Managed Money Reporter Newsletter — Issue 144, February 1999
Editors: Carl Spiess & Allan McGlade
By John Zufelt
While 1998 proved to be a very volatile year indeed, forecasts for 1999 equity markets are not much better. Scotia is forecasting single digit increases (possibly) and expects volatility with Y2K concerns. Bond markets did provide stability for investment accounts last year and we continue to recommend a balance of bonds and stocks for the years ahead. The appropriate weighting will vary from person to person. For a review of what's best for you, call the Mutual Fund Reporter Service Centre at (416) 863-7777 or 1-800-387-9273 or email us.
Last Year's Recommendations
Before we get to our current recommendations, I would like to draw attention to the performance of last year's recommended funds. The market volatility left the TSE 300 index -3% for 1998. Our recommendations in comparison, out-performed the index by a wide margin while offering far more diversification.
Labour Sponsored Investment Funds (LSIF) are back again offering substantial tax credits. The Government has raised the limit back to $5,000/investor which will qualify for an additional 30% ($1,500) back in tax savings. This means your after tax cost of the $5,000 LSIF is $3,500. Working Ventures Fund has re-opened and is one of our top picks. If you want further recommendations, call for our complete LSIF list or view it online.
100% Foreign Content and Guaranteed Funds
We have run articles in the past about Segregated Funds (Seg Funds), and the fact that they guarantee your principal investment over a 10-year period. A feature that we find additionally attractive is that a Seg Fund qualifies as 100% Canadian content regardless of the underlying portfolio of investments. For example, the Templeton Group of Funds has come to market with a family of Seg Funds that fully qualify as an RRSP investment even though these funds buy shares of global mutual funds such as Templeton International Stock Fund and Templeton Growth Fund. It is therefore possible to place all of your RRSP money into a number of these funds, stay within Canadian content limits and achieve a 100% exposure to global markets. If you did utilize this strategy, you would be able to diversify into some of the other excellent Seg Funds offered by companies such as BPI and Manulife. This, plus having your principal guaranteed, we find attractive. Revenue Canada has said that it will review this opinion two years from now in 2001.
A number of the fund companies have come out with similar products and choices, but note, not all funds guarantee 100% of your principal, some guarantee only 75%. For more information on Seg Funds, please contact our insurance specialist, Allan McGlade at (416) 862-3066 or 1-800-387-9273 or firstname.lastname@example.org. .
Current Recommendations and RRSP Service
A specialty service that we provide for our ScotiaMcLeod clients at the Mutual Fund Reporter Service Centre, is to sort all of Canada's mutual funds and recommend a short list of funds that offer both good returns and lower risk. A fund with top returns may not make our short list if the risk factor is high relative to other funds in the same category. We also track the movements of portfolio managers and alert clients if switches should be made in their account. Please email us for our current recommended fund list and our brochure, "Your Investment Options", which shows the 800 plus funds (and their returns) that are available for investment in your ScotiaMcLeod account.
RRSP Loans at Prime
Don't forget that RRSP loans for current contributions and catch-up loans for unused past contributions can be arranged at your nearest Bank Of Nova Scotia (Scotiabank) branch. These loans are offered at Prime rate. Just take in your ScotiaMcleod account number. See http://www.scotiabank.ca/cgi-bin/Scotiabank/Calculators/LoanSaver.cgi for more information.
Taking Care of Your RRSP
Our goal is to provide you unequaled RRSP account coverage. Call today, in Toronto at (416) 863-RRSP, or 1-800-387-9273 or email us.
AGF has made an asset allocation shift to their Canadian Tactical Asset Allocation Fund, effective December 1st. The previous mix positioned equities at 70%, bonds at 25% and cash at 5%. The new asset mix increases equity exposure to 75%, with bonds at 20% and cash remaining at 5%. The shift out of bonds into equities resulted from a significant flattening of the yield curve. AGF cites that the lower yield environment combined with the recent decline in the equity market has made equities relatively more attractive than bonds. They also assess that other factors, such as somewhat more positive analysts' earnings forecasts impact positively on equities.
Along with the recent changes at Dundee Bancorp, the company plans to bring together both the Dynamic Canadian Growth Fund and the Power Canadian Fund. Combined they will be known as Power Canadian Growth Fund.
The following is an extract from an article of the same title from the Fall/Winter 1998 issue of the IDA Report. The Investment Dealers Association is the national self-regulatory organization and trade association of the securities industry.Testing
Preliminary industry-wide test plans have been established. These test plans can be found on the Ontario Securities Commission website, (removed as of 2011). Test plans have been created for mutual funds, equities and debt. These test plans include test objectives, criteria for selecting test participants, and test dates. Criteria for selecting test participants include completion of internal remediation and testing projects, completion of assessed reliance on external organizations and completion of external point-to-point testing.
The Beta Tests for both mutual funds and equities are scheduled for Saturday, March 20, 1999. The industry-wide tests for mutual funds and equities are scheduled for Saturday, May 29, 1999 to Sunday, June 6, 1999. Debt tests are scheduled for Monday, March 8, 1999 to Thursday, March 11, 1999.
The Association will continue to keep members informed on developments regarding this important issue.
As millennium approaches, we will continue to hear from a handful of clients who are hesitant about investing their money, clients who fear the worst in the markets. The following are some other pivotal points in history along with the market statistics of the Dow Jones Industrial Average. Don't be among those who say to us "I don't want to invest my money now because..."
|1939||War in Europe||150|
|1947||Cold War begins||181|
|1954||Dow tops 300 - "market too high"||330|
|1962||Cuban missile crisis||652|
|1972||Largest trade deficit in US history||1020|
|1979||Oil skyrockets - 10%+ unemployment||839|
|1981||Deep recession begins - Reagan shot||875|
|1985||Economic growth slows||1547|
|1986||Dow nears 2000 - "market too high"||1896|
|1987||The Crash - Black Monday||1939|
|1990||Gulf War - worst 1 yr mkt decline in 16 yrs||2634|
|1991||Recession - "market too high"||3169|
|1994||Interest rates are going up||3834|
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The Spiess McGlade Team is a personal trade name of Carl Spiess and Allan McGlade.