WEALTH Matters — WINTER 2008

WHEN LIFE GIVES YOU LEMONS...Make Lemonade

So the saying goes. 2008 will be remembered for a long time as one of the worst investment market years on record. It will be a rare investor who had positive returns on a diversified portfolio this year. Even many conservative investment portfolios have declined in value since the start of the US sub-prime mortgage crisis which began in the summer of 2007.  There are however, financial planning opportunities which come out of the recent poor market performance. And while these opportunities might not restore all of the losses, they may partially offset them and the related disappointment.

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Making lemonade

tax-loss selling

Asset swap

Tax free savings account

In this issue of Wealth Matters, we will look at three strategies that our clients are using to take advantage of opportunities today. First, we’ll show you how to recover taxes paid in prior years on capital gains, using a strategy called Tax Loss Selling. Next, we show how to reduce tax on future RRSP/RRIF withdrawals or estate taxes, using an Asset Swap. Finally, we discuss the new Tax Free Savings Account as a tool to reduce taxes on investment income.

While the media headlines quote the declines in a major index like the TSX (Toronto Stock Exchange), many of the portfolio managers we use in our clients’ portfolios have been able to outperform the market index by limiting exposure to declining sectors and companies. But very few analysts expected the dramatic events of 2008 to follow on top of the 2007 adjustments, and the sinking overall market has pulled down the share values of even the most stable businesses. As of November 30, not one single Canadian Equity fund manager had positive returns.

And while that may be cold comfort to those of us who have diversified into equities (including all of us here at Page and Associates), it should at least help ease the remorse that we might have done better just throwing darts at a list of investments. And even after this horrendous year, all asset classes except US Equity still have positive 5-year returns.  After all, equities are long-term investments.

Also in this issue of Wealth matters:

tax-loss selling

Asset swap

Tax free savings account

Mutual Funds and Segregated funds provided by Fund Companies offered through

Worldsource Financial Management Inc. sponsoring mutual fund dealer.

All other services provided by Page and Associates Ltd.

To read more about how putting these dismal results into a longer-term context, please read our Fall 2008 article about Managing Portfolio Volatility. Click here to read this article. You can also review our article series on portfolio construction and management in back-issues of Wealth Matters in the Newsletters section of this web site.

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