Managed Money Reporter Newsletter — Issue 213, January 2005

Editors: Carl Spiess & Allan McGlade

Featured Articles

Your 2005 RRSP Contribution: What to Do?

Carl SpiessWondering what to do with this year's RRSP contribution? Most importantly, get your contribution in. Remember, the deadline for RRSP contributions for the 2004 tax year is March 1, 2005.

Carl wants to remind you that we can help decide how to invest it. ScotiaMcLeod continues to offer the widest range of investment choices for you:

Allan McGladeAllan says that the market gains of the last 18 months have rewarded equity investors nicely, but actually make it harder for us to simply recommend more equities for our clients.  The recent growth may in fact have pushed you overweight in stocks.  A quick review of your target asset allocation is in order.

Also, for many clients, being a full year closer to retirement, means that we need to become more conservative.  Depending on your situation, bonds may be the appropriate choice. 

As always, our team is here to help you so contact us for advice. Also, check out the resources listed below. We would be pleased to review your overall asset allocation, and provide a recommendation appropriate for your portfolio. Don't be one of those people who will spend more time this year planning a vacation, than they do planning for retirement!

More on your 2005 RRSP contribution ...

  • See our Quick Facts guide to RRSPs - This ScotiaMcLeod guide contains a review of the various contribution rules and strategies.
  • Know your RRSP limit From CRA - The Canada Revenue Agency website allows you to log on to "Your Account".  There, you can see your RRSP contribution limit.  For an easier way to see your exact RRSP room, look at your notice of assessment from last year, it was attached to your income tax refund. 
  • Complete our RRSP Investment Order Form - Use this form to make contributing a lump sum RRSP contribution easier. 
  • Make your contribution online - If you have ScotiaMcLeod online access, you can also contribute online from their Scotiabank account.  
  • Get a low interest RRSP Loan - Scotiabank offers RRSP loans at prime. If you need a little extra to make your contribution, borrow and then use your tax refund to pay down the loan.

Interesting statistic:
Of those who made RRSP contributions in 2003, one in six Canadians also withdrew taxable funds from their RRSP (does not include Home Buyers and Life Long Learning withdrawals.)

Article from Statistics Canada


Tax Receipts

ScotiaMcLeod RRSP receipts for contributions made from March - December 2004, have already been mailed.  RRSP receipts for the first 60 days of 2005, will be mailed as contributions are made, or for payroll accounts, by March 10th.

Canadian Mutual Fund Assets Continue to Grow

Canadians continue to have increasing assets in mutual funds, and December 2004 continued the trend.  Fueled by strong market performance, assets increased for the third consecutive month to its highest level ever for the industry.  Overall mutual fund assets rose $58 billion or 13.3% in 2004.  Source: IFIC

Lower Fees on Fidelity Funds

Fidelity funds announced recently that investors in most of its funds will soon be enjoying lower management fees. This applies to investors in their "front end load" or Initial Sales Charge (ISC) fund versions.  Also, investors who have Deferred Sales Charge (DSC) funds, where the DSC has expired, will see their units rolled over to the new front load version with the lower Management Expense Ratio (MER).  We will continue to work to find the most cost effective ways to help you invest.  

Please contact us if you would like us to review your fund DSCs. DSC expired units can be converted to their equivalent front-end load version at no charge. 

More on lower Fidelity fees ...

Tsunami Relief

We have all been affected by the events in Asia.  Your investment team has made a significant donation to the Red Cross. Scotiabank has set up online and in-branch collection of donations for the relief effort. We are pleased to work for an organization that takes a leadership role in difficult situations like these.

Donate Online or In Person - The Bank of Nova Scotia has set up a site to make it easier to donate online and branches will be accepting donations until January 28th.  

Fun With Numbers

What is Risk?  We are often asked what our "risk" number on our recommended list means.  It is a figure provided by Morningstar to help understand how much the fund price has fluctuated on a month-by-month basis over the last 3 years.  Specifically, the risk figure is the standard deviation of the month-end unit price over the last 36 months. 

But there is more to risk than just monthly fluctuations.  Another way to look at market risk is the percentage of time periods over which one could lose money. If you were to hold an investment for a certain period of time, how likely would you be to make money. Using the example of the S&P500 index (see chart & graph, below), if you had bought the index and sold it an hour later at any point between 1926 and 1998, there is a 50.2% chance you would have made a profit. However, if you had held the investment for any 15 year period during those years, there is a 100% chance, you would have made money.

Periods When Stock Returns Were Positive, 1926–1998
Hour 50.2%
Day 51.4%
Month 56.3%
Quarter 60.5%
Year 71.0%
5 Years 89.7%
Decade 96.8%
15 Years 100.0%
20 Years 100.0%

Sources: Behavioral Investing, Ibbotson

This demonstrates the risk of not being invested, and missing the long term performance of the markets.  

All investments have risk associated with them. Even risk free investments like savings accounts or Treasury bills have risk (i.e. the risk of inflation leaving you with negative returns). Understanding and weighing the risks associated with any particular investment is key. Ultimately, the goal is balancing risk and return. As always, we are here to help you in assessing the risk of individual investments and investment strategies - contact us for more information.

More on risk ...

Risk Calculations - Detailed description of the statistical basis we use for assessing mutual fund risks.

Mutual Fund Reporter Recommended Website of the Month  

Fidelity has a great site about getting the best advice from your investment advisor. Appropriately enough, the site is called "Getting Good Advice". It also has some great planning and portfolio evaluation tools. We recommend you take a look.


Contact Us

T.  416.863.RRSP (7777)
F.  416.863.7479

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

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