Posts made in December, 2007
130/30 Funds' Past Performance
Standard and Poor’s has announced that they will launch index coverage of the 130/30 Strategy. Note that this will be different from the actual universe of 130/30 funds’ performance. (See yesterday’s post on the 130/30 mutual fund structure for more information.) The key word is "Strategy". What the index will track is the S&P 500 as the core of the index plus a 1% overweight to 30 top stocks and a 1% underweight to 30 bottom picks. This is designed to provide a benchmark of sorts for the fund managers to try and beat. Basically, since there is no real 130/30 index they have attempted to create an index that is derived from the S&P...
Read More130/30 Funds Are Coming To Canada
A new type of mutual fund may be entering the Canadian market in the near future. This particular type of mutual fund is known as the "130/30 Fund". Let me explain how it gets it’s name: For every $100 invested into the fund, the fund manger will invest the $100 according to an already established mandate (for example Canadian Large Cap Value). The manager will then also short $30 worth of securities (based on the most over-valued securities in his/her mandate). When you short a security, you are selling a security you don’t already own (you borrow the security from inventory). The hope is that the stock will go down and then you can buy the...
Read MoreWhy are "Dollars" also called "Bucks"?
The slang "buck" or "bucks" when referring to money is so common-place that no-one really questions it’s oddity. But it turns out that the word "buck" is short for "buck-skin" (from a deer). Buck-skin’s were used as currency once upon a time. The term "bread" has an origin from the United Kingdom. Specifically the Cockney phrase for money is "bread and honey" which was eventually truncated to just "bread". With regard to the $ symbol, seemingly the most popular theory as to it’s origin is that it was created through the superimposition of the initials of "United...
Read MoreDon't Qualify for the Lifelong Learning Plan? Who Cares…
Mike from the Quest for Four Pillars blog commented on a post I had written about the Lifelong Learning Plan. He mentioned that if he were ever considering going back to school, he would be inclined to just withdraw the money from his RRSP since that year would probably be a lower income year and the tax hit not as bad as a "full" income year. It is an excellent suggestion. In fact, for the LLP, you almost always have to be enrolled in a full-time capacity at a qualifying educational institution. That means it is indeed likely to be a lower income year. Add to that: 1. You no longer have to worry about what program you take and making sure it qualifies under...
Read MoreWhen Not Paying Back the Home Buyer's Plan or Lifelong Learning Plan Can Make Sense
If you are aware of the Home Buyer’s Plan or the Lifelong Learning Plan, you know that there are ways you can get money out of your RRSP (temporarily) through tax-free withdrawals. The programs require that you pay money back to your RRSP over time and the CRA will inform you of how much of the loan is required to be paid back in any given year. There is no rule that says you have to make the repayment - only that if you don’t, then the year’s required re-payment amount will be included as taxable income for that tax year. So if you are in a low income year and you have a repayment required – it might not be a bad idea to skip the payment...
Read MoreYou can make Spousal RRSP Contributions after Age 71
It is still possible to make RRSP contributions after the year in which you turn 71 – just not to your OWN RRSP. If you have a spouse or common-law partner who is younger than you, then you can contribute to a Spousal RRSP set up in their name. This allows you to claim a deduction on your tax return and reduce your tax bill. Click here to read about Spousal RRSP’s in more detail. There are a few catches of course. You must have RRSP contribution room in order to make an RRSP or a Spousal RRSP contribution – and this is generally harder and harder to come by when you are over 71 as you are most likely retired by now. BUT – so long as you generate...
Read MoreYou can Claim Unused RRSP Deductions after Age 71 too
You may remember that you can make an RRSP contribution in a given year but carry forward the resultant RRSP deduction until a future year. This rule still applies even after you have matured your RRSP into a RRIF (or any of the other conversion options). The RRSP deduction will reduce your taxable income in the year that you use it. So if you think that there will be a significant tax liability a few years into retirement, such as the sale of capital property that would result in a large tax bill, you could make your RRSP contributions but delay claiming the RRSP deductions until that year. In other words, you do not lose the ability claim the RRSP deductions once you...
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