This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
The next few years, we will see a massive transition, as millions of Baby Boomers reach retirement age. Retirement should not be an event, but a well mapped out transition. There has been a great deal of attention to your “number,” the amount of money you will need to live out your retirement goals…but there is so much more to it. What about the impact on your health, your home, and other members of your family.
Tune in tomorrow at 8:30 AM, as I discuss managing all the different parts of the transition to retirement, and how you should start managing the process now.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Friday, August 29, 2008
Wednesday, August 27, 2008
August 27, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
With Hurricane Gustav churning toward the Gulf of Mexico, the price of oil is back in the headlines…we know that energy prices react to weather and geopolitical events, but where are the long term prices of oil and energy companies heading?
Join me September 9th, for a lunch seminar featuring Nevin Markwart, Vice President of Fidelity Investments, as he discusses surviving market volatility, and the opportunity to invest in Canada’s economy for the long term.
Do you need a fresh approach for your growing portfolio?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
With Hurricane Gustav churning toward the Gulf of Mexico, the price of oil is back in the headlines…we know that energy prices react to weather and geopolitical events, but where are the long term prices of oil and energy companies heading?
Join me September 9th, for a lunch seminar featuring Nevin Markwart, Vice President of Fidelity Investments, as he discusses surviving market volatility, and the opportunity to invest in Canada’s economy for the long term.
Do you need a fresh approach for your growing portfolio?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Monday, August 25, 2008
August 25, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
Over the past couple of years, I have spoken on the impact of mutual fund fees on investors with growing portfolios. Over the next few months, I am hosting a series of seminars outlining strategies for investors with portfolios of 500000 or more. Please join me for lunch on September 9th, as Nevin Markwart, Vice President of Canadian Equities for Fidelity Investments, and I, discuss strategies to survive volatile markets.
If you are looking for direction, after surviving the last couple of years of market volatility and uncertainty, join me for a discussion of the emerging trends in the Canadian and global investment markets.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Over the past couple of years, I have spoken on the impact of mutual fund fees on investors with growing portfolios. Over the next few months, I am hosting a series of seminars outlining strategies for investors with portfolios of 500000 or more. Please join me for lunch on September 9th, as Nevin Markwart, Vice President of Canadian Equities for Fidelity Investments, and I, discuss strategies to survive volatile markets.
If you are looking for direction, after surviving the last couple of years of market volatility and uncertainty, join me for a discussion of the emerging trends in the Canadian and global investment markets.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
August 23, 2008 Saturday Morning Show with Guest Dave McKerlie, Account Manager, Small Business, ScotiaBank London Main Branch
Today I'd like to talk about some creative financing ideas when it comes to finding money for new start up of small businesses. First it's important to briefly define what exactly constitutes a "small" business. Small business is defined by the government and hence the banking world as any business with the gross annual revenue of no more than $5 million. The bank further describes a small business as having less than $5 million in sales and credit needs of $500,000 or less. If the business in question exceeds the sales or borrowing amounts, it is no longer considered a small business by definition.
In this segment, we are going to be talking about start-up businesses as well so, while we are at it, let's define what exactly a start up business is. The bank definition of a start up business is a business in operation and generating income, for a 24 month period. Some customers have made the argument that the business they are purchasing has been operating for 10-15 years so the start up label shouldn't apply to them. If the purchaser of the business has been employed by that business and has a wide range of experience in this business, sometimes we are able to make an exception but generally, when the ownership of the business changes hands, the clock starts over.
Jeff:
So why is the 2 year mark so important?
Dave:
If a business is going to fail, statistics show that it's most likely going to be in the first 2 years. Banks are not high risk lenders. As a result, banks generally like to finance small businesses that have at least a 2 year track record.
Jeff:
If banks only like to finance small operations in business for 2 years or more, what options are available for start up businesses?
Dave:
That's a great question Jeff. You know, at the bank we warned about using a lot of acronyms that not everybody would understand. There is one acronym that every small business owner should know however and that is CSBFA.
CSBFA stands for Canada Small Business Financing Act. This is more commonly referred to as a government guaranteed loan.
Jeff:
So tell us some more about this government loan
Dave:
Some years ago, the federal government saw a need to come up with a loan to encourage the entrepreneurial spirit in Canada. The loan is approved through all chartered banks and secured or guaranteed by the government of Canada.
Here are some of the details. Through the government guaranteed loan you can finance equipment purchases, leasehold improvements and building purchases. The figure to keep in mind here is 90%. That means that you can finance 90% of the cost through the loan.
Jeff:
That's interesting Dave, is there anything that can't be financed through this loan?
Dave:
There are a few things Jeff. Inventory, because of it's liquidity can't be financed and goodwill because of it's nature can't be financed but virtually all fixed assets and improvements can be financed.
Jeff:
Can used equipment be financed through the loan?
Dave:
Great question. Actually used equipment can be financed through the loan if the equipment is purchased through a reputable equipment dealer. If the equipment is being purchased privately, an appraisal will have to be ocmpleted by an accredited appraiser.
Jeff:
Dave are there any fees associated with this loan?
Dave:
There is a 2% fee charged to the customer on the total amount of the loan used so on a loan of $100,000 the fee would be $2,000. The customer has the choice of either paying the fee themselves or adding the fee to the loan.
Jeff:
What is the toal amount of loan that a customer could apply for Dave?
Dave:
The maximum amount that any one customer can apply for is $250,000.
Jeff:
What kind of pricing can a customer expect to see on a CSBFA loan?
Dave:
Pricing is set by government guidelines and generally, the customer will be paying Prime + 2.5%. Bank Prim at present is 4.75% so the loan rate will be approximately 7.25%. For a start up business, this is a fairly attractive rate.
Jeff:
Can a customer fainance either GST or PST taxes throught the loan?
Dave:
No taxes can't be pain by the loan. The loan is strictly for the purchase of the asset and not for the financing of the taxes associated with the purchase which quite often is recoverable to the customer.
Jeff:
Are there any additional features of the loan that our listeners should be aware of Dave?
Dave:
There is one unique feature that i haven't covered yet. For start up businesses who are approved for a CSBFA governemnt guaranteed loan, make sure you ask up front about the intereste only period. The government has provided that you may be approved for up to 11 months interset only payements, before you start paying back the loan. This is a huge feature for start up businesses when cash flow is tight, especially in the first few months.
Jeff:
Dave, we've covered alot of information about the CSBFA governemnt guaranteed loan program, i wonder if you might review the main components of this loan to refresh our memories.
Dave:
Sure, i'd be glad to. CSBFA stands for Canada Small Business Financing Act. The maximum amount is $250,000. It can be used to finance the purchase new or used equipment, finance leasehold improvements or to finance the purchase of a building. The interest rate is usually Prime + 2.5% and there is a 2% application fee which can be financed throught the loan. And, don't forget that you can get up to 11 months interst only period for start up businesses. The bank usually has to control funds for the loan which means that you supply the bank with the invoices to be paid and we will pay them directly. You can apply for this loan through any major chartered bank. Before applying for the loan, i would suggest you visit their website. Just type in CSBFA and follow the link.
Jeff:
That's great Dave. Do you have any advice for start up business owners who are looking for financing for their new buiness? Specifically Dave, what would you suggest a business owner bring with them when they meet their banker to apply for a small business loan?
Dave:
Small business owners in the past have had a love/hate relationship and in my opinion, neither one of them have given enough respect to the other one. As a former small business owner i can tell you that i was extremely guarded with the informaiton about my small business. Small businesses to their owners are like their children, they are a part of their personal information when meeting with a banker for financing. In order to secure financing, small business owners need to open themselves up to their banker. On the other side, banker's need to appreciate the small business owners are special people. They work extemely hard and long hours at their business. They are proud of the business they are building and rightfully so.
Having said all that, there are some things that the small business owner can do to increase their odds of securing financing for their business. When they meet with their banker they should be prepared and have the following:
1. Articles of Incorporation or Master Business Licence showing the legal name
of the company.
2. Personal Notice of Assessment for each of the owners.
3. Financial statments, prepared by a Chartered Accountant for the last 2 years
if possible
4. If this is a start up business, you should have a 2 year projected income
statment and an opening balance sheet.
5. Prepare a quick net worth statment and take along with you
6. If you are purchasing a franchise, take along the franchise agreement
7. Take along the quote for the equipment you are wishing to buy
8. Take along details of your lease or a copy of your lease if possible
Do your homework and be prepared. Meeting with you banker should be a scarey experience. You can make it less scarey by beeing properly prepared.
If you would like to talk over your financing needs, Dave can be reached at 519-642-0308 or his email address is dave.mckerlie@scotiabank.com
In this segment, we are going to be talking about start-up businesses as well so, while we are at it, let's define what exactly a start up business is. The bank definition of a start up business is a business in operation and generating income, for a 24 month period. Some customers have made the argument that the business they are purchasing has been operating for 10-15 years so the start up label shouldn't apply to them. If the purchaser of the business has been employed by that business and has a wide range of experience in this business, sometimes we are able to make an exception but generally, when the ownership of the business changes hands, the clock starts over.
Jeff:
So why is the 2 year mark so important?
Dave:
If a business is going to fail, statistics show that it's most likely going to be in the first 2 years. Banks are not high risk lenders. As a result, banks generally like to finance small businesses that have at least a 2 year track record.
Jeff:
If banks only like to finance small operations in business for 2 years or more, what options are available for start up businesses?
Dave:
That's a great question Jeff. You know, at the bank we warned about using a lot of acronyms that not everybody would understand. There is one acronym that every small business owner should know however and that is CSBFA.
CSBFA stands for Canada Small Business Financing Act. This is more commonly referred to as a government guaranteed loan.
Jeff:
So tell us some more about this government loan
Dave:
Some years ago, the federal government saw a need to come up with a loan to encourage the entrepreneurial spirit in Canada. The loan is approved through all chartered banks and secured or guaranteed by the government of Canada.
Here are some of the details. Through the government guaranteed loan you can finance equipment purchases, leasehold improvements and building purchases. The figure to keep in mind here is 90%. That means that you can finance 90% of the cost through the loan.
Jeff:
That's interesting Dave, is there anything that can't be financed through this loan?
Dave:
There are a few things Jeff. Inventory, because of it's liquidity can't be financed and goodwill because of it's nature can't be financed but virtually all fixed assets and improvements can be financed.
Jeff:
Can used equipment be financed through the loan?
Dave:
Great question. Actually used equipment can be financed through the loan if the equipment is purchased through a reputable equipment dealer. If the equipment is being purchased privately, an appraisal will have to be ocmpleted by an accredited appraiser.
Jeff:
Dave are there any fees associated with this loan?
Dave:
There is a 2% fee charged to the customer on the total amount of the loan used so on a loan of $100,000 the fee would be $2,000. The customer has the choice of either paying the fee themselves or adding the fee to the loan.
Jeff:
What is the toal amount of loan that a customer could apply for Dave?
Dave:
The maximum amount that any one customer can apply for is $250,000.
Jeff:
What kind of pricing can a customer expect to see on a CSBFA loan?
Dave:
Pricing is set by government guidelines and generally, the customer will be paying Prime + 2.5%. Bank Prim at present is 4.75% so the loan rate will be approximately 7.25%. For a start up business, this is a fairly attractive rate.
Jeff:
Can a customer fainance either GST or PST taxes throught the loan?
Dave:
No taxes can't be pain by the loan. The loan is strictly for the purchase of the asset and not for the financing of the taxes associated with the purchase which quite often is recoverable to the customer.
Jeff:
Are there any additional features of the loan that our listeners should be aware of Dave?
Dave:
There is one unique feature that i haven't covered yet. For start up businesses who are approved for a CSBFA governemnt guaranteed loan, make sure you ask up front about the intereste only period. The government has provided that you may be approved for up to 11 months interset only payements, before you start paying back the loan. This is a huge feature for start up businesses when cash flow is tight, especially in the first few months.
Jeff:
Dave, we've covered alot of information about the CSBFA governemnt guaranteed loan program, i wonder if you might review the main components of this loan to refresh our memories.
Dave:
Sure, i'd be glad to. CSBFA stands for Canada Small Business Financing Act. The maximum amount is $250,000. It can be used to finance the purchase new or used equipment, finance leasehold improvements or to finance the purchase of a building. The interest rate is usually Prime + 2.5% and there is a 2% application fee which can be financed throught the loan. And, don't forget that you can get up to 11 months interst only period for start up businesses. The bank usually has to control funds for the loan which means that you supply the bank with the invoices to be paid and we will pay them directly. You can apply for this loan through any major chartered bank. Before applying for the loan, i would suggest you visit their website. Just type in CSBFA and follow the link.
Jeff:
That's great Dave. Do you have any advice for start up business owners who are looking for financing for their new buiness? Specifically Dave, what would you suggest a business owner bring with them when they meet their banker to apply for a small business loan?
Dave:
Small business owners in the past have had a love/hate relationship and in my opinion, neither one of them have given enough respect to the other one. As a former small business owner i can tell you that i was extremely guarded with the informaiton about my small business. Small businesses to their owners are like their children, they are a part of their personal information when meeting with a banker for financing. In order to secure financing, small business owners need to open themselves up to their banker. On the other side, banker's need to appreciate the small business owners are special people. They work extemely hard and long hours at their business. They are proud of the business they are building and rightfully so.
Having said all that, there are some things that the small business owner can do to increase their odds of securing financing for their business. When they meet with their banker they should be prepared and have the following:
1. Articles of Incorporation or Master Business Licence showing the legal name
of the company.
2. Personal Notice of Assessment for each of the owners.
3. Financial statments, prepared by a Chartered Accountant for the last 2 years
if possible
4. If this is a start up business, you should have a 2 year projected income
statment and an opening balance sheet.
5. Prepare a quick net worth statment and take along with you
6. If you are purchasing a franchise, take along the franchise agreement
7. Take along the quote for the equipment you are wishing to buy
8. Take along details of your lease or a copy of your lease if possible
Do your homework and be prepared. Meeting with you banker should be a scarey experience. You can make it less scarey by beeing properly prepared.
If you would like to talk over your financing needs, Dave can be reached at 519-642-0308 or his email address is dave.mckerlie@scotiabank.com
Sunday, August 24, 2008
August 22, 2008 Daily Market Wrap
This is Jeff Wareham, Scotia McLeod Wealth Advisor, with your daily market wrap... Toronto's TSX closed 91.93 points lower at 13447.29 as oil swooned. . While The Dow closed 197.85 points higher at 11628.06, The NASDAQ was 34.33 points higher at 2414.71, and the S&P finished up 1.13 percent, or 14.47 points...oil settled at 114.71 US dollars per barrel and the Canadian dollar closed at 0.9537. This is for information purposes only, Best efforts have been made to furnish accurate data...Performance data does not represent future performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF
Friday, August 22, 2008
August 22, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
As I mentioned Wednesday, many of the financially successful people I meet are entrepreneurs. Getting started in business can be tough, especially if you need financing. Our economy depends heavily on the effort and courage of entrepreneurs. Fortunately, there are programs available for new and growing businesses. Tune in tomorrow at 8:30, as Scotia Bank Account Manager Dave McKerlie and I discuss the special financial planning needs of professional and business owners.
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
As I mentioned Wednesday, many of the financially successful people I meet are entrepreneurs. Getting started in business can be tough, especially if you need financing. Our economy depends heavily on the effort and courage of entrepreneurs. Fortunately, there are programs available for new and growing businesses. Tune in tomorrow at 8:30, as Scotia Bank Account Manager Dave McKerlie and I discuss the special financial planning needs of professional and business owners.
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Thursday, August 21, 2008
August 21, 2008 Daily Market Wrap
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with your daily market wrap for August 21, 2008.
A pretty solid day on the markets today. Toronto surged 189 points on strength in oil and commodities, while the Dow finished up 13 points, the NASDAQ off 6 points, and the S&P finished up 3 points... Oil ended at 121.34 dollars per barrel, and the Canadian was steady at 95.82 cents US. Gold closed at $833 per ounce This is for information purposes only, Best efforts have been made to furnish accurate data...Performance data does not represent future performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF.
Tune in Saturdays at 8:30 AM, for Beyond Funds Market Weekly, for further information on the markets, visit my blog on AM 980's website, or at www.beyondfunds.ca
A pretty solid day on the markets today. Toronto surged 189 points on strength in oil and commodities, while the Dow finished up 13 points, the NASDAQ off 6 points, and the S&P finished up 3 points... Oil ended at 121.34 dollars per barrel, and the Canadian was steady at 95.82 cents US. Gold closed at $833 per ounce This is for information purposes only, Best efforts have been made to furnish accurate data...Performance data does not represent future performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF.
Tune in Saturdays at 8:30 AM, for Beyond Funds Market Weekly, for further information on the markets, visit my blog on AM 980's website, or at www.beyondfunds.ca
Wednesday, August 20, 2008
August 20, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
Many of the financially successful people I meet are entrepreneurs, and these people have very special financial planning needs.
Often, if a significant portion of your wealth is invested in your business, you need to look very carefully at the risks you face, and work with professional partners who understand the unique needs of entrepreneur investors.
Tune in Saturday at 8:30, as Scotia Bank Account Manager Dave McKerlie and I discuss the special financial planning needs of professional and business owners. portfolios.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Many of the financially successful people I meet are entrepreneurs, and these people have very special financial planning needs.
Often, if a significant portion of your wealth is invested in your business, you need to look very carefully at the risks you face, and work with professional partners who understand the unique needs of entrepreneur investors.
Tune in Saturday at 8:30, as Scotia Bank Account Manager Dave McKerlie and I discuss the special financial planning needs of professional and business owners. portfolios.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Tuesday, August 19, 2008
August 19, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds. If you missed Saturday's show, I spoke on diversification as the key to surviving market volatility. Many investors understand this, and buy a basket of mutual funds to achieve diversification. The problem is, many funds move in tandem, as they tend to hold very simillar equities. Most funds hold many of the stocks that make up the index against which they are neasured, so if you hold multiple Canadian equity funds, you will likely find that their prices very similarly to the index, and each other. With a two or three percent management fee, you are very likely to underperform. Have you outgrown your mutual funds? For a review of your portfolio, or a complimentary copy of my CD, visit my website, www.beyondfunds.ca, or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing. Investors should consult a prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF.
August 19, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds. If you missed Saturday's show, I spoke on diversification as the key to surviving market volatility. Many investors understand this, and buy a basket of mutual funds to achieve diversification. The problem is, many funds move in tandem, as they tend to hold very simillar equities. Most funds hold many of the stocks that make up the index against which they are neasured, so if you hold multiple Canadian equity funds, you will likely find that their prices very similarly to the index, and each other. With a two or three percent management fee, you are very likely to underperform. Have you outgrown your mutual funds? For a review of your portfolio, or a complimentary copy of my CD, visit my website, www.beyondfunds.ca, or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing. Investors should consult a prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF.
Saturday, August 16, 2008
Market wrap August 15
This is Jeff Wareham, Scotia McLeod Wealth Advisor, with your daily
market wrap... Toronto's TSX closed 262.21 points lower at 13096.70.
While The Dow closed 43.97 points higher at 11659.90,
The NASDAQ was 1.15 points lower at 2452.52, (comment), and the S&P
finished up 0.41
percent, or 5.27 points...oil settled at 113.69 US dollars per barrel and
the
Canadian dollar closed at 0.9443.
This is for information purposes only, Best efforts have been made to
furnish accurate data...Performance data does not represent future
performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF
market wrap... Toronto's TSX closed 262.21 points lower at 13096.70.
While The Dow closed 43.97 points higher at 11659.90,
The NASDAQ was 1.15 points lower at 2452.52, (comment), and the S&P
finished up 0.41
percent, or 5.27 points...oil settled at 113.69 US dollars per barrel and
the
Canadian dollar closed at 0.9443.
This is for information purposes only, Best efforts have been made to
furnish accurate data...Performance data does not represent future
performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF
Wednesday, August 13, 2008
August 13, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
I frequently discuss the impact of fund management fees on overall fund returns.
Yesterday, I encountered two major funds with management expenses well over 3 percent. That is nearly thirty percent of the historical return of equities.
No matter how smart the manager may be, a fund with this high an expense ratio has a real challenge…the manager has to deliver about thirty percent better returns to match the return of the index. This means either greater risk, greater volatility or both. Ultimately, you, the investor, must tolerate greater risk, or lesser returns.
No wonder nearly ninety percent of mutual funds fail to meet the index against which they are measured.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
I frequently discuss the impact of fund management fees on overall fund returns.
Yesterday, I encountered two major funds with management expenses well over 3 percent. That is nearly thirty percent of the historical return of equities.
No matter how smart the manager may be, a fund with this high an expense ratio has a real challenge…the manager has to deliver about thirty percent better returns to match the return of the index. This means either greater risk, greater volatility or both. Ultimately, you, the investor, must tolerate greater risk, or lesser returns.
No wonder nearly ninety percent of mutual funds fail to meet the index against which they are measured.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Monday, August 11, 2008
August 11, 2008 Daily Market Wrap
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with your daily market wrap for August 11, 2008.
North American markets went different directions again today.
Gold hit a new low for the year, as the US dollar continued its recent surge.
Oil followed gold lower, and energy and material stocks continued to hit Toronto...this time, the Dow finished up 46 points. The NASDAQ up 26 points, and the S&P finished up 9 points...The TSX shed 139 points. Oil ended at $114.60 dollars per barrel, and the Canadian dollar slid to 93.61 cents US. Gold closed at $825 per ounce, down 4% today.
This is for information purposes only, Best efforts have been made to furnish accurate data...Performance data does not represent future performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF.
Tune in Saturdays at 8:30 AM, for Beyond Funds Market Weekly, for further information on the markets, visit my blog on AM 980's website, or at www.beyondfunds.ca
North American markets went different directions again today.
Gold hit a new low for the year, as the US dollar continued its recent surge.
Oil followed gold lower, and energy and material stocks continued to hit Toronto...this time, the Dow finished up 46 points. The NASDAQ up 26 points, and the S&P finished up 9 points...The TSX shed 139 points. Oil ended at $114.60 dollars per barrel, and the Canadian dollar slid to 93.61 cents US. Gold closed at $825 per ounce, down 4% today.
This is for information purposes only, Best efforts have been made to furnish accurate data...Performance data does not represent future performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF.
Tune in Saturdays at 8:30 AM, for Beyond Funds Market Weekly, for further information on the markets, visit my blog on AM 980's website, or at www.beyondfunds.ca
August 11, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
Last week’s US rally and Canadian slide reinforces the value of diversification. Add in a 4% move by the US greenback against the Loonie, and it sure paid to be international in your thinking.
Much of the benefit of holding a Canadian equity fund has disappeared in the last few weeks, as our currency has followed energy and material prices lower.
Is time to revisit your portfolio, and determine how you want to be positioned over the next year?
I think so.
Solid Canadian companies should form the core of most investment plans, but real opportunity exists around the world, and now is a great time to move from a basket of mutual funds, to a globally diversified portfolio.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Last week’s US rally and Canadian slide reinforces the value of diversification. Add in a 4% move by the US greenback against the Loonie, and it sure paid to be international in your thinking.
Much of the benefit of holding a Canadian equity fund has disappeared in the last few weeks, as our currency has followed energy and material prices lower.
Is time to revisit your portfolio, and determine how you want to be positioned over the next year?
I think so.
Solid Canadian companies should form the core of most investment plans, but real opportunity exists around the world, and now is a great time to move from a basket of mutual funds, to a globally diversified portfolio.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Saturday, August 9, 2008
Beyond Funds Weekly August 9th
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with Beyond Funds Market Weekly for the week of August 9, 2008.
North American markets headed in opposite directions this week, as Toronto paid the price for its heavy reliance on energy and material prices.
Toronto's TSX slid 1.2%, down to 13341 for the week as oil prices fell about 7%. After reaching over $147 last month, oil ended the week below $115. Other commodity sectors also suffered a similar fate as investors moved their money from oil and commodities into US equities.
New York reached a 6 week high as the DOW had 2 days with gains of over 300 points. Even with a fall of 200 points on Thursday, the Dow really did have a spectacular week ending up 3.6%, at 11734.
The NASDAQ ended the week at 2414, 4.5% higher.
And the S$P finished at 1296, up 2.8%.
If oil was the worst performer on the week, the real superstar this week was the US dollar, which gained over 4 cents against the Canadian dollar, and reached highs for 2008 against the euro and the yen. With the US dollar gaining strength, gold continued to slide ending the week at $863.
After peaking at over 15,000 in June, TSX remains in correction territory, and may stay there if we continue to see downward pressure on energy and commodity prices. Lost in the TSX's poor week was the rebound in Canadian financials. Although the recovery has been far from uniform, several financials saw levels they have not seen in months.
US financials also have recovered from the despair of July 15th but there still are many issues that need to be worked out south of the border. The 2 government sponsored entities, Fannie Mae and Freddie Mac reported massive losses this week, and until a US government sorts out how it is going to handle mortgage insurance, the US financial situation promises to remain much more dire than Canada's.
Looking at other sectors, energy stocks may actually become interesting again, as current prices have fallen to levels last seen at a much lower price for oil. Investors should definitely consult an advisor before wading into this market, but valuations in the energy sector really are starting to look interesting.
Times like these call for discipline. A disciplined investment process begins with determining the asset mix that is right for you. Life, markets and your portfolio all change with time, so decisions made yesterday may not hold true with new information tomorrow. This is the reason that your investment strategy is not just about the markets. When you buy a house, have a child or approach retirement your investment goals will change. As your goals change, so might your asset allocation. For example, the asset allocation of a very aggressive investor would not be suitable for someone who is retiring in the coming years. Just as major life events change us, we can also look at major market events as changing the way we look at our portfolio. For some investors this may be an opportunity for reflection. You may ask yourself if your “normal” asset allocation is still valid once you have considered any changes in your life. If that answer is yes, then when markets change as they do, it may also be time to consider rebalancing your portfolio back to its original mix.
Because market movement fluctuates between asset classes, it is the natural course for a portfolio to change its look. Asset classes do not change at the same rate. Over time, stocks may grow faster than bonds making the growth in your portfolio uneven. For example a portfolio of 60% equities and 40% bonds could drift to 70%/30, or alternatively the other way to 50%/50%. Regardless of the direction of the change in your portfolio, it is necessary to remember the importance of the reasoning behind your original asset allocation. Although it may seem counter intuitive to sell in an asset class that is doing well or buy into one that is not that is precisely what is required if the fundamental principle of “buy low – sell high” is to be followed. By rebalancing your portfolio, you are staying the course and increasing the potential to improve returns without increasing risk.
Disciplined rebalancing can provide comfort by taking the emotion out of your investment decisions. It does not seem natural to sell a portion of your investments that have done well and buy more of those that have been more sluggish. This discipline allows a reassuring way to buy when it is difficult and sell…that is, when it seems counterintuitive. When markets are down human nature would have us get out rather than buy low, but a disciplined rebalancing process can prevail in the long run.
Although at times the changes in the market may not be large enough for an investor to feel that there is any need to rebalance, the benefit to doing so can be significant over the long run with compounding returns.
For a beginning investor, doing this is relatively easy. You can sit down with an advisor, either in a bank or an investment planning firm, and discuss with the advisor what you are trying to accomplish. They will likely discuss your options, and recommend a fund or group of funds that may be rebalanced automatically to meet your needs. Most of the major banks, like Scotia, have individual funds designed to meet the needs of beginning investors, and many of the independent firms have funds that are designed to rebalance automatically as you approach your goal…for example, if you are accumulating money to retire in 2025, you might choose Fidelity’s Clearpath 2025, which starts with a higher level of equity, but becomes less and less equity oriented, and therefore aggressive, as 2025 approaches.
This type of strategy is a great starting point, but this show is called Beyond Funds Market Weekly…and let me be clear…I feel that as an investor’s wealth grows, so does their need for more sophisticated, but not necessarily more complicated, financial solution…frequently, this is a solution beyond mutual funds.
Why?
First and foremost is the bottom line…a recent study indicated that 91 percent of Canadian mutual funds fail to meet the benchmark against which they are measured…there is no way to sugar coat it…that is awful. One of the main reasons for this is that fund management fees in Canada are the highest in the developed world…at a bit over two and one half percent, they are approximately double those of the United States. That may seem to be logical, when you consider the relative size of the markets…but this logic fails, when you discover that Australia, with a much smaller population than Canada, has lower annual fees than the Americans, let alone Canada.
That two and one half percent average may not sound too bad…until you consider that the long term average gross return of the Canadian equity market is a bit over ten percent…so 2.5% represents one quarter of an investor’s return on their capital going back to the fund manager…and the impact of that can be staggering. The Ontario Securities Commission produced an excellent web based tool, at www.investored.ca, which allows a fund investor to calculate the impact on their portfolio…and I will happily walk anyone through it one on one…I recently worked through an example, where, based on a pretty average fund expense and rate of return, an investor had paid more in fees after 22 years than they had originally invested! Let me be clear…a $300,000 investment cost over $300,000 in fees!
Funds are a great starting point…for a few hundred dollars, a starting investor gets access to professional money management for a small, invisible monthly fee. An investor paying 2.5% on $500.00 only pays 12.50 per year! What a bargain!
Unfortunately, the process is a bit too democratic…a $500,000 investment gives the investor the exact same access to their portfolio manager, for 1000 times more in cost…in this example, $12500.00
Very few investors want to retire on less than this $500,000 threshold…so this discussion is relevant to most our listeners…after the break, I will share with you ten strategies for investors outgrowing their mutual funds…stay tuned.
Welcome back to segment two of Beyond Funds Market Weekly…I am your host, ScotiaMcLeod Wealth Advisor Jeff Wareham…before the break, I was discussing investor alternatives beyond mutual funds…I do not have time today, but I will briefly discuss each one, and dig deeper into them in upcoming shows.
Here are ten options for investors outgrowing mutual funds…the list is not exhaustive, but it gives you an idea of your options.
Individual stocks, bonds, GICs and cash
Managed money
Discretionary management
Exchange traded funds
Annuities
Segregated Funds
Corporate Class Funds
Structured Products
Trusts
Hedge Funds
Looking at them one at a time
Individual stocks, bonds, GICs and cash
-Traditionally, investors who wished to hold individual stocks and bonds would deal with a stock broker, who charged a commission for every purchase and sale they did. Although many brokers still follow this model, more and more are going to a model where they choose to charge a fee based on the value of the assets that their clients have with them, and do not charge commissions on each trade…both models have their strengths and weaknesses, and some investors even have both types of accounts, depending on what they are looking for…for example, a client may want to pay for equity advice, but prefer to buy only GICs in their fixed income accounts.
-Most brokers are licensed to deal in insurance and mutual funds, and can choose among a variety of investment products depending on the level of involvement an investor seeks, the amount invested, and the comfort of the client with risk.
Managed money
-Some clients may recognize the expensive nature of mutual funds, but may like the due diligence and research of fund firms…for these investors, managed solutions, many of them offered by major mutual fund firms, or even pension management firms, may be an alternative. The investment advisor, in consultation with the client, determines the client’s asset allocation, and entrusts the management of the money to the money management firm. Generally, the fund manager uses pooled funds, and the asset allocation of the funds is rebalanced, by either the manager, or the advisor. Often, the fees are segregated from the fund and billed to the investor, so on non registered money, the investor is much better off, as they may deduct these fees from their other income…a huge advantage for a higher net worth investor.
Discretionary management
-this option involves engaging a Portfolio manager, and in most cases, the investor deals both with their advisor, and with a portfolio manager. The manager uses both pooled funds and individual stocks and bonds to achieve the investor’s asset goals, and the advisor looks after ensuring the financial plan is executed.
Exchange traded funds
As I mentioned…most mutual funds fail to beat the market…an exchange traded fund or index mutual fund is designed to track the performance of a particular index…with the underlying theory being “you can’t beat the market.”
More and more narrowly focused versions of these have been coming to market recently, tracking such narrow indices as ‘twice the negative return of a barrel of oil,” but the most useful ones, in my opinion, are those that track the return of various indices, which offer the opportunity for global diversification without the challenge of selecting the best company in a distant market…global ETFs offer a direct competitor to international mutual funds at a fraction of the cost…although because they have small, embedded management expenses, they will never beat their index, as their return will be approximately the return of the index, less their management fees…so the down side is that they will never beat “the index,” but the up side is that they will never lag the index by a great deal…in fact, most index funds in Canada rank in the top quarter of equity mutual funds…and the ETFs would as well, if they were measured that way.
Annuities
Perhaps the oldest long term investment vehicle in the market is the annuity…investors put a lump sum up front, and receive a fixed payment for the balance of a time period…generally for life…defined benefit pension plans are generally based on annuity rates, and some are actually purchased using an annuity. Low interest rates and inflexibility have left annuities on the sidelines in recent years, but many investors are giving them a second look, especially with non-registered money, as a strategy called the insured annuity has allowed healthy investors to garner a cash flow much higher than the after tax cash flow of bonds or GICs…but this is a very long term strategy, and like every other solution I have discussed, really requires the guiding hand of an advisor.
Segregated Funds
A much newer solution from the insurance world is the segregated fund…which is covered under totally separate legislation than a mutual fund, but is essentially a mutual fund with a guarantee provided by an insurance company…early versions have frequently been plagued by even higher management fees than traditional mutual funds, and some have had such poor performance that the insurance guarantees are likely to kick in over the next few years…and many were designed with very flexible insurance costs, which have skyrocketed as the insurance companies faced the risk of paying out their guarantees. Having said that, some really novel product has come to market recently, which has led to phenomenal inflow to vehicles like Manulife’s GIF. The big attraction is that the latest generation have very retirement friendly guarantees…for example, many guarantee that the invested principal is the least that can pay out over twenty years of retirement…and some increase the benefit for every year that the principal is left untouched…investors may like to remain in the equity market, but have security of their principal…and older investors may choose these funds as a hedge against inflation, and an estate planning vehicle…as an insurance contract, they may avoid probate fees, and pay out like any other insurance proceeds…again, an advisor is key to avoid any undesired consequences.
Corporate Class Funds
Many major mutual fund companies offer corporate class mutual funds…and these may be attractive to investors who are seeking tax efficient income…the mechanics are a bit beyond what I want to get into today, but because these funds are set up as shares in a corporation, income that might have been traditionally allocated to an investor as interest or dividend income may be converted to capital gains income…which may be taxed at a significantly lower rate…other companies have set up fixed distributions of the invested capital, which reduce further the immediate tax on income…although any tax planning strategy should involve your lawyer and wealth advisor.
Structured Products
In the declining interest rate environment of the last few years, many fund management companies developed so called structured products…the lion’s share of these are issued with a guarantee of principal at maturity, and provide a distribution of income during the life of the product, based on some formula…generally, the coupon was meant to exceed the rate of interest on a bond or GIC…some of these have real merit, but I find they are often highly complex, and the liquidity…the ability to cash them in early…is often at the issuing firm’s discretion…so, at the risk of repetition…work with an advisor on this solution.
Trusts
Almost every solution I have discussed can be held in a trust…so why create a separate category? Trusts are not simple, but with the guiding hand of a lawyer, accountant, trust officer, and advisor, investors with significant assets may find trusts an effective way to grow and distribute wealth, while reducing taxes…I recently hosted two trust specialists on the show, and encourage anyone wanting to know how to integrate a trust into your financial plan to contact me directly, and I will put you in touch with a specialist in this area.
Hedge Funds
The final alternative to mutual funds that I will discuss today is hedge funds…these will be the topic of a future show, as they have garnered massive attention in the media recently. A good hedge fund is designed to move in low correlation to the market…a fancy way of saying that their change in value should bear little resemblance to the movement of the equity or bond market… but some are very costly, and may only provide access to your money a few times per year…there are many strategies, and frequently a good hedge fund is only available to accredited investors, so work with an advisor to select the best solution…
I have given you a lot to think about today…but the key message is this…many advisors hold themselves out as being capable of solving every financial need for a client, yet frequently they offer only mutual fund solutions…which may be very expensive as your investments grow…seek out an advisor with a disciplined process, that can help you select the right solution, beyond mutual funds…not just what they are able to offer.
That brings us to the end of this week’s episode of Beyond Funds Market Weekly…thank you for tuning in…if you have questions or comments, visit www.beyondfunds.ca and email me, or call me, Jeff Wareham, at 519-660-3260.
This blog is for general information purposes only. You should not undertake
any investment or portfolio assessment or other transaction on the basis of
this publication, but should first consult your investment advisor, who can
assess all relevant particulars of any proposed investment or transaction.
When making recommendations, we take a complete look at your financial
situation, including risk tolerance and objectives to determine a strategy
or strategies best suitable to your individual needs. Call today and find
out whether your portfolio can benefit.
North American markets headed in opposite directions this week, as Toronto paid the price for its heavy reliance on energy and material prices.
Toronto's TSX slid 1.2%, down to 13341 for the week as oil prices fell about 7%. After reaching over $147 last month, oil ended the week below $115. Other commodity sectors also suffered a similar fate as investors moved their money from oil and commodities into US equities.
New York reached a 6 week high as the DOW had 2 days with gains of over 300 points. Even with a fall of 200 points on Thursday, the Dow really did have a spectacular week ending up 3.6%, at 11734.
The NASDAQ ended the week at 2414, 4.5% higher.
And the S$P finished at 1296, up 2.8%.
If oil was the worst performer on the week, the real superstar this week was the US dollar, which gained over 4 cents against the Canadian dollar, and reached highs for 2008 against the euro and the yen. With the US dollar gaining strength, gold continued to slide ending the week at $863.
After peaking at over 15,000 in June, TSX remains in correction territory, and may stay there if we continue to see downward pressure on energy and commodity prices. Lost in the TSX's poor week was the rebound in Canadian financials. Although the recovery has been far from uniform, several financials saw levels they have not seen in months.
US financials also have recovered from the despair of July 15th but there still are many issues that need to be worked out south of the border. The 2 government sponsored entities, Fannie Mae and Freddie Mac reported massive losses this week, and until a US government sorts out how it is going to handle mortgage insurance, the US financial situation promises to remain much more dire than Canada's.
Looking at other sectors, energy stocks may actually become interesting again, as current prices have fallen to levels last seen at a much lower price for oil. Investors should definitely consult an advisor before wading into this market, but valuations in the energy sector really are starting to look interesting.
Times like these call for discipline. A disciplined investment process begins with determining the asset mix that is right for you. Life, markets and your portfolio all change with time, so decisions made yesterday may not hold true with new information tomorrow. This is the reason that your investment strategy is not just about the markets. When you buy a house, have a child or approach retirement your investment goals will change. As your goals change, so might your asset allocation. For example, the asset allocation of a very aggressive investor would not be suitable for someone who is retiring in the coming years. Just as major life events change us, we can also look at major market events as changing the way we look at our portfolio. For some investors this may be an opportunity for reflection. You may ask yourself if your “normal” asset allocation is still valid once you have considered any changes in your life. If that answer is yes, then when markets change as they do, it may also be time to consider rebalancing your portfolio back to its original mix.
Because market movement fluctuates between asset classes, it is the natural course for a portfolio to change its look. Asset classes do not change at the same rate. Over time, stocks may grow faster than bonds making the growth in your portfolio uneven. For example a portfolio of 60% equities and 40% bonds could drift to 70%/30, or alternatively the other way to 50%/50%. Regardless of the direction of the change in your portfolio, it is necessary to remember the importance of the reasoning behind your original asset allocation. Although it may seem counter intuitive to sell in an asset class that is doing well or buy into one that is not that is precisely what is required if the fundamental principle of “buy low – sell high” is to be followed. By rebalancing your portfolio, you are staying the course and increasing the potential to improve returns without increasing risk.
Disciplined rebalancing can provide comfort by taking the emotion out of your investment decisions. It does not seem natural to sell a portion of your investments that have done well and buy more of those that have been more sluggish. This discipline allows a reassuring way to buy when it is difficult and sell…that is, when it seems counterintuitive. When markets are down human nature would have us get out rather than buy low, but a disciplined rebalancing process can prevail in the long run.
Although at times the changes in the market may not be large enough for an investor to feel that there is any need to rebalance, the benefit to doing so can be significant over the long run with compounding returns.
For a beginning investor, doing this is relatively easy. You can sit down with an advisor, either in a bank or an investment planning firm, and discuss with the advisor what you are trying to accomplish. They will likely discuss your options, and recommend a fund or group of funds that may be rebalanced automatically to meet your needs. Most of the major banks, like Scotia, have individual funds designed to meet the needs of beginning investors, and many of the independent firms have funds that are designed to rebalance automatically as you approach your goal…for example, if you are accumulating money to retire in 2025, you might choose Fidelity’s Clearpath 2025, which starts with a higher level of equity, but becomes less and less equity oriented, and therefore aggressive, as 2025 approaches.
This type of strategy is a great starting point, but this show is called Beyond Funds Market Weekly…and let me be clear…I feel that as an investor’s wealth grows, so does their need for more sophisticated, but not necessarily more complicated, financial solution…frequently, this is a solution beyond mutual funds.
Why?
First and foremost is the bottom line…a recent study indicated that 91 percent of Canadian mutual funds fail to meet the benchmark against which they are measured…there is no way to sugar coat it…that is awful. One of the main reasons for this is that fund management fees in Canada are the highest in the developed world…at a bit over two and one half percent, they are approximately double those of the United States. That may seem to be logical, when you consider the relative size of the markets…but this logic fails, when you discover that Australia, with a much smaller population than Canada, has lower annual fees than the Americans, let alone Canada.
That two and one half percent average may not sound too bad…until you consider that the long term average gross return of the Canadian equity market is a bit over ten percent…so 2.5% represents one quarter of an investor’s return on their capital going back to the fund manager…and the impact of that can be staggering. The Ontario Securities Commission produced an excellent web based tool, at www.investored.ca, which allows a fund investor to calculate the impact on their portfolio…and I will happily walk anyone through it one on one…I recently worked through an example, where, based on a pretty average fund expense and rate of return, an investor had paid more in fees after 22 years than they had originally invested! Let me be clear…a $300,000 investment cost over $300,000 in fees!
Funds are a great starting point…for a few hundred dollars, a starting investor gets access to professional money management for a small, invisible monthly fee. An investor paying 2.5% on $500.00 only pays 12.50 per year! What a bargain!
Unfortunately, the process is a bit too democratic…a $500,000 investment gives the investor the exact same access to their portfolio manager, for 1000 times more in cost…in this example, $12500.00
Very few investors want to retire on less than this $500,000 threshold…so this discussion is relevant to most our listeners…after the break, I will share with you ten strategies for investors outgrowing their mutual funds…stay tuned.
Welcome back to segment two of Beyond Funds Market Weekly…I am your host, ScotiaMcLeod Wealth Advisor Jeff Wareham…before the break, I was discussing investor alternatives beyond mutual funds…I do not have time today, but I will briefly discuss each one, and dig deeper into them in upcoming shows.
Here are ten options for investors outgrowing mutual funds…the list is not exhaustive, but it gives you an idea of your options.
Individual stocks, bonds, GICs and cash
Managed money
Discretionary management
Exchange traded funds
Annuities
Segregated Funds
Corporate Class Funds
Structured Products
Trusts
Hedge Funds
Looking at them one at a time
Individual stocks, bonds, GICs and cash
-Traditionally, investors who wished to hold individual stocks and bonds would deal with a stock broker, who charged a commission for every purchase and sale they did. Although many brokers still follow this model, more and more are going to a model where they choose to charge a fee based on the value of the assets that their clients have with them, and do not charge commissions on each trade…both models have their strengths and weaknesses, and some investors even have both types of accounts, depending on what they are looking for…for example, a client may want to pay for equity advice, but prefer to buy only GICs in their fixed income accounts.
-Most brokers are licensed to deal in insurance and mutual funds, and can choose among a variety of investment products depending on the level of involvement an investor seeks, the amount invested, and the comfort of the client with risk.
Managed money
-Some clients may recognize the expensive nature of mutual funds, but may like the due diligence and research of fund firms…for these investors, managed solutions, many of them offered by major mutual fund firms, or even pension management firms, may be an alternative. The investment advisor, in consultation with the client, determines the client’s asset allocation, and entrusts the management of the money to the money management firm. Generally, the fund manager uses pooled funds, and the asset allocation of the funds is rebalanced, by either the manager, or the advisor. Often, the fees are segregated from the fund and billed to the investor, so on non registered money, the investor is much better off, as they may deduct these fees from their other income…a huge advantage for a higher net worth investor.
Discretionary management
-this option involves engaging a Portfolio manager, and in most cases, the investor deals both with their advisor, and with a portfolio manager. The manager uses both pooled funds and individual stocks and bonds to achieve the investor’s asset goals, and the advisor looks after ensuring the financial plan is executed.
Exchange traded funds
As I mentioned…most mutual funds fail to beat the market…an exchange traded fund or index mutual fund is designed to track the performance of a particular index…with the underlying theory being “you can’t beat the market.”
More and more narrowly focused versions of these have been coming to market recently, tracking such narrow indices as ‘twice the negative return of a barrel of oil,” but the most useful ones, in my opinion, are those that track the return of various indices, which offer the opportunity for global diversification without the challenge of selecting the best company in a distant market…global ETFs offer a direct competitor to international mutual funds at a fraction of the cost…although because they have small, embedded management expenses, they will never beat their index, as their return will be approximately the return of the index, less their management fees…so the down side is that they will never beat “the index,” but the up side is that they will never lag the index by a great deal…in fact, most index funds in Canada rank in the top quarter of equity mutual funds…and the ETFs would as well, if they were measured that way.
Annuities
Perhaps the oldest long term investment vehicle in the market is the annuity…investors put a lump sum up front, and receive a fixed payment for the balance of a time period…generally for life…defined benefit pension plans are generally based on annuity rates, and some are actually purchased using an annuity. Low interest rates and inflexibility have left annuities on the sidelines in recent years, but many investors are giving them a second look, especially with non-registered money, as a strategy called the insured annuity has allowed healthy investors to garner a cash flow much higher than the after tax cash flow of bonds or GICs…but this is a very long term strategy, and like every other solution I have discussed, really requires the guiding hand of an advisor.
Segregated Funds
A much newer solution from the insurance world is the segregated fund…which is covered under totally separate legislation than a mutual fund, but is essentially a mutual fund with a guarantee provided by an insurance company…early versions have frequently been plagued by even higher management fees than traditional mutual funds, and some have had such poor performance that the insurance guarantees are likely to kick in over the next few years…and many were designed with very flexible insurance costs, which have skyrocketed as the insurance companies faced the risk of paying out their guarantees. Having said that, some really novel product has come to market recently, which has led to phenomenal inflow to vehicles like Manulife’s GIF. The big attraction is that the latest generation have very retirement friendly guarantees…for example, many guarantee that the invested principal is the least that can pay out over twenty years of retirement…and some increase the benefit for every year that the principal is left untouched…investors may like to remain in the equity market, but have security of their principal…and older investors may choose these funds as a hedge against inflation, and an estate planning vehicle…as an insurance contract, they may avoid probate fees, and pay out like any other insurance proceeds…again, an advisor is key to avoid any undesired consequences.
Corporate Class Funds
Many major mutual fund companies offer corporate class mutual funds…and these may be attractive to investors who are seeking tax efficient income…the mechanics are a bit beyond what I want to get into today, but because these funds are set up as shares in a corporation, income that might have been traditionally allocated to an investor as interest or dividend income may be converted to capital gains income…which may be taxed at a significantly lower rate…other companies have set up fixed distributions of the invested capital, which reduce further the immediate tax on income…although any tax planning strategy should involve your lawyer and wealth advisor.
Structured Products
In the declining interest rate environment of the last few years, many fund management companies developed so called structured products…the lion’s share of these are issued with a guarantee of principal at maturity, and provide a distribution of income during the life of the product, based on some formula…generally, the coupon was meant to exceed the rate of interest on a bond or GIC…some of these have real merit, but I find they are often highly complex, and the liquidity…the ability to cash them in early…is often at the issuing firm’s discretion…so, at the risk of repetition…work with an advisor on this solution.
Trusts
Almost every solution I have discussed can be held in a trust…so why create a separate category? Trusts are not simple, but with the guiding hand of a lawyer, accountant, trust officer, and advisor, investors with significant assets may find trusts an effective way to grow and distribute wealth, while reducing taxes…I recently hosted two trust specialists on the show, and encourage anyone wanting to know how to integrate a trust into your financial plan to contact me directly, and I will put you in touch with a specialist in this area.
Hedge Funds
The final alternative to mutual funds that I will discuss today is hedge funds…these will be the topic of a future show, as they have garnered massive attention in the media recently. A good hedge fund is designed to move in low correlation to the market…a fancy way of saying that their change in value should bear little resemblance to the movement of the equity or bond market… but some are very costly, and may only provide access to your money a few times per year…there are many strategies, and frequently a good hedge fund is only available to accredited investors, so work with an advisor to select the best solution…
I have given you a lot to think about today…but the key message is this…many advisors hold themselves out as being capable of solving every financial need for a client, yet frequently they offer only mutual fund solutions…which may be very expensive as your investments grow…seek out an advisor with a disciplined process, that can help you select the right solution, beyond mutual funds…not just what they are able to offer.
That brings us to the end of this week’s episode of Beyond Funds Market Weekly…thank you for tuning in…if you have questions or comments, visit www.beyondfunds.ca and email me, or call me, Jeff Wareham, at 519-660-3260.
This blog is for general information purposes only. You should not undertake
any investment or portfolio assessment or other transaction on the basis of
this publication, but should first consult your investment advisor, who can
assess all relevant particulars of any proposed investment or transaction.
When making recommendations, we take a complete look at your financial
situation, including risk tolerance and objectives to determine a strategy
or strategies best suitable to your individual needs. Call today and find
out whether your portfolio can benefit.
Friday, August 8, 2008
August 8, 2008
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
Mutual funds are a great starting point if you are an investor starting to save, as they give you access to professional management and diversification for a fee.
Unfortunately, they don’t generally give you a discount as your portfolio grows…so your fees increase with every dollar you add. If you put 500 dollars in a fund with a 2.5% management expense, you pay $12.50 a year…but if you have $500,000, the cost jumps to $12,500, yet you are receiving no more access to or advice from the manager than the beginning investor.
Fortunately, many alternatives exist for investors with growing portfolios…if you have $250,000 or more to invest, you may be able to save thousands of dollars.
Tune in tomorrow at 8:30, as I discuss options for growing portfolios.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Mutual funds are a great starting point if you are an investor starting to save, as they give you access to professional management and diversification for a fee.
Unfortunately, they don’t generally give you a discount as your portfolio grows…so your fees increase with every dollar you add. If you put 500 dollars in a fund with a 2.5% management expense, you pay $12.50 a year…but if you have $500,000, the cost jumps to $12,500, yet you are receiving no more access to or advice from the manager than the beginning investor.
Fortunately, many alternatives exist for investors with growing portfolios…if you have $250,000 or more to invest, you may be able to save thousands of dollars.
Tune in tomorrow at 8:30, as I discuss options for growing portfolios.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Tuesday, August 5, 2008
August 5, 2008 Daily Market Wrap
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with your daily market wrap for August 5, 2008.
Investors needed to hold onto their hats today, as commodities fell out of favour.
Oil closed below 120 for the first time since May, and Toronto sold off in response...although many sectors were up.
North American markets went different directions again today...this time, the Dow finished up 332 points. The NASDAQ up 64 points, and the S&P finished up 36 points...The TSX shed 254 points, driven by energy and materials, while financials surged ahead over 2 percent. Oil ended at 118.61 dollars per barrel, and the Canadian dollar slid to 95.91 cents US. Gold closed at $879 per ounce
This is for information purposes only, Best efforts have been made to furnish accurate data...Performance data does not represent future performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF.
Tune in Saturdays at 8:30 AM, for Beyond Funds Market Weekly, for further information on the markets, visit my blog on AM 980's website, or at www.beyondfunds.ca
Investors needed to hold onto their hats today, as commodities fell out of favour.
Oil closed below 120 for the first time since May, and Toronto sold off in response...although many sectors were up.
North American markets went different directions again today...this time, the Dow finished up 332 points. The NASDAQ up 64 points, and the S&P finished up 36 points...The TSX shed 254 points, driven by energy and materials, while financials surged ahead over 2 percent. Oil ended at 118.61 dollars per barrel, and the Canadian dollar slid to 95.91 cents US. Gold closed at $879 per ounce
This is for information purposes only, Best efforts have been made to furnish accurate data...Performance data does not represent future performance. ScotiaMcLeod s a division of Scotia Capital, member CIPF.
Tune in Saturdays at 8:30 AM, for Beyond Funds Market Weekly, for further information on the markets, visit my blog on AM 980's website, or at www.beyondfunds.ca
Monday, August 4, 2008
August 4, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
Happy Civic Holiday.
Summer is passing quickly, but the dog days of summer do not mean that your money should take time off.
Your mutual fund management fees do not take the summer off.
Take a few minutes to consider the impact of paying too high a management fee on your funds…paying one percent too much on a half million dollar portfolio means you are paying nearly $500 extra per month.
This has a real impact on your long term return.
As you take time off this summer, ask yourself, have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Happy Civic Holiday.
Summer is passing quickly, but the dog days of summer do not mean that your money should take time off.
Your mutual fund management fees do not take the summer off.
Take a few minutes to consider the impact of paying too high a management fee on your funds…paying one percent too much on a half million dollar portfolio means you are paying nearly $500 extra per month.
This has a real impact on your long term return.
As you take time off this summer, ask yourself, have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
Friday, August 1, 2008
August 1, 2008 Morning Spot
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
One of the biggest investments most people make is their home.
The government recently announced some changes to rules on down payments and amortization.
Tune in tomorrow, to Beyond Funds Market Weekly, as I am joined by David Brawn of Scotiabank, as we discuss what is new in mortgages, and how you, as an investor, may be affected by changes in the mortgage market.
As well, we will review the state of the market, and July’s performance numbers.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
One of the biggest investments most people make is their home.
The government recently announced some changes to rules on down payments and amortization.
Tune in tomorrow, to Beyond Funds Market Weekly, as I am joined by David Brawn of Scotiabank, as we discuss what is new in mortgages, and how you, as an investor, may be affected by changes in the mortgage market.
As well, we will review the state of the market, and July’s performance numbers.
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260.
This program is for information purposes only. Fees, management fees, and commissions may be associated with mutual fund investing.
Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital Inc, member CIPF.
July 28, 2008 Morning Spot
his is jeff Wareham, ScotiaMcLeod Wealth Advisor, with some thoughts for investors outgrowing their mutual funds.
Mutual fund investors have had a wild ride this year, and this summer is no exception. Day after day, week after week, month after month, fund investors have ridden the volatility of the Canadian market...both through the strength of this spring, and the wild fluctuations of the last few weeks. As oil continues to come under selling pressure, our markets will likely continue to experience fluctuation. You can reduce the volatility, by investing in markets less tied to the price of oil...but the guiding hand of an advisor is handy in naking that change.
Have you outgrown your mutusl funds?
For a review of your portfolio, or a complimentary cupy of my CD, call me; Jeff wareham, at 519 660 3260.
This program is for information purposes only. Views expressed are those of the author, not Scotia capital. ScotiaMcLeod is a division of scotia capital inc, member CIPF
Mutual fund investors have had a wild ride this year, and this summer is no exception. Day after day, week after week, month after month, fund investors have ridden the volatility of the Canadian market...both through the strength of this spring, and the wild fluctuations of the last few weeks. As oil continues to come under selling pressure, our markets will likely continue to experience fluctuation. You can reduce the volatility, by investing in markets less tied to the price of oil...but the guiding hand of an advisor is handy in naking that change.
Have you outgrown your mutusl funds?
For a review of your portfolio, or a complimentary cupy of my CD, call me; Jeff wareham, at 519 660 3260.
This program is for information purposes only. Views expressed are those of the author, not Scotia capital. ScotiaMcLeod is a division of scotia capital inc, member CIPF
July 25, 2008 Daily Market Wrap
This is jeff wareham, scotiamcleod wealth advisor with beyond funds market weekly for july 26, 2008.
Canadian markets continbued to suffer this week with the ongoing correction in the price of oil. Many other segments of the market actually posted fairly positive numbers. But energy and material stocks, stars of 2008 gave away more of their gains.
In new york it would have been a pretty good week if not for Thursday.
Next week should be interesting...the Federal Reserve's prohibition on shorting some of the largest financial stocks expires Tuesday...will the recent rally in their prices continue, or will the trade unwind?
Oil's fall has been remarkable...down twenty dollars in two weeks.
Looking at the numbers, toronto finished the week at 13378 remaining in correction territory, while the Dow finished at 11371. The Nasdaq finished on a positive note, at 2311, while the S&P finished at 1258.
Canadian markets continbued to suffer this week with the ongoing correction in the price of oil. Many other segments of the market actually posted fairly positive numbers. But energy and material stocks, stars of 2008 gave away more of their gains.
In new york it would have been a pretty good week if not for Thursday.
Next week should be interesting...the Federal Reserve's prohibition on shorting some of the largest financial stocks expires Tuesday...will the recent rally in their prices continue, or will the trade unwind?
Oil's fall has been remarkable...down twenty dollars in two weeks.
Looking at the numbers, toronto finished the week at 13378 remaining in correction territory, while the Dow finished at 11371. The Nasdaq finished on a positive note, at 2311, while the S&P finished at 1258.
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