2007 October | WhereDoesAllMyMoneyGo.com

When "over"-over-contributing to an RRSP can make sense…?

Posted by Preet on Oct 31, 2007 | 0 comments

This is an advanced level topic – keep reading to find out why… One too many "over"’s? Well, first you have to be familiar with the lifetime $2000 over-contribution limit. As you are probably aware, when you make a contribution to your RRSP it qualifies as a tax deduction, but of course only when you are within your "contribution limits". You may also be aware that there is a lifetime $2000 over-contribution limit which means you can exceed your contribution limit, but you won’t be able to deduct the contribution from your tax return. So while you won’t get a tax refund for that "over-contribution", many...

Canada Pension Plan: Good for another 75 years…

Posted by Preet on Oct 30, 2007 | 2 comments

According to actuaries, the CPP (Canada Pension Plan) is viable and strong for another 75 years based on a report presented to government by the Office of the Chief Bean Counter Actuary. I took a look through the 132 page report and it is pretty detailed. Section 6 outlines the uncertainty of the projections and further provides an analysis of a generally younger population and a generally older population than they are expecting. It further analyzes the impacts of varying levels of financial market "shock" - including consecutive years of negative double-digit returns coupled with higher equity exposure in the portfolio. It looks like even if there was...

Employment Insurance: Earned Income for RRSP calculations?

Posted by Preet on Oct 29, 2007 | 1 comment

I’m just throwing out a quick one tonight as I have a full day tomorrow – out of the house before 7am and not back until midnight… :( You may or may not know that when calculating how much you can contribute to your RRSP you have to look at LAST year’s earned income. "Earned income" is the important thing, because not all sources of income are "earned" income – and therefore do not factor in for the calculation of your RRSP contribution. One distinction is with respect to Employment Insurance Benefits. If you are on EI because you lost your job – then whatever you get in regular EI payments DOES NOT make up...

RIM was bigger than the Royal Bank… for a few hours

Posted by Preet on Oct 26, 2007 | 0 comments

I don’t know if many people caught this, but on Wednesday during the day Research in Motion (RIM – the maker of the Blackberry) increased in share price enough to become Canada’s largest publicly traded company by market capitalization – overtaking the Royal Bank! By the end of the day though, RIM had fallen back to number two… When investors refer to the IT sector in Canada – really they are referring only to RIM – there are no other major players anymore in that space – in fact, every analyst seems to chuckle when they mention the "IT sector in Canada" these days since it is strange to call one company a whole...

So what IS a Mortgage-Backed Security? (MBS)

Posted by Preet on Oct 25, 2007 | 0 comments

So yesterday you found out that your bank may not actually own your mortgage anymore (even though they still "operate the storefront"). And you know that this amazing feat was accomplished through the securitization of your mortgage into what is known as a Mortgage-Backed Security or MBS for short. But let’s look at it from the investor’s side today! You can buy and sell these MBS’s all day long – but before you do that, it might help to learn a little bit more about their risk-return characteristics… :) To cut right to the chase, MBS’s trade just like bonds. They have a price, coupon payment, yield and maturity date. But...

Do you know who owns your mortgage? You probably don't…

Posted by Preet on Oct 25, 2007 | 2 comments

Similar to the capital markets, there exists a "primary" market for mortgages and a "secondary" market as well. You will be very familiar with the primary market – that is the market you deal in when you first get a mortgage or negotiate the terms of your mortgage renewal with your local bank (or other mortgage provider, like a trust company, etc.). But you may be surprised to find out that even though your mortgage statement reads "Royal Bank" or "Wells Fargo" or whomever your mortgage provider is, they may no longer actually hold your mortgage. Sounds confusing? Well, what normally happens these days is that a bank will...

What is the "Beta" of a portfolio?

Posted by Preet on Oct 23, 2007 | 2 comments

Beta is a term used to measure the correlation of volatility of a portfolio against the index in which it resides. The market has a Beta of 1 since it IS the market. Your portfolio would be more volatile than the market if it had a Beta higher than 1. Conversely, if your portfolio had a Beta of less than 1, it means that you have less volatility than the market. As an example, let’s say that you owned 20 stocks found in the S&P 500 and that the index (the S&P 500) returned 10% over the last 5 years. If your portfolio returned 10% but had a Beta of 0.5 than your portfolio (from a risk versus return point of view) was better than holding the index....