Managing Your Money with John Scholl

Emotional investing – the road to ruin

It’s a fact: Emotional investing doesn’t pay, it costs. Market study after market study has clearly proved that when investors are driven by emotions – jumping into and out of stocks looking for the next winner, pouring money into mutual funds following a period of strong market growth, and then moving to the next ‘hot’ asset class during market troughs – they often lose, and sometimes lose big.

Here’s an example: In 1999, the Canadian equities market jumped a spectacular 31.7 per cent, prompting a lot of investors to hop on board in the year 2000. Over the next two years, the market went negative, declining by over 12% in each of those two years and many of those ‘heat seeking’ investors bailed out. So, not only did they miss the big jump of 1999, they also absorbed large losses when they cashed out. However, had those investors stayed invested for the entire 1999-2007 period they would have enjoyed overall returns of close to 30 per cent.*

And that brings us to one of the prime rules for investing success: Trying to time the market or a stock almost never works. But time in the market does by delivering better overall returns – especially when you couple your long-term stay the course strategy with:

· Effective asset allocation Markets are always volatile to some degree or another – it’s in their nature – but with a carefully selected and properly diversified ‘mix’ of assets, you can effectively reduce risk, and enhance your chances of achieving your long-term goals.

· Dollar cost averaging This is the strategy of buying a stock or fund on a regular basis, at an amount you can afford, regardless of the stock or fund price. It is a systematic buying approach that saves you from trying to time the market, averages out the price of your stock or mutual fund units, and ensures you are always participating in the market so you will never miss out on periods of excellent returns.

When you invest with reason instead of emotion and wrap other effective strategies around the ones introduced here – such as investing according to your tolerance for risk, achieving instant diversification through a portfolio mutual fund, and dollar cost averaging to eliminate any concerns you may have as to when the right time to invest is – you will be well on the road to financial success, regardless of short-term market or economic downturns. Your professional advisor can make sure your investing strategies are right for your personal needs, expectations and goals.

John Scholl B. Mathematics, CGA, Consultant - Investors Group Financial Services Inc.

Wealth Management & Financial Planning Phone: (905) 450-2891 X529 Toll Free: 1 (866) 799-2223 x529 Cell (416) 731-3660

Yes! -- tax efficient investing still matters

It’s easy to be short-sighted in these uncertain economic times. Each day, you scan the business section of your newspaper or look online for concrete signs that the recession is receding. And even though the market now seems to be having more good days than bad, it still has some climbing to do. Which means that investment returns and interest rates continue to lag – and that makes it too easy to take a narrow focus on the short term and lose sight of your overall financial objectives.

It’s important to hold fast to the fundamental rules for a successful financial plan because they are proven principles for weathering any economic storm. Among the most important are:

• Smooth out market cycles by staying invested for the long term.
• Diversify your investments using effective asset allocation techniques.
• Select investments that match your appetite for risk and take maximum advantage of the ‘miracle of compounding’.
• And practice tax-efficient investing – an investing rule that assumes even more importance when returns and interest rates are low.

That’s why you should …

Make the most of your Registered Retirement Savings Plan (RRSP). Your RRSP is an exceptional tax-saving, nest-egg building investment – and you’ll get a maximum tax reduction by making your maximum RRSP contribution each year. Fill up unused past contribution room for even bigger tax savings this year and a much larger nest-egg over time.

Reduce taxes generated by your non-registered investments by selecting investments that benefit from lower tax rates – for example, investments that generate capital gains or dividends eligible for the enhanced dividend tax credit.

Make an annual $5,000 contribution to a Tax Free Savings Account (TFSA). Your contribution isn’t tax deductible but money and interest inside a TFSA is tax-free and so are withdrawals, which can be made at any time for any purpose.

Make the most of your spouse. Look into income-splitting with your spouse, having the higher-earning spouse contribute to a spousal RRSP, and/or having the spouse with a higher marginal tax rate make a prescribed rate loan to the other spouse in a lower tax bracket. When used correctly these ‘spousal options’ can effectively reduce a family’s taxes.

There may be other tax-reducing strategies that will work for you. A truly effective tax plan must be an integral part of your overall financial plan, investment program and life goals. Your professional advisor can help you put it all together in the best possible way for your unique situation.

John Scholl B. Mathematics, CGA,

Consultant - Investors Group Financial Services Inc.

(905) 450-2891 (866) 799-2223 Direct (416) 731-3660

What to do with your Tax Refund?

It’s great to get a tax refund, isn’t it? So, what are you going to do with it? In past years, you might have been sorely tempted to spend it on a guilty pleasure but maybe not in this more economically ‘iffy’ year.

However – ‘if’ you want to improve your personal economy in the longer run, here are a few options for making the best use of your tax refund.

Accelerate your RRSP. Get a head start on your next year’s Registered Retirement Savings Plan (RRSP) contribution. You’ll benefit from almost an extra year of potential long-term RRSP

tax-deferred growth, plus a tax deduction against your taxes next year.

Check out new investment opportunities: If your RRSP is topped up, use your refund to:

• Open a Tax-Free Savings Account – you’ll enjoy tax-free earnings and growth and you can make tax-free withdrawals at any time for any use you can imagine.

• Add to your non-registered investments. The best tax-reducing strategy is to hold stocks and equity mutual funds outside an RRSP. Any gains on these investments are taxed at

the more favourable capital gains inclusion rate and Canadian dividends received from these types of investments qualify for the dividend tax credit.

Build an education fund. Fund your children’s future education costs with a Registered Education Savings Plan (RESP). RESP contributions are not tax deductible, but their growth is tax deferred and they qualify for Canada Education Savings Grants* of 20 per cent or more of your contribution.

Pay down your most costly debt. The interest rate on credit card debt can range from 15 to 29 per cent per annum – so be sure to reduce or eliminate that debt first.

Pay down your long-term debt. Taken care of your high-cost debt? Then pay down nondeductible debt like your mortgage. Every pre-payment will reduce your repayment schedule

and could save plenty in interest payments.

Zero next year’s refund. Why give the government an interest-free loan of your money for a year and have to wait for a refund cheque? Apply to have less tax withheld from your pay cheque and you’ll have a little more money for your own use every pay period. Apply to lower your withholding tax using File Form T1213, available from your local CRA office or from the CRA Website, www.cra-arc.gc.ca.

It’s great to get a tax refund – but it’s even better to have a comprehensive tax and financial plan. A professional financial advisor can help develop the right plan for you.

* Canada Education Savings Grant and Canada Learning Bond are sponsored by Human Resources and Skills

Development Canada.

John Scholl   B. Mathematics, CGA, 

Wealth Management & Financial Planning

I strive to continually improve my wealth management practice to be worthy of the referrals received. I build my business one introduction at a time, and would consider it a great compliment to be introduced to one of your business associates, friends or family.

Investors Group 200 - 24 Queen Street East, Brampton, Ontario L6V 1A3

 (905) 450-2891 X529   Toll Free:  (866) 799-2223  Cell:  (416) 731-3660

Email: john.scholl@investorsgroup.com

Save or Spend your Tax Refund?

What could be better than getting a tax refund?

The answer is - not getting one. You see, a tax refund cheque is not a gift from the Canada Revenue Agency (CRA). It’s money you overpaid during the year that you are now getting back – but without interest.

You could spend it – it is yours after all. Or you could explore some other options including making that money grow and not getting a refund next year. Here’s how:

Make your 2009 RRSP contribution right now. You get the benefit of almost an extra year of potential long-term RRSP tax-deferred growth, plus a tax deduction against your taxes next year.

Contribute to a TFSA. Starting in 2009, you are able to save up to $5,000 a year in a Tax-Free Savings Account, or TFSA. While the contributions are not tax-deductible, you will not be taxed on any of the investment income generated by the TFSA. As well, the tax-free withdrawals can be re-contributed to the TFSA in a future year.

Increase your non-registered investments. If your RRSP and TFSA are topped up, add to your non-registered investments. Plan to hold stocks and equity mutual funds outside an RRSP or TFSA because any gains on these investments are taxed at the more favourable capital gains inclusion rate. As well, Canadian dividends received from these types of investments qualify for the dividend tax credit.

Get a grip on education costs. Establish a Registered Education Savings Plan (RESP) to fund your children’s future education costs. RESP contributions are not tax deductible, but their growth is tax deferred and they qualify for Canada Education Savings Grants* of up to 20 per cent of your contribution.

Pay down your most costly debt. The interest on credit card debt often ranges from 15 to 29 per cent so you should reduce or eliminate that debt first.

Pay down your long-term debt. Once you’ve taken care of your high-cost debt, pay down non-deductible debt such as your mortgage. A pre-payment will chop months or years off your repayment schedule and could save you hundreds or thousands of dollars in interest payments.
Park your refund for a rainy day. If your refund is large, park some cash in a short-term investment where you can access it without penalty. You’ll have a ready source of cash for a new car or emergency home repairs without having to borrow or use your credit card to meet unexpected expenses.(Some individuals may use the TFSA for their emergency fund).

Eliminate next year’s refund by having less tax withheld from your paycheque. You’ll have a little more money for your own use every pay period. To lower your withholding tax, use File Form T1213, available from your local CRA office or from the CRA Website, www.cra-arc.gc.ca.

With the right tax strategy, you won’t necessarily get a refund cheque but you will get the most out of what you earn and invest. Talk to your professional financial advisor to find out what works for you.

John Scholl B. Mathematics, CGA,
Wealth Management & Financial Planning

I strive to continually improve my wealth management practice to be worthy of the referrals received. I build my business one introduction at a time, and would consider it a great compliment to be introduced to one of your business associates, friends or family.

Investors Group 200 - 24 Queen Street East, Brampton, Ontario L6V 1A3
(905) 450-2891 X529 (866) 799-2223 (416) 731-3660 john.scholl@investorsgroup.com

Home Renovation Tax Credit Update

In a recent conversation with Henry Kordowski Tax Accountant (he) brought to my attention the fact that condominium owners are also eligible for the Home Renovation Tax Credit.

The units, condominium suites, in older buildings will have a component from the maintenance fees that are allocated to capital improvement and renovations.

So.. In fact, the maintenance fees that are applicable to the inprovement portion would thereby become deductible.

"When preparing the tax returns, Condominium owners may not realise they are entitled to deduct a portion of the maintenance fees, into bnext years tax return." Henry Kordowski said in a recent interview.

Henry Kordowski is a Tax Accountant in the Bloor west Village neighbourhood and may be contacted at 416 767 7554 hkordca@rogers.com

Tax Preparation is NOT tax planning

Here comes that dreaded tax filing deadline – and maybe a late night of tax preparation along with it. But don’t confuse your last minute tax prep dash with real tax planning.

Tax planning means taking the right financial steps throughout the year to reduce the taxes you pay. And the time to start is now – using strategies like these:

Keep a record. Use home finance or tax preparation software to track finances for tax purposes. If you don’t have a computer, use a good filing system.

Plan now to make your maximum RRSP contribution for 2009 and beyond. A Registered Retirement Savings Plan (RRSP) is the biggest tax break available to most Canadians. The sooner you get your cash into your RRSP, the longer it has to grow.

Add a spousal RRSP. Whether married or common-law, if one of you is likely to generate more income in retirement, the other should consider contributing to a spousal RRSP – a strategy that can equalize income streams during retirement and lower your combined income tax bill.

Initiate an investment strategy that takes taxation levels into account. Some types of investment income, such as capital gains and dividends, receive preferential tax treatment, while others, such as interest, are taxed at normal rates. Hold heavily taxed investments in an RRSP, where they will grow on a tax-deferred basis. You should also consider investing in a Tax-Free Savings Account that allows your after-tax investment to grow without further tax liability being incurred.

Invest child tax benefit payments in the child’s name. The income earned will then be taxable in the hands of the child, who may not have enough income to generate a tax bill.

Consider borrowing for business or investment purposes. The interest may be tax deductible.
Set aside money to make quarterly personal income tax payments on time. Lateness can result in penalties and interest. Installments are due the 15th of March, June, September and December.

Don’t get a tax refund. A large refund means you’ve loaned your money to the government interest-free. Request a reduction in taxes withheld at source.

If you expect a refund this year and are confident the same thing will happen next year, you can apply to have your employer reduce the amount of tax deducted from your paycheque.

When you were first hired, your employer had you complete a Personal Tax Credits Return form (TD1) that included all the deductions and credits you normally claim in a year. If your circumstances have changed since then, making you eligible for additional deductions (child care expenses or spousal maintenance, for example), your taxable income and your tax bill will be lower now. So reduce the amount withheld from your paycheque each month by filing a T-1213 form. (Available from your local CRA office or from the CRA Website, www.cra-arc.gc.ca.

Are you turning 71 in 2009? If so, you must wind up your RRSP by December 31. Be sure to investigate your retirement income options well in advance, otherwise you could end up paying a huge tax bill.

Planning to move to a province with a lower tax rate? Make it by the end of the 2009 and you’ll pay taxes for the entire year to the province in which you live on December 31.

Tax planning reduces the taxes you pay. Financial planning makes it possible to achieve your life and retirement dreams. Discuss these and other steps with your professional advisor.

John Scholl B. Mathematics, CGA,
Wealth Management & Financial Planning
I strive to continually improve my wealth management practice to be worthy of the referrals received. I build my business one introduction at a time, and would consider it a great compliment to be introduced to one of your business associates, friends or family.
________________________________________
Investors Group
* Tel. : (905) 450-2891 X529
* Toll Free: (866) 799-2223
* Cell: (416) 731-3660
* Fax: (905) 450-9747
* Email: john.scholl@investorsgroup.com

Fast Facts About your 2008 RRSP

RRSP fast facts – what you need to know to save and grow

The deadline for making your 2008 Registered Retirement Savings Plan (RRSP) contribution is fast approaching – but you still have time to take advantage of a few last-minute RRSP facts and tips that will reduce your tax load this year and help build a financially comfortable retirement.

· Don’t miss the deadline. This year’s contribution deadline is March 2nd, 2009.

· Maximize your RRSP contribution. The best strategy is to always make your maximum allowable contribution each taxation year.

That way, you’ll get the most in immediate tax savings and maximize the potential long-term growth of the investments in your RRSP. You’ll find your personal maximum allowable contribution room on your most recent notice of assessment from the Canada Revenue Agency (CRA).

· Catch up on past contribution room. You can fill your unused contribution room in a single year or over a number of years until the year you reach age 71 – but the faster you fill it, the better for additional tax savings and longer term tax-deferred, compound growth.

· Borrow to save. Taking out an RRSP loan can be a smart way to maximize this year’s contribution or to catch up on your past contributions. The key is to get a loan at a low interest rate and pay it back as quickly as possible. You can even use your RRSP tax savings to help pay off the loan.

· Split income to save. While you can take advantage of the new pension income splitting rules in retirement, in the right situation, a spousal RRSP can still make sense to save taxes in your retirement.

· Diversify for better growth. The government caps the amount you can contribute to your RRSP(s), so it’s highly likely you’ll need additional income to afford the retirement of your dreams – and that’s where a Tax-Free Savings Account and your non-registered investment portfolio comes in. A well-balanced portfolio is based on an asset allocation plan that matches your risk profile and time horizon.

· Choose an RRSP beneficiary. You can designate a beneficiary on your RRSP (in Quebec, this must be done through the Will). If you die without a beneficiary designation, up to 48% of your total RRSP value could be lost to taxes. Generally speaking, the RRSP assets do not form part of your estate and, therefore, do not attract probate fees. And, if your beneficiary is your spouse (or a disabled dependent child or grandchild) your RRSP may be transferred on a tax-deferred basis to your beneficiary’s registered plan.

With the right RRSP strategies wrapped in a sound, overall financial plan, you will save on taxes every year and retire with more.

John Scholl B. Mathematics, CGA,
Wealth Management & Financial Planning

I strive to continually improve my wealth management practice to be worthy of the referrals received. I build my business one introduction at a time, and would consider it a great compliment to be introduced to one of your business associates, friends or family.

Investors Group 200 - 24 Queen Street East, Brampton, Ontario L6V 1A3
* Tel. : (905) 450-2891 X529
* Toll Free: (866) 799-2223
* Cell: (416) 731-3660
* Fax: (905) 450-9747
* Email: john.scholl@investorsgroup.com

New Years Resolution OPEN TFSA

Managing your Money

I resolve to open a TFSA

It’s coming up to the time of year for making resolutions and a good one for almost anybody looking for financial security – and some solid tax breaks, too – is to open a Tax-Free Savings Account (TFSA).

TFSAs will become available to Canadians in the 2009 taxation year. This new tax-free option is a flexible, general-purpose savings vehicle into which you can make an annual non-deductible contribution (up to $5,000 per adult in 2009) that will grow without incurring taxation.

Withdrawals can be made at any time for any purpose and are also exempt from taxation.

Unused contribution room can be carried forward indefinitely and any amounts withdrawn in a year will be added back to your contribution room for the following year.

Here are just a few ways that you can put a TFSA to the best use for you:

• A source of emergency funds The rule of thumb is to set aside an emergency fund equal to three months of your after-tax income. A TFSA gives you an easily accessible source of tax-free emergency money that can be paid back to your TFSA without penalty once the ‘emergency’ is over.
  
• An addition to your RRSP If you are in a lower tax bracket, you may have a small amount of RRSP contribution room that will not deliver much of a tax benefit. And if you need to withdraw some RRSP dollars for emergency use, you’ll pay a tax penalty. A TFSA will allow you to have tax-free emergency funds on hand and you can later move your tax-free TFSA funds into your RRSP when your income is higher and the RRSP deduction is more valuable.
  
• Saving for a home Under the Home Buyers Plan (HBP) you can withdraw money from your RRSP for a down payment – but there is a $20,000 limit on withdrawals, a fixed repayment schedule and strict eligibility requirements, including meeting the definition of ‘first-time home buyer’. Alternatively, you can choose to save for a home through your TFSA and still enjoy the tax-free benefits without the restrictions of a HBP.
  
• Saving to start a business A TFSA can be a tax-effective way to save the initial equity required to start a business. And unlike RRSPs, a TFSA can be used for security when obtaining bank financing.
  

There are plenty of other TFSA strategies that could work for you. Your professional advisor can help you make the best choices for your situation.

This column, written and published by Investors Group Financial Services Inc. (in Quebec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.

John Scholl B. Mathematics, CGA,
Wealth Management & Financial Planning Investors Group
200 - 24 Queen Street East,
Brampton, Ontario L6V 1A3
( Tel. : (905) 450-2891 X529