Category Archives: Investments

Odette Morin

How Much is Too Much Equity?


When you come in for your annual review meeting, we tell you that you have 80% equity and – in some cases – you get concerned. Is that too much to be investing in the stock market, you ask? Shouldn’t you have more of safer fixed income especially as you get closer to retirement? These are valid questions.

The old investing rule of thumb was to have an equal amount of fixed income to your age.  So if you are 50, you should have an equal proportion of fixed income and equity.  This is now thought to be too conservative because of three main reasons:

  • We live longer, and we therefore have a longer time horizon and need more money to fund a longer retirement. Many now live now live beyond the 80-85 year life expectancy.
  • Fixed-income yields have plunged in past years, and are likely to stay very low in this low interest rate environment. If inflation is higher than the saving rate you get, you are actually “losing” money with a safer investment.
  • Dividends keep up with inflation, which is very important over the long-term, and also because many pension plans no longer guarantee inflation adjustments.

While stocks are more volatile in the short-term, they tend to rise over the long-term. The longer the holding period, the higher the probability that you will come out ahead. Morningstar data service, shows that the S&P500, for example, has produced positive returns in about 95% of rolling monthly 10-year holding periods from 1926 to 2015. For 15-year periods, the return was positive 99.8% of the time. That is why we always buy quality, diversify, and hold regardless of market sentiments.

So, how much equity and fixed income should you hold in your own portfolio?  It highly depends on your personal risk tolerance, as rated when you first became a client; also, it depends on whether you are retired & need income from your portfolio, or are still in the accumulation phase.

Other factors include how much other liquid savings you have on hand in case of an emergency, and if you also are part of a pension plan. Typically, we like our retired clients to have a minimum of 30% fixed income, and our younger clients only 20%. Therefore, 70% to 80% equity is normally what we recommend.

These are general guidelines. We look forward to discussing your personal asset allocation at your next annual review meeting.




Odette Morin

Where are Interest Rates Headed, and Why Should You Care?

Text Interest rates on up trend arrow, with financial data visible on the background.

All eyes are on Janet Yellen, Chair of the US Federal Reserve, these days to try to anticipate where interest rates will go. For the United States, the talk is all about when and how high, not if.  In Canada, it is a different story. Bank of Canada Governor, Stephen Poloz, reiterated that rates are not expected to go up yet. Many analysts believe there won’t be a rate increase until some time in 2018. Our economy is not growing meaningfully enough, and there is no inflation to worry about. Rate increases are a monetary tool to tame rapid growth, and to contain inflation.

While low interest rates are good for Canadians’ pocket books, for now, eventually, rates will go up here in Canada too and this is nothing but bad news for those with too much debt. Unlike the Americans, Canadian debt levels have steadily been increasing in recent years. Raising rates too high or too quickly  risks a huge debt problem for many Canadians.

A recent report by credit monitor TransUnion shows that up to a million Canadians would suffer financial stress if rates increased by 1%. However, rates are likely to increase by 2 or 3%, not only 1%. The Bank of Canada’s own research, states that the Bank’s natural rate of interest is in the range of 3% to 4% (*). This means that the best bank rate to consumers would be in the 4% to 6% range. That kind of increase would translate to considerable economical damage, and would be devastating to real estate markets.

We should care very much about interest rates as they impact us in many ways. Our best word of advice is to use current low interest rates to reduce debt as much as possible. Make sure that you can easily afford a 5-6% interest rate on your mortgage, for example. Manage your credit responsibly, and borrow only what you can afford at the anticipated higher rate.

Rate increases will also have an effect on your investments. Make sure that your portfolio is well balanced, keep fixed income in the lower range of your target allocation and select dividend paying equities which will help keep up with inflation and reduce volatility. Finally, don’t miss your annual portfolio review. This is becoming more important as we approach these uncertain times. This is when we rebalance your portfolio and review your circumstances in light of the current economic environment.

(*) Globe & Mail – Unlike the Fed, the BofC is constrained by a paradox of household debt. Sept 22, 2016 Louis-Phillippe Rochon Professor at Laurentian University.

Frank Mueller

BC Training & Education Savings Grant – Who Says Nothing in Life is Free?

In 2013, the Government of British Columbia introduced the BC Training & Education Savings Grant. This grant is a great way to help build your child’s RESP, as it will receive a one-time grant of $1,200.

According to the BC Training and Education Savings Grant’s info website, the following 3 conditions must be met in order to qualify for the $1,200 one-time grant:

  1. The child must be born in 2006 or later
  2. You and the child must be residents of British Columbia
  3. The child is the beneficiary of a Registered Education Savings Plan (RESP) with a participating financial institution

The earliest you can apply to receive the grant is on the child’s 6th birthday, and the latest you can apply is the day before the child’s 9th birthday.

If your child meets these 3 conditions, they are eligible to apply for and receive the one-time grant of $1,200. We have been reviewing all of our client RESP accounts, and looking for accounts with beneficiaries that meet the above criteria. If you have an RESP account with us, and would like to find out if your child qualifies for this one-time grant, please do not hesitate to contact us.

Anthony Sabti

Corporate Class Switching Deadline Extended – Will Take Effect January 1, 2017

In March, the 2016 Federal Budget announced that the tax-deferred switching advantage of corporate class funds would be ending this year. Originally, the budget called for the regulation change to take effect on October 1, 2016; however, the regulation change will now take effect on January 1, 2017.

Until this year, an investor was able to use this fund structure in a non-registered account and switch from one corporate class fund to another – within the same fund company – on a tax-deferred basis.  For example, an investor could switch from ABC Canadian Equity Fund Corp. Class to ABC Global Equity Fund Corp. Class without incurring a capital gain. With a regular fund structure, the investor would normally pay capital gains taxes on the profit incurred on the fund being sold.

While this is unfortunate news, corporate class funds will continue to offer the advantage of tax-efficient distributions.  These funds will restructure any income distribution (including interest income) in the form of capital gains or dividends, and are taxed at a lower rate than interest income.

Since the announcement was made, we have reviewed and will continue to review all non-registered portfolios at client meetings for any changes we would like to make before the rule change takes place. If you have a non-registered account with us and would like to see if we should act on your portfolio before the end of the year, please do not hesitate to contact us.

Anthony Sabti

The 2016 Presidential Election: How Will Markets Be Affected?

the important moment of political choice, Democrats or Republicans

General Impact of Elections to Markets

In 2000 and 2008, the last two elections where we knew we were getting a new president, markets were in the midst of a downward correction. In November 2000, the S&P 500 was three months into the Dotcom bubble correction that wouldn’t bottom out for almost another two years. Similarly, in 2008, the S&P was one year into the financial crisis that wouldn’t hit bottom for another four months.

Investors are fortunate enough to not have experienced any such bad luck since then. American markets are trading at market highs, and aren’t defined by any one sector, or a highly leveraged consumer. Fiscal policy is still very accommodating, with interest rates at historical lows.

Although studies show that no one party (Democrat or Republican) is better for the markets, change and uncertainty usually lead to short-term market volatility.  Certainly, the potential of a Trump win could bring a Brexit-like shock to the markets. Frank and I will examine the potential impacts of a Clinton vs. Trump win:

Anthony – What Happens If Clinton Wins?

The research shows that since the 1950’s, whichever candidate leads the polls in October usually goes on to become president. Going by this trend, it seems Hillary Clinton has the better chance of winning the election. The Republicans are expected to maintain control over the Congressional House of Representatives.

This “status quo” outcome would have lesser economic and market impact. Two major policy actions of a Clinton presidency could benefit the economy: changes in corporate tax laws to promote repatriation of corporate profits held overseas to fund infrastructure spending, and immigration reform. Both of these could garner bipartisan support and have a high possibility of enactment.

Possible risks to business of a Clinton win include executive orders on drug pricing, antitrust enforcement, and restrictions on fracking for domestic oil & gas production. Inflation and interest rates will likely remain lower for longer.

Frank  What Happens If Trump Wins?

As Anthony astutely points out, there is no historical evidence in favour of either a Republican or a Democrat presidency, in terms of the effect on the markets. However, the prospect of a Donald Trump presidency does introduce one key variable into the equation: uncertainty.

Opting out, or “ripping up” of NAFTA, and other free trade agreements, could hurt emerging markets (e.g. China, Mexico, etc) who have benefitted greatly from free trade with the U.S.  Trump’s intention to put America First could lead to a shift away from globalization and would represent a risk to all asset classes, at least in the short term, similar to the market corrections post-Brexit.

Introducing stiff tariffs would have the effect of increased prices of goods, leading to lower discretionary income for Americans. This would naturally lead to decreased spending on entertainment, luxury items, etc. Increasing government spending on the military and on infrastructure could be bad for the bond market.


A Clinton presidency would certainly offer – in many ways – a “status quo” for the economy and the markets. There would be little chance of serious reform or change, as a projected Republican-controlled House would work to oppose Mrs. Clinton’s policy reform bills. As far as the markets go, they’d likely continue to be unaffected in any meaningful way in the long term. This would continue the historical trend of economic cycles ebbing and flowing independently of the Presidential election winner.

Trump, on the other hand, would be the more unpredictable president, and the uncertainty surrounding many of his platform policies could have a negative affect on the markets for an unforeseen length of time.

In the long term – regardless of the outcome – markets historically have shown resiliency and eventually adapt to the events at hand.

Terry Broaders

Weekly Update July 19 2016

“No Cause Justifies The Killing of Innocent People ” – Albert Camus


After 5 Day Rally, Markets Quiet On Friday

North American markets were relatively flat Friday, ending a five-day rally, even as positive economic news emerged from China and the U.S. The loonie finished the day at 77.30 cents US, down 0.23 of a U.S. cent. The S&P/TSX composite index fell by 32.10 points to 14,482.42. For the week the index grew by 1.6%. Year to date the return is +11.32%.

In New York, the Dow Jones industrial average advanced by 10.14 points to 18,516.55, a new record high. Meanwhile, the S&P 500 gave back 2.01 poi nts to 2,161.74 and the Nasdaq composite slipped by 4.47 points to 5,029.59. In commodities, the August contract for crude oil gained 27 cents to US$45.95, while the more heavily-traded September contract climbed 23 cents to US$46.65.
August natural gas was up three cents to US$2.76 per mmBtu and August gold lost US$4.80 to US$1,327.40 per ounce.



RCMP and CRA Issue Warning On Taxpayer Scam 

The RCMP and the Canada Revenue Agency are warning again about the “taxpayer scam” as Canadians continue to be victimized almost daily. Fraudsters impersonating CRA employees target their victims and demand either personal information, or payment for phony fees or back taxes.   “To date in 2016, almost $2 million has been reported lost by 590 individuals,” says RCMP assistant commissioner Todd Shean, who leads the force’s Federal Policing Special Services.  “And if only 5% of victims report their losses, we can assume that the actual total amount lost to this scam is much, much higher.”  The agencies call on taxpayers to take steps to ensure their personal information remains confidential and to avoid being duped.
“The CRA will never request prepaid cards, ask for information about your passport, health card or driver’s licence, or leave personal information on your answering machine,” adds Diane Lebouthillier, Minister of National Revenue. “Before taking any action, taxpayers should always verify their tax account by checking My Account via the secure CRA portal or by contacting the CRA at 1 800 959-8281. This information, including examples of real scam telephone calls and e-mails, can be easily found on the CRA website,” she says.


Sources: Bloomberg; Investment Executive;,