fact that people don’t know about this program. It’s sometimes called the Widows and Orphans benefit program, and is sometimes applied for by the funeral director on behalf of the family at the same time as the Death Benefit from CPP, often to help the funeral director get paid.

In Canada We Have A Complex System!

We’re expected to navigate it with very little assistance, unless we ask, and even when we do ask, it’s at the whim of a bureaucrat who may not care that we are struggling. They get a union wage and a government pension. It’s probably easy to get complacent and think that everyone else is okay too, when they aren’t.

There’s More To This Than Meets The Eye…

I will leave you with a story. A taxpayer had a sizeable pension he was splitting on tax returns with his spouse who had never worked. She didn’t earn any income, other than a tiny bit of CPP and OAS. She didn’t qualify for GIS as their combined income was too high. When she was placed in a care home, they became involuntarily separated.

We were able to reverse that pension split for prior years, and her care was under the province’s program where 80% of her income was claimed for the cost of her care. That 80% came from the GIS she was able to claim due to something called “involuntary separation”. The forms and the time it took to complete this paperwork was insane. It took me about three days and a half-day visit with the taxpayer to the Service Canada office. Once it was accomplished, his income was his, and he paid the

high rate of tax on his own pension. He didn’t have to pay for her nursing care. Her income was GIS, and her cost of care paid to the province came from 80% of her GIS, CPP and OAS.

Eileen Reppenhagen, Certified QuickBooks ProAdvisor writes about, and presents webinars/workshops on keeping records for tax purposes. Find more information at www.taxdetective.ca

Many people don’t

know about and

never apply for these

benefits. The federal

government has

admitted many people

qualify but haven’t

applied.

http://www.esdc.gc.ca/en/cpp/oas/payments.page?

http://www.esdc.gc.ca/en/cpp/oas/gis/eligibility.page

http://www.esdc.gc.ca/en/cpp/oas/gis/eligibility.page

http://www.taxdetective.ca



Taking Care Of Business

Planning For RRSPs Beyond Today

For many of us still in the wealth accumulation stage, we were likely topping up or contributing to a registered retirement savings plan (RRSP) the past two months. Longer

life expectancy today forces planning for retirement to be even more important. We also need to have a plan to pass on this potentially large asset in the event of death. What are the options available to help with minimizing the tax burden at death?

According to the general rule, the fair market value of an RRSP at the time of death is included in the deceased person's income for that year and is taxed at their marginal tax rate. Amounts paid from an RRSP upon the death of an annuitant is known as a “refund of premiums”. This amount can be transferred directly or indirectly to a qualified beneficiary of the deceased annuitant.

Spouse Or Common-Law Partner One of the most recognized and accepted option is to

have our RRSPs rolled over to the RRSP of the spouse of the deceased person. To transfer a refund of premiums to an RRSP, the qualified beneficiary must be 71 years old or younger at the end of the year the transfer is made. As such, the amount will be exempted from the deceased person's income and added to the income of the spouse or common-law partner. The issuer who receives the transferred funds will issue a receipt to the qualified beneficiary. The beneficiary can use the receipt to claim a deduction on his or her income tax return for the year the refund of premiums was received. This spousal rollover has resulted in deferring taxes until such time that the recipient makes a withdrawal.

Dependent Child Or Grandchild When a child or grandchild who is financially

dependent on the deceased person at the time of death

Becky Wong

is designated as the beneficiary of the RRSP, the amount paid can also be exempted from the deceased’s income in the year of death. The refund of premiums received by a financially-dependent child or grandchild will be included in his or her income, and since the child has little income, this is generally advantageous.

A child or grandchild is considered dependent if his or her income in the year preceding the death does not exceed the basic personal tax credit for that preceding taxation year ($11,327 for 2015). In addition, if the child or grandchild is a minor, the taxation of the RRSP can be spread over a number of years by purchasing a term-certain annuity with a maximum term to age 18. The annuity payments will be taxed in the minor’s hands up to age 18.

Infirm Dependent Child Or Grandchild

In the case of a child or grandchild who is financially dependent because of a physical or mental impairment, the income threshold is the basic personal tax credit plus the disability amount tax credit, resulting in a total amount of $19,226 for 2015. This recipient can transfer the taxable amount of the refund of premiums to his or her own RRSP, again deferring its taxation until withdrawal.

The infirm child or grandchild may also choose to purchase a life annuity with the refund of premiums and the annuity payments will be taxed to the child or grandchild.

Since July 1, 2011, proceeds of a deceased annuitant's RRSP is permitted to be rolled into a registered disability savings plan (RDSP) of a financially dependent infirm child or grandchild. The maximum rollover amount into an RDSP is $200,000. All contributions and rollover



MoneyTip

amounts made to any RDSP of a beneficiary will reduce this amount. A grant will not be paid into the RDSP on amounts that are rolled over.

All of the above options can be facilitated on a partial rollover basis. It may make sense for the deceased annuitant to report some of the RRSP income if a capital loss is available. Tax losses die with the deceased, hence, it may be advantageous to make use of it on the terminal return.

In conclusion, planning for RRSPs beyond today should consider several factors as a combination of options may be more appropriate for your specific circumstance. Tax rules on death can be complicated, and seeking the advice of a tax accountant or financial advisor is prudent.

Becky Wong, B.Comm (Hons), CFP, FMA, Independent Financial Planner, Richmond, BC. www.beckywong.com

Value Investing: Current State, Outlook And How To Select A Value ETF

The concept of value investing dates back at least as far as the 1920s, when Benjamin Graham and David Dodd first began teaching finance at Columbia University. The idea: Buy securities at prices below their intrinsic value and wait patiently for their market price to reflect their true value. Style indexes were ultimately born out of these ideas.

From Dec. 29, 1978, through March 13, 2016, the Russell 3000 Value Index of U.S. stocks gained 12.05% on an annualized basis while the Russell 3000 Growth Index grew by 10.78% annualized.

Value investing is simple in theory, but difficult in practice. Today, value investors find themselves in the middle of a particularly tough stretch. From Aug. 8, 2006 through Dec. 31, 2015, the Russell 3000 Growth Index has outperformed its value counterpart by 3.89 percentage points on an annualized basis. Styles come in and out of fashion and of course value investing still has merits. In fact, bad investor behaviour that will persist inevitably will likely reward those value investors who can stay the course. For example, fed up with years of underperformance, value investors will flee value funds and drive up prices elsewhere only to subsequently come down with a case of buyer's remorse as their new funds of choice disappoint. Value will inevitably rebound, and those "value" investors will invariably chase performance back in the same direction they came from. The net result of this isn't pretty for the performance-chasers, but their

flightiness could yield long-term rewards for the steady hands--the true value investors.

There is a host of ETFs that look to home in on value. The plain-vanilla ones track broad, market-cap-weighted benchmarks that tilt toward value stocks by splitting their parent indexes into growth and value buckets. Others look to isolate the value premium by focusing on stocks that demonstrate the strongest value characteristics. There are important differences among these apparently similar funds that are important to understand. Each fund's benchmark index may have different value factors that it takes into consideration.

What matters even more than the details of index construction is investor fortitude. Some of these funds might be easier to stick with than others. For example, in the U.S. ‘RPV’ had the best absolute returns over the five years ended Dec. 31, 2015; however, it was a bumpy ride, as evidenced by the fund's substantially higher volatility versus its peers. So on a risk-adjusted basis, the fund was actually near the bottom of the pack. While a fund like RPV might provide more-potent exposure to the value factor and the potential for greater absolute long-run returns, it comes at the cost of greater volatility.

Source: Morningstar

http://cawidgets.morningstar.ca/ArticleTemplate/ArticleGL.aspx?culture=en-CA&id=747805

http://www.beckywong.com

http://cawidgets.morningstar.ca/ArticleTemplate/



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

Despite the headwinds of dramatic softening in the Calgary office market, Artis REIT (AX.UN on TSX) reported FFO per diluted unit of $0.38, flat-year-over-year, and in line with expectations. While there was a significant vacancy in Calgary (the space has been re-leased), same-property NOI rose 0.7% in Q1/16, largely due to the strength of the U.S. dollar. We expect internal growth to accelerate, as the space in Calgary is occupied as of April. Longer-term, we are expecting some pressure on cash flow as leases in Calgary expire.

Mitigating the drop in same-property NOI from the Canadian portfolio was interest expense savings from refinancing debt at lower rates, as well as the benefit of the stronger U.S. dollar.

Strength of U.S. dollar drives +0.7% internal growth.By geography, the REIT’s U.S. portfolio generated internal growth of +12.0%, compared to -3.4% for the Canadian portfolio:

• The U.S. portfolio (31% of NOI) posted a +12.0% increase in same-property NOI, mostly as a result of the stronger U.S. dollar. Excluding the benefit of foreign exchange, internal growth was +1.1%.

• Though same-property NOI from the Canadian portfolio (69% of NOI) dropped -3.4%, this was entirely driven by the vacancy of approximately 200,000 sf by Amec Americas Ltd. in a suburban Calgary office building. Management indicated that a new tenant has leased the entire space and commenced paying rent on April 1, 2016, albeit at a slightly lower rental rate. Therefore, we expect a boost to NOI in Q2/16.

Looking ahead, while the benefit of the strong U.S. currency should be less significant in coming quarters, leasing activity has picked up and occupancy has risen. Therefore, despite soft fundamentals in Alberta, we expect same-property NOI to rise in Q2/16.

Recycling capital to reduce leverage and expand in the U.S. While there has not been any notable office properties traded in Calgary of late, management of Artis has expressed confidence that the REIT will divest some of its properties in Calgary in 2016. While it is difficult to foresee strong demand for these assets, we would view the sale of Calgary office properties at the current IFRS value extremely positively. As public market investors are currently ascribing little value to these properties, it could be a potential catalyst for Artis REIT’s unit price. Management indicated that the proceeds of asset sales would be utilized to reduce leverage and grow in the U.S., and that the REIT’s U.S. exposure could reach as a high as 40% of NOI (currently 31%).

Valuation and recommendation. We continue to utilize a 6.5% cap rate to value Artis REIT’s portfolio, and our net NAV per unit estimate is now $14.93 (from $15.24 previously). Artis REIT currently trades at an implied cap rate of 6.9%, or a 13.5% discount to NAV, which is slightly below the weighted average discount of 10.6% for its diversified commercial REIT peers. Combined with an annualized distribution of $1.08 per unit (8.4% current yield), our C$15.00 target price implies a 12-month forecast total return of 24.6%.

Source:Cannacord Genuity

ARTIS SURVIVING THE WESTERN ECONOMY



CANADIAN MONEYSAVER RECOMMENDED DRIPSCA

NA

DIA

N D

IVID

END

REI

NVE

STM

ENT

PLA

NS

(DRI

Ps)

TSX

Com

pani

es S

ymbo

l52

-Wee

kCl

osin

gPr

ice

Div

Yiel

dEP

SP/

EPa

yout

Rati

o %

5-Yr

Div

iden

d G

row

thH

igh

Low

Agni

co E

agle

Min

esAE

M$6

0.70

$27.

63$5

9.65

$0.4

20.

70%

$0.4

313

8.7

97.7

%-7

.0%

Algo

nqui

n Po

wer

AQN

$12.

06$8

.59

$11.

44$0

.56

4.90

%$0

.46

24.9

121.

7%15

.6%

Alta

Gas

ALA

$40.

85$2

7.09

$29.

62$1

.98

6.68

%$0

.05

592.

4>1

00%

6.0%

BCE

Inc

BCE

$60.

39$5

1.56

$59.

72$2

.73

4.57

%$3

.50

17.1

78.0

%7.

4%

Bk o

f Mon

trea

lBM

O$8

2.56

$64.

01$8

2.07

$3.3

64.

09%

$6.9

411

.848

.4%

3.5%

Bk o

f Nov

a Sc

otia

BNS

$66.

99$5

1.17

$62.

62$2

.88

4.60

%$5

.84

10.7

49.3

%7.

1%

Cana

dian

Tir

eCT

C.A

$146

.31

$101

.53

$141

.12

$2.3

01.

63%

$8.9

015

.925

.8%

17.8

%

Cana

dian

Uti

litie

sCU

$37.

90$2

9.49

$36.

71$1

.30

3.54

%$2

.05

17.9

63.4

%9.

7%

Cdn

Impe

rial

Bk

(CIB

C)

CM$1

02.9

0$8

2.19

$101

.14

$4.7

24.

67%

$9.4

710

.749

.8%

5.5%

Cons

tella

tion

Sof

twar

eCS

U$5

98.0

0$4

27.9

9$5

04.0

8$5

.20

1.03

%$2

3.96

21.0

21.7

%21

.8%

DH C

orpo

rati

onDH

$44.

14$2

8.52

$34.

25$1

.28

3.74

%$2

.32

14.8

55.2

%-3

.5%

Emer

aEM

A$4

8.54

$39.

12$4

6.37

$1.9

04.

10%

$2.4

518

.977

.6%

7.7%

Enbr

idge

EN

B$6

2.68

$40.

03$5

1.70

$2.1

24.

10%

$2.3

322

.19

91.0

%16

.8%

Exch

ange

Inc

ome

Corp

EIF

$32.

45$2

0.01

$32.

14$1

.92

5.97

%$2

.36

13.6

281

.4%

3.7%

Fort

is

FTS

$41.

58$3

4.16

$40.

63$1

.50

3.69

%$2

.17

18.7

269

.1%

5.1%

Hyd

ro O

neH

$24.

50$2

1.01

$23.

80$0

.84

3.53

%$1

.18

20.1

771

.2%

n/a

Impe

rial

Oil

IMO

$50.

89$3

7.25

$40.

15$0

.60

1.49

%$0

.52

77.2

111

5.4%

4.5%

Inte

rPip

elin

eIP

L$3

1.88

$18.

43$2

5.51

$1.5

66.

12%

$1.3

618

.76

114.

7%10

.4%

Keye

ra C

orp

KEY

$44.

84$3

2.87

$36.

77$1

.50

4.08

%$1

.59

23.1

394

.3%

10.1

%

Man

ulif

e M

FC$2

4.20

$15.

32$1

7.90

$0.7

44.

13%

$2.2

87.

8532

.5%

8%

Nat

iona

l Ban

kN

A$5

0.26

$34.

86$4

2.03

$2.1

65.

14%

$4.4

79.

4048

.3%

6.4%

Pem

bina

Pip

elin

esPP

L$4

2.24

$26.

05$3

7.10

$1.9

25.

18%

$1.2

629

.44

152.

4%3.

3%

Sun

Life

Fin

anci

alSL

F$4

5.65

$36.

64$4

3.48

$1.6

23.

73%

$3.7

411

.63

43.3

%1.

3%

Sunc

or E

nerg

ySU

$40.

35$2

7.32

$34.

07$1

.16

3.40

%-$

0.19

n/a

>100

23.5

%

Supe

rior

Plu

sSP

B$1

4.14

$8.4

2$1

1.01

$0.7

26.

54%

$1.0

810

.19

66.7

%n/

a

Td B

ank

TD$5

6.48

$47.

75$5

6.09

$2.2

03.

92%

$4.7

611

.78

46.2

%10

.8%

Telu

s T

$45.

19$3

5.51

$40.

53$1

.84

4.54

%$2

.62

15.4

770

.2%

10.9

%

Tran

sCan

ada

Corp

TR

P$5

4.74

$40.

58$5

1.75

$2.2

64.

37%

$2.4

720

.95

91.5

%5.

8%

WSP

Gro

upW

SP$4

9.18

$35.

11$3

9.93

$1.5

03.

76%

$2.4

716

.17

60.7

%-6

.0%

CHA

RT N

OTE

- P

rice

s at

clo

se M

ay 1

3th

2016

. Sou

rce:

TD

Wat

erho

use/

Bloo

mbe

rg L

P. S

tock

pri

ces

chan

ge d

aily

. Che

ck fo

r cur

rent

pri

ces.

The

se C

anad

ian

com

pani

es li

sted

on

the

TSX

are

our

reco

mm

ende

d co

mpa

nies

a D

RIP.

Wit

h th

e DR

IP, y

ou c

an r

einv

est

all y

our

divi

dend

s to

pur

chas

e ad

diti

onal

sha

res

at n

o co

st. S

ome

DRIP

S of

fer

a di

scou

nt s

o th

at a

ddit

iona

l sh

ares

are

bou

ght

at a

dis

coun

t to

the

ave

rage

mar

ket

pric

e. S

ome

divi

dend

s ar

e pa

id in

US

dolla

rs a

nd w

e ha

ve a

djus

ted

num

bers

and

rati

os a

ccor

ding

to

rece

nt e

xcha

nge

rate

s.

Div.

5yr

gr:

We

have

add

ed t

he fi

ve-y

ear d

ivid

end

grow

th ra

te t

o ou

r cha

rt, i

nfor

mat

ion

obta

ined

from

Blo

ombe

rg L

P.Ea

rnin

gs a

re fo

rwar

d ea

rnin

gs e

stim

ates

. Yi

eld

= Di

vide

nd d

ivid

ed b

y cu

rren

t pr

ice.

Pay

out

rati

o =

divi

dend

div

ided

by

earn

ings

per

sha

re (

EPS)

. Th

e di

vide

nd p

ayou

t ra

tio

is s

impl

y ca

lcul

ated

by

divi

ding

the

com

pany

’s

divi

dend

by

its

forw

ard

(est

imat

ed)

earn

ings

. If

a co

mpa

ny w

ith

a lo

w p

aym

ent

rati

o ex

peri

ence

s an

ear

ning

s de

clin

e, it

may

con

tinu

e to

pay

the

sam

e di

vide

nd. O

r, at

leas

t, it

may

w

eath

er th

e do

wnt

urn

wit

hout

cut

ting

the

divi

dend

. A h

igh

divi

dend

pay

out r

atio

of 1

00%

indi

cate

s th

at th

e di

vide

nd p

ayou

t is

equa

l or a

bove

the

com

pany

’s e

arni

ngs.

The

refo

re, o

ne

shou

ld b

e ve

ry v

igila

nt a

nd p

lace

the

sto

ck o

n yo

ur “

wat

ch”

list.

Calc

ulat

ion

for i

nter

est e

quiv

alen

t of d

ivid

end

yiel

d fo

r elig

ible

sha

res:

(10

0 - m

argi

nal r

ate

for d

ivid

ends

) di

vide

d by

(10

0 - m

argi

nal t

ax ra

te o

n re

gula

r inc

ome)

. For

exa

mpl

e, in

201

1 an

Ont

ario

tax

paye

r wit

h or

dina

ry in

com

e of

$65

,514

use

s: (

100

– 11

.72)

div

ided

by

(100

– 3

1.15

) is

app

roxi

mat

ely

1.28

22. T

here

fore

, a s

tock

wit

h a

Cana

dian

div

iden

d yi

eld

of 5

.0%

ha

s an

equ

ival

ent

inte

rest

retu

rn o

f 5.0

x 1

.282

2, w

hich

is a

ppro

xim

atel

y 6.

41%

.



The answers to the following questions have been provided by Robert Keats, CFP (US and Canada), RFP (Canada), MSFP, best-selling author and contributing editor.

Q I understand one can transfer from a RRIF account to one's personal account "in kind". I have U.S. stock S&P 500 ETF , which I would like to transfer but my financial advisor said I would have to convert to Canadian funds first then once in my account convert back to U.S. Do you have any suggestions with this problem?

A Unfortunately the RRIF trustees need to account for distributions/transfers of any kind in and out of RRIFs or RRSPs in Canadian funds so it would be difficult to find any trustee to do this in kind transfer without the liquidation the the ETF and conversion to Canadian dollars. The best you may be able to do is convince your broker/financial advisor to give you a break on the commissions to sale and buy back the ETF as well as a preferred exchange rate.

Q Recently, I have become intrigued by the high yields offered by the following investment vehicles:

U.S. Real Estate Investment Trusts (REITs)U.S. Business Development Corporations (BDCs)U.S. Master Limited Partnerships (MLPs)U.S. Closed-End Funds (CEFs)

I was wondering what is the withholding tax for the above investment options, if they are held in a registered account (ie. RRSP), or if they are held in a non-registered (taxable) account?

A The standard nonresident withholding rates on these investments is 30%, reduced by the Canada/US Treaty to 15% for non-registered investments. For registered investments if you can convince the payor to follow the Treaty the withholding rates would be zero as RRSPs under the Treaty are considered pensions. In any event to get the Treaty withholding rate you need to file IRS form W8 BEN with the custodian/payor. There are some other considerations that may make these purchases difficult, unless they are listed on stock exchanges you cannot purchase them in Canada. Also from an investment standpoint you may not want to have these investments types forming the majority of your portfolio as they are considered in the higher-risk category. There are REITs that are available in Canada that purchase US real estate so you don’t need to purchase the US REIT direct from a US provider.

Q Is it possible to transfer the monies in both a Roth IRA & a 403(b) pension plan to a RRSP and / or a TFSA with no or little U.S. federal tax consequences? The plans are values at $16K & $7.5K, respectively. I contributed to the plans for three years while I was employed as a teacher in the U.S.. In 2010 I returned to Canada, where I have been pressuring future education. I am 33 years old. If it is not possible to transfer the monies to a RRSP or TFSA, is there any other way to close my U.S. pension plans with the least amount of federal tax consequences?

A There is no mechanism to be able to transfer US Individual Retirement Accounts(IRAs) or other qualified plans directly to Canadian registered plans of any type or to TFSAs. Technically, what you need to do is cash in the US plan, pay nonresident withholding tax (15% for periodic or 30% lump sum withdrawals) and then the



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

CRA will allow you to transfer the plan total plan balance to your RRSP under what is called a Section 60 j transfer. If you don’t use the Section 60 j transfer to an RRSP you will pay Canadian taxes on the entire withdrawal income from the US plans less the taxes paid to the US as foreign tax credits. If you do the 60 j transfer you need to understand you actually are getting double taxed on your plan, once by the IRS and then eventually whenever you withdraw from your RRSP in Canada. You need to weigh all of these factors to just leaving the plans as they are in the US until you actually need to use the funds for your retirement as neither Canada or the US will tax you on the build up of income deferred in the plans. Alternatively, you could just cash the plans in, pay all the taxes and treat the net remaining funds as ordinary nonregistered investments.

Although it is too late for you, unless you move back to the US, the best way to handle US IRAs and other qualified plans is actually before you leave the US to come back to Canada. There are some great options that will give you tax-free income for the rest your life on your savings by converting all of your US IRAs and qualified plans to US Roth IRAs. This is protected by being built into the Canada/US Tax Treaty. Unfortunately, you cannot do this after you are back in Canada because you will lose the Treaty protection providing the tax free benefit of the Roths as well as you would have to pay Canadian and US taxes on the withdrawal from the US plans.

Q I recently had my 2014 tax return prepared by a tax professional. I own shares of U.S. companies in both my RRSP, and in my non-registered account.

When calculating my foreign dividend tax credit (for the 15% withholding tax that I paid to the U.S. government on the U.S. shares held in my non-registered account), the tax

professional informed me that there is a maximum amount ($281.90) that is eligible for the foreign tax credit.

Is this correct? I had never heard that there was a maximum amount eligible for the foreign tax credit, and wish to have one of Canadian Moneysaver's experts confirm this.

A There is no dollar amount maximum of foreign tax credits you can take. You get to deduct the actual amount of foreign tax paid or the lesser of tax due in Canada on your net income from the US(see CRA form T2209). There is a CRA rule that they will only give the maximum credits up to the Treaty rate allowed under the Canada/US Tax Treaty. For dividends this is 15% so your maximum credit is 15% of what ever dividends you were paid from the US stock, this may be what your tax professional is referring to as the maximum credit you can take. If you paid more tax than 15% and paid the standard US non-treaty withholding rate of 30% you get no credit on the overpayment of withholding, if this is what happened you need to go to the payor of your dividend in the US and get your withholding reduced to the Treaty rate so Canada will give you full credit for the US taxes paid.

http://www.CanadianMoneySaver.ca



TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF M

AY 9

, 201

6

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)

CA

NA

DIA

N F

IXED

IN

COM

E B

ALA

NCE

DM

anul

ife

Cons

erva

tive

Inc

ome

L0.

603.

112.

182.

42-0

.46

5.04

6.33

5.27

-3.

991.

471.

1598

.55

Fide

lity

Inco

me

Allo

cati

on S

erie

s S8

-0.3

80.

330.

890.

210.

945.

746.

286.

54-

1.69

1.74

1.40

2799

.87

Com

pass

Con

serv

ativ

e Ba

lanc

ed P

ortf

olio

0.25

2.38

1.29

1.35

0.22

5.79

6.28

5.65

-1.

851.

601.

5035

85.7

2Fi

delit

y In

com

e Al

loca

tion

Ser

ies

B-0

.38

0.33

0.89

0.20

0.92

5.72

6.27

6.53

-1.

731.

761.

4027

99.8

7SE

I M

oder

ate

R0.

111.

831.

621.

060.

706.

086.

13-

-2.

440.

19-

60.4

4Fi

delit

y In

com

e Al

loca

tion

Ser

ies

A-0

.40

0.28

0.78

0.14

0.70

5.48

6.04

6.31

-1.

531.

991.

5527

99.8

7Fi

delit

y In

com

e Al

loca

tion

Ser

ies

T8-0

.40

0.28

0.78

0.13

0.69

5.47

6.03

6.30

-1.

471.

991.

5527

99.8

7St

eady

hand

Inc

ome

0.25

3.05

2.60

2.99

0.53

4.54

5.94

--

3.08

1.04

1.04

91.8

7Ja

risl

owsk

y Fr

aser

Sel

ect

Inco

me

E0.

281.

981.

811.

76-0

.01

4.84

5.84

--

2.51

0.81

0.65

186.

70M

anul

ife

Cons

erva

tive

Inc

ome

E0.

572.

991.

842.

27-1

.02

4.53

5.74

4.61

-4.

292.

021.

5098

.55

Rena

issa

nce

Opti

mal

Inc

Pt

Elit

e Cl

0.16

2.20

1.12

1.56

-0.4

64.

845.

66-

-4.

041.

371.

4528

43.9

1Re

nais

sanc

e Op

tim

al I

nc P

t El

ite

T6 C

l0.

162.

201.

111.

56-0

.47

4.81

5.65

--

6.22

1.40

1.45

2843

.91

TD M

gd I

dx I

nc P

ort

- e

-0.2

50.

370.

69-0

.45

-0.0

65.

395.

624.

374.

341.

831.

191.

2014

.17

SEI

Inco

me

20/8

0 Cl

ass

R0.

241.

451.

610.

760.

744.

835.

41-

-2.

410.

16-

173.

03M

anul

ife

Port

rait

Con

serv

ativ

e Po

rt L

-0.2

40.

38-0

.56

-0.9

7-1

.00

4.81

5.38

--

0.34

1.47

1.15

142.

64Ta

nger

ine

Bala

nced

Inc

ome

Port

folio

-0.0

80.

490.

83-0

.40

0.04

5.12

5.37

--

1.98

1.07

0.80

323.

43Re

nais

sanc

e Op

tim

al I

ncom

e Pt

Sel

Cl

0.14

2.12

0.96

1.46

-0.7

64.

525.

33-

-4.

091.

681.

6528

43.9

1Re

nais

sanc

e Op

tim

al I

ncom

e Pt

Sel

T8

Cl0.

132.

100.

921.

44-0

.83

4.46

5.30

--

8.53

1.74

1.65

2843

.91

TD M

gd I

dx I

nc P

ort

- I

-0.2

60.

310.

57-0

.55

-0.3

15.

095.

294.

064.

051.

581.

481.

5014

.17

Rena

issa

nce

Opti

mal

Inc

ome

Pt S

el T

6 Cl

0.13

2.10

0.93

1.44

-0.8

44.

455.

28-

-6.

261.

761.

6528

43.9

1

CAN

AD

IAN

EQ

UIT

Y M

awer

Can

adia

n Eq

uity

A-0

.23

4.99

0.84

3.54

-1.6

411

.82

9.60

7.86

9.36

1.14

1.22

1.00

2127

.74

Man

ulif

e Cd

n In

vest

men

t Cl

ass

Adv

-0.2

54.

980.

273.

28-2

.89

10.6

68.

32-

-2.

722.

452.

1037

1.22

Beut

el G

oodm

an C

anad

ian

Equi

ty C

lass

I1.

427.

452.

455.

77-1

.28

10.2

17.

857.

20-

2.95

0.07

-55

13.2

1U

nite

d Ca

nadi

an E

quit

y Al

pha

Corp

Cl E

0.13

5.27

2.78

5.55

-1.7

35.

906.

99-

-1.

052.

331.

9072

9.41

Edge

Poin

t Cd

n Po

rt (

non-

HST

) Sr

A(N

)5.

7611

.98

3.11

8.95

-2.0

611

.03

6.73

--

0.00

1.98

1.80

949.

15Ex

empl

ar C

anad

ian

Focu

s Po

rt A

-0.2

6-0

.15

-1.7

0-3

.29

-0.6

29.

576.

69-

-0.

592.

761.

6515

4.27

Edge

Poin

t Ca

nadi

an P

ortf

olio

Ser

ies

A5.

7411

.94

3.03

8.89

-2.2

210

.85

6.55

--

0.00

2.15

1.80

949.

15Ed

gePo

int

Cdn

Port

(no

n-H

ST)

Sr B

(N)

5.73

11.9

12.

978.

84-2

.34

10.7

16.

44-

-0.

002.

272.

0094

9.15

Beut

el G

oodm

an C

anad

ian

Equi

ty C

lass

D1.

317.

101.

765.

31-2

.58

8.77

6.44

5.90

7.97

1.56

1.38

1.25

5513

.21

Fran

klin

Bis

sett

Cdn

Equ

ity

I2.

918.

895.

668.

97-3

.76

7.64

6.35

5.42

6.88

1.53

1.59

1.40

2983

.20

Uni

ted

Cana

dian

Equ

ity

Alph

a Co

rp C

l A0.

075.

092.

515.

39-2

.28

5.27

6.31

--

1.05

2.93

2.50

729.

41Ed

gePo

int

Cana

dian

Por

tfol

io S

erie

s B

5.72

11.8

62.

898.

79-2

.49

10.5

66.

27-

-0.

002.

442.

0094

9.15

CI S

elec

t Ca

nadi

an E

quit

y M

gd C

orp

Cl Z

1.43

6.43

1.85

4.62

-3.9

46.

986.

16-

-0.

932.

28-

263.

12Fi

delit

y Tr

ue N

orth

Sr B

0.44

3.50

1.21

2.29

-2.9

99.

276.

085.

226.

580.

622.

291.

8548

26.8

3Fi

delit

y Tr

ue N

orth

Sr S

80.

443.

511.

212.

29-2

.99

9.27

6.08

5.22

-0.

592.

291.

8548

26.8

3Fi

delit

y Tr

ue N

orth

Cl S

50.

443.

521.

232.

31-2

.97

9.27

6.07

--

1.55

2.28

1.85

126.

62Fi

delit

y Tr

ue N

orth

Sr S

50.

443.

501.

202.

28-3

.01

9.24

6.05

--

0.60

2.31

1.85

4826

.83

Fide

lity

True

Nor

th C

l B0.

443.

511.

212.

29-3

.00

9.23

6.04

5.18

-1.

582.

291.

8512

6.62

Fide

lity

True

Nor

th C

l S8

0.44

3.51

1.22

2.30

-3.0

09.

226.

02-

-1.

532.

311.

8512

6.62

CI S

elec

t Ca

nadi

an E

quit

y M

gd C

orp

Cl1.

446.

411.

824.

55-4

.02

6.84

6.01

4.65

-0.

932.

432.

0026

3.12



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

FIX

ED I

NCO

ME

Cans

o Co

rpor

ate

Bond

Cla

ss C

0.32

1.28

2.39

1.60

2.09

4.18

6.16

6.46

-2.

99-

0.40

974.

91Dy

nam

ic A

urio

n To

tal R

etur

n Bd

Ser

I0.

191.

983.

972.

495.

935.

196.

07-

-5.

270.

08-

1462

.13

Dyna

mic

Aur

ion

Tota

l Ret

urn

Bd C

l Ser

IT

0.12

1.93

3.87

2.38

5.93

5.24

6.06

--

0.00

0.13

-22

6.01

Dyna

mic

Aur

ion

Tota

l Ret

urn

Bd C

l Ser

I0.

161.

863.

862.

395.

975.

176.

03-

-0.

000.

13-

226.

01Ca

nso

Cana

dian

Bon

d Cl

ass

C0.

251.

022.

321.

432.

023.

975.

54-

-2.

53-

0.40

166.

36Su

n Li

fe M

FS C

anad

ian

Bond

I0.

362.

183.

082.

592.

474.

195.

41-

-3.

410.

06-

101.

88H

SBC

Cana

dian

Bon

d In

stit

utio

nal

0.25

1.54

2.38

1.46

1.79

3.56

5.13

5.50

-3.

630.

04-

847.

32Ca

nso

Corp

orat

e Bo

nd C

lass

A0.

241.

011.

841.

241.

003.

065.

10-

-1.

40-

1.35

974.

91CI

BC C

anad

ian

Bond

Pre

miu

m C

lass

0.21

1.58

2.40

1.68

1.16

2.96

4.93

--

3.01

0.59

0.75

2607

.58

RBC

Bond

Sr D

0.25

1.75

2.87

1.78

2.00

3.37

4.93

--

2.54

0.77

0.65

1631

3.19

Sun

Life

MFS

Can

adia

n Bo

nd D

0.29

1.96

2.66

2.31

1.62

3.32

4.80

4.99

5.31

2.64

0.89

0.65

101.

88PH

&N

Tot

al R

etur

n Bo

nd S

r D0.

131.

512.

791.

722.

093.

504.

765.

085.

732.

750.

580.

5080

24.9

0Ca

pita

l Gro

up C

anad

ian

Core

Plu

s Fi

xed

I-0

.22

0.70

1.95

1.05

1.64

3.07

4.66

--

3.00

0.10

-50

.00

PH&

N B

ond

Sr D

0.04

1.30

2.72

1.59

2.08

3.43

4.64

5.11

5.69

2.73

0.60

0.50

9481

.12

Dyna

mic

Can

adia

n Bo

nd S

erie

s I

0.34

1.22

1.68

1.18

1.86

2.87

4.60

5.45

-3.

750.

08-

2028

.34

SEI

Inco

me

100

Clas

s R

0.24

1.38

2.21

1.48

1.49

3.14

4.60

--

2.60

0.16

-28

.16

PH&

N C

omm

unit

y Va

lues

Bon

d Sr

D0.

031.

282.

741.

572.

103.

414.

584.

95-

2.58

0.60

0.50

179.

29Dy

nam

ic A

dvan

tage

Bon

d Se

ries

I0.

642.

162.

021.

771.

402.

924.

54-

-4.

840.

08-

818.

84RB

C Bo

nd A

dv0.

221.

652.

671.

651.

602.

974.

534.

66-

2.10

1.17

1.00

1631

3.19

Dyna

mic

Adv

anta

ge B

ond

Clas

s Se

ries

I0.

832.

312.

121.

771.

572.

904.

50-

-0.

000.

08-

775.

36

TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF M

AY 1

2, 2

016

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

0 is

in t

he t

op 2

5% o

f all

fund

s in

its

fund

typ

e ca

tego

ry.

Sour

ce -

Mor

ning

star

Pal

Trak

, Mor

ning

star

Can

ada,

(80

0) 5

31-4

725,

htt

p://

ww

w.m

orni

ngst

ar.c

a.


http://www.cifsc.org/en/index.php







http://www.morningstar.ca





Specialty ETFsTOP EXCHANGE TRADED FUNDS RANKED BY FIVE-YEAR RETURNS AS OF MAY 12, 2016 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 Eq Wght US HlthCare Hdgd to CAD ETF ZUH -4.56 2.72 5.74 -3.94 18.61 16.72 -

iShares Global Healthcare (CAD-Hedged) XHC -5.41 2.36 1.51 -5.45 12.48 15.14 16.08

BMO Global Infrastructure ETF ZGI 2.17 -1.32 -0.33 -5.40 10.62 14.95 15.08

iShares Global Water Comm CWW -2.99 -0.36 -1.83 5.64 15.89 12.90 5.42

iShares Global Real Estate Comm CGR -6.59 -3.78 -3.05 5.48 9.57 12.18 7.18

iShares MSCI World XWD -8.30 -2.27 -3.88 -0.62 13.87 11.63 11.68

Horizons Active Global Dividend ETF Comm HAZ -6.44 -2.14 -4.43 2.98 13.37 11.38 -

First Asset Canadian REIT ETF Common RIT 7.93 1.24 10.34 13.09 9.51 11.51 -

iShares US Fundamental (CAD-Hedged) Comm CLU 2.31 1.51 8.82 -2.30 9.11 9.39 4.69

iShares Japan Fundamental (CAD-Hdg) Comm CJP -18.79 -5.96 -14.45 -22.54 2.65 7.23 -5.10

iShares Equal Weight Banc & Lifeco Comm CEW 5.52 3.70 7.97 2.26 12.12 8.39 6.98

BMO Long Corporate Bond ETF ZLC 4.38 1.48 4.87 2.43 4.48 7.86 7.89

First Asset Active Util & Infra ETF Comm FAI 5.00 0.09 3.61 -4.00 8.99 8.93 -

iShares Core Canadian Long Term Bond XLB 3.13 0.29 2.73 2.26 4.69 7.68 7.04

iShares Equal Weight Banc & Lifeco Adv CEW.A 4.90 3.35 8.60 0.62 11.15 7.41 6.06

Horizons Seasonal Rotation ETF Comm HAC 2.76 1.36 8.22 5.23 8.33 7.34 8.54

BMO Long Federal Bond ETF ZFL 1.09 -1.16 -1.22 3.83 3.73 7.42 -

BMO Covered Call Canadian Banks ETF ZWB 8.23 3.95 9.96 2.86 9.69 7.20 7.93

iShares Global Agriculture Comm COW -3.71 0.29 0.79 -1.51 8.15 7.13 6.18

First Asset CanBanc Income Class ETF CIC 2.55 0.00 2.55 0.54 8.41 5.79 -

BMO Eq Weight US Banks Hdgd to CAD ETF ZUB -7.53 8.60 8.13 -7.34 7.17 6.83 -

iShares Global Infrastructure Comm CIF 0.45 -0.27 1.59 -5.26 5.71 6.63 4.02

iShares US Small Cap (CAD-Hedged) XSU -0.78 1.55 9.32 -6.83 7.30 6.52 3.12

BMO Emerging Market Bnd Hdgd to CAD ETF ZEF 4.41 0.43 3.77 4.09 3.46 6.23 -

iShares Global Completion Port Builder XGC 0.11 0.25 3.90 -1.86 4.57 6.13 8.71

Horizons Active Cdn Dividend ETF Comm HAL 4.37 -0.25 6.76 -4.87 6.97 6.06 -

BMO Equal Weight REITs ETF ZRE 12.36 2.65 12.37 -1.34 1.31 5.94 -

iShares US IG Corporate Bond CAD-Hdgd XIG 6.00 1.48 6.06 3.62 3.34 5.99 -

BMO Mid Corporate Bond ETF ZCM 2.40 0.39 2.69 2.71 3.95 5.82 5.74

BMO MSCI EAFE Hdg to CAD ETF ZDM -5.68 0.46 -1.22 -11.70 4.91 5.68 4.97

BMO India Equity ETF ZID -9.04 -2.58 -4.22 -2.44 13.17 5.23 3.87

iShares International Fundamental Comm CIE -8.81 -0.30 -3.34 -8.86 8.32 4.99 0.08

iShares MSCI EAFE CAD-Hedged XIN -5.72 0.28 -1.52 -12.13 4.32 5.12 2.44

iShares Alternatives Complt Port Builder XAL 2.57 0.41 4.35 -1.81 2.62 5.14 8.74

iShares Canadian HYBrid Corporate Bd XHB 6.36 1.97 7.81 1.29 3.04 5.19 5.23

iShares JP Morgan USD EM Bond CAD-Hdg XEB 6.21 1.25 6.36 2.61 1.52 5.02 5.17

BMO Mid Federal Bond ETF ZFM 0.46 -0.92 -0.61 2.86 3.05 4.95 -

iShares Balanced Inc CorePortfolio Comm CBD 3.60 0.71 5.59 -0.26 4.08 4.84 4.35

iShares Canadian Select Dividend XDV 8.11 1.87 9.01 -6.13 4.33 4.75 4.92

BMO Monthly Income ETF ZMI -0.83 -0.38 1.45 -3.34 2.41 4.63 5.06

©2015 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.


Back Issues Each back issue @ $5.20 with GST/$5.59 with HST for ON, NB, NL & NS residents. We currently have back issues available from January 2014 to May 2016. All back issues since January 2001 (plus article archives) are available online to print members by adding an online upgrade. Use the order form above or order online at https://www.canadianmoneysaver.ca. (GST/HST REGISTRATION # R105201230)

NEW/RENEW MEMBERSHIP • GIFT • ONLINE EDITION


Independent Financial Advice For Everyday Use - Since 1981 SAVERTo order, use the form below or go online at www.canadianmoneysaver.ca

FILL OUT, DETACH AND MAIL THIS PAGE WITH YOUR PAYMENT AND INFORMATION TO THE CANADIAN MONEYSAVER AT THE ADDRESS BELOW. PLEASE PRINT CLEARLY:

YOUR NAME ______________________________________________________________________ MEMBERSHIP NUMBER (ID) ____________________ (if applicable)

ADDRESS ___________________________________________ ________________________ CITY________________________________________________________

PROVINCE ____________ POSTAL CODE _______________________ TELEPHONE (____________) _____________________________________

E-MAIL _________________________________________________________________________________________________________________________

GIFT DESCRIPTION: __________________ YOU ARE RESPONSIBLE FOR GIFT ANNOUNCEMENT TO: (NAME) __________________________________________________

ADDRESS ___________________________________________ ________________________ CITY________________________________________________________

PROVINCE ____________ POSTAL CODE _______________________ E-MAIL ______________________________________________________________________

***FOR ADDITIONAL GIFTS, PLEASE SUPPLY SEPARATE LIST OF RECIPIENTS STATING GIFT DESCRIPTION, RECIPIENT NAME, ADDRESS AND EMAIL. THANK YOU.***

PREPAID ORDERS ONLY BY: CHEQUE/MO CARD # _____________-______________-______________-______________ EXP _____/_____

Cheques should be made payable to The Canadian MoneySaver Inc. 55 KING ST W, SUITE 700, KITCHENER, ON N2G 4W1 TELEPHONE: 519-772-7632 EMAIL: [email protected] WEBSITE: https://www.canadianmoneysaver.ca

Enter QUANTITY in boxes belowPrint and/or Online, 1-Year and/or 2-Year,

and fill in $ Total Price.

PRINT EDITION OR ONLINE EDITION includes 10% off the second year New/Renew/GiftCHOOSE THE PROVINCE IN WHICH YOU RESIDE:

1-Yr Online 9 Issues

1-Yr Print9 Issues

2-Yr: Online18 Issues

2-Yr: Print18 Issues

PRINT1-YEAR

PRINT2-YEAR

ONLINE1-YEAR

ONLINE2-YEAR $ TOTAL PRICE

ON, NB, NL $22.59 $28.19 $40.67 $53.57 HST incl. $__________

NS $22.98 $28.69 $41.39 $54.52 HST incl. $__________

PEI $22.78 $28.44 $41.03 $54.04 HST incl. $__________

AB, QC, MB, BC, SK $20.98 $26.20 $37.79 $49.78 GST incl. $__________

PRINT PLUS ONLINE EDITIONS with 50% off the second service New/Renew/Gift1-Year - 9 Issues 2 Year - 18 Issues Quantity: 1-Year 2-Year

ON, NB, NL $39.49 $78.19 HST incl. $__________

NS $40.19 $79.58 HST incl. $__________

PEI $39.84 $78.88 HST incl. $__________

AB, QC, MB, BC, SK $36.70 $72.66 GST incl. $__________

ONLINE UPGRADEON, NB, NL, NS, PEI $1.57 per issue times the number of

issues remaining in a current print membership to reach a common expiry date.

HST incl. x Number of Issues ____________ $__________

AB, QC, MB, BC, SK $1.46 GST incl. x Number of Issues ____________ $__________

You may purchase gift memberships to Canadian MoneySaver for Canadian residents. Please select price that includes applicable taxes based on where you reside in Canada.

50%off the second service with the purchase of a combined print & online membership





Time to Renew?

Give as a Gift?If your mailing address is printed BELOW this box,

your membership is about to expire. Renew today and assure continuous service.

Use the form on the reverse side or the renewal envelope bound inside this issue to renew.

No other renewal notice is sent.

Give as a gift and share the wealth of financial knowledge and expert advice

with a friend or family member.

You can also renew or order online at www.canadianmoneysaver.ca

Don't miss a single issue!


Independent Financial Advice For Everyday Use - Since 1981 SAVER

DEALFINDER

Dealfinder Inc. is an independent consumer service company dedicated to eliminating the hassle and high mark-ups of the auto industry. We do not repre-

sent nor are we paid by any dealer.

For a one-time fee of $159 plus $7.95 GST, we will shop the local dealerships, find the exact vehicle you want, and use our experience and industry knowledge to negotiate the lowest price for you. All you have to do is tell us the type of vehicle and op-tions you want, whether it’s a purchase or lease, the geographic area you want us to search, and we do the work for you. Once you approve the deal, we will arrange for you to go to the dealership to sign the paperwork and pick up your new vehicle.

When you use our service, we guarantee that we will get your vehicle at a lower price than you can obtain on your own, or we will refund our fee. Dealfinder can offer the guaranteed lowest price because we know what the vehicles cost the dealer and we only deal with fleet managers and sales managers who offer us a volume discount.

One of the questions most frequently asked by our customers is whether the warranty (or service) work has to be done by the dealership the vehicle was obtained from. The answer is no. The warranty (service) work can be performed by the dealership of your choice. Most people simply take the vehicle to the dealer that is conveniently located near their home or office.

DEALFINDER BENEFITS✔shops the local dealerships for your vehicle; ✔guarantees you the lowest price; ✔ eliminates hassles, bargaining and pressure; and ✔ one-year MoneySaver membership (new or gift)

with each payment.

TESTIMONIALS

✔

“I would like to let you know how pleased I was with Bob Prest’s Dealfinder service. Bob found the desired vehicle at a saving of $2,591 thus living up to your namesake, Canadian MoneySaver. Thank you for promoting Dealfinder Inc. in the ‘Member Benefits’ sec-tion. This satisfied customer will certainly do his part by passing the word to my friends and acquaint-ances.” Ron Welwood, Nelson, BC

✔

“I ordered a specific model with many options late in the model year. He (Bob) was able to fill my order and get me $6,334 off the final price as well as the $1,500 cash back from the dealer...WOW! The bend-over-backwards service he provided for me was a return to customer-oriented strategy seldom experi-enced these days.” Brent Nicholls, Toronto, ON

AUTOMOBILE PRICING CONSULTANTS

HASSLE-FREE auto shopping with the GUARANTEED lowest price!

FOR MORE INFORMATION OR TO START SAVING TODAY CALL DEALFINDER: (800) 331-2044 OR

OTTAWA (613) 837-4000

Buying or leasing a new car? Why pay retail?
