About Tax

Income taxes are a critical aspect of financial planning. Being aware of the implications of tax on a portfolio of investments is a necessary first step to managing tax liability. To find out more about general tax information or to learn about potential opportunities that will allow you to optimize your tax situation, please visit our Maximize After-Tax Returns section.

About Investing

The more you know about investing, the better you can communicate with your financial advisor. We have compiled information that defines different investments styles that are used by different investment managers. 

Growth vs. Value

Portfolio managers can often be identified by their investment style. These styles are commonly categorized as growth, value, and often a hybrid of the two. The value manager looks for inexpensive stocks that are often out of favour. Many stocks that fit this criterion are cyclical stocks at the end of their business cycle. Managers who follow a value approach search for assets that are undervalued or where the manager feels the market may not be recognizing the full potential for that company or industry. The strategy is to buy companies when prices are depressed and sell them when their market value rises. Growth managers look for companies with a track record of rapid growth in sales and earnings and the potential for more of the same. The belief is that the future growth of the company will, in a relatively short time frame, justify its stock's current high price and provide even higher prices in the future. Some investment managers choose not to commit themselves to any one investment style by using aspects of both during different phases of the economic cycles. Returns on growth stocks and value stocks are not highly correlated. By diversifying between growth and value managers, investors can help manage investment risk.

 

Top-Down vs. Bottom-Up

Managers who use a top-down approach will first analyze the economy and the market outlook and then select markets and industries that they feel will outperform. These managers are more concerned with macro-economic variables than individual companies. Fund managers who follow a bottom-up management style start by selecting promising individual companies. Only stocks or bonds that meet these managers' investment criteria are purchased. If they can't find what they want at a price they are willing to pay, they will hold cash until they do. Some fund managers combine top-down and bottom-up styles by determining not only the countries and industries in which to invest but also the individual companies.

 

Technical vs. Fundamental Analysis

Some portfolio managers look at the fundamentals of individual stocks, while others invest based on technical analysis. Fundamental analysts spend time poring over annual reports and visiting companies in an effort to glean information about a company's financial health. Technical analysts pore over charts of stock prices and economic data in an attempt to divine future trends. Technical analysis has seen a resurgence in use due to the prevalence of accurate real time market information.

 

Interest-Rate Anticipation

This technique used commonly by fixed income managers involves forecasting and analyzing the direction of the change in interest rates, the degree of the change across maturities and the timing of the change. Interest rate changes have far-reaching effects, but can also directly impact prices of financial instruments like bonds. A correct forecast on interest rates can have a significant effect on a portfolio’s incremental returns.

 

Credit Analysis

Fixed income managers who employ this technique analyze financial statements in order to determine the overall creditworthiness of a company and its ability to meet financial obligations. This allows the manager to ascribe value to different portions of the capital structure and to then value the company’s securities. A more accurate assessment of the current and future value of securities enables the manager to add value by purchasing those securities that are undervalued and by selling those that are overvalued, generating incremental returns in the process.

Diversification

Many experts encourage diversification in many aspects including investment style, geographic scope, industry and asset class. Please consult a financial services professional in your area to assist you with constructing an appropriate portfolio mix.

 

About Registered Accounts

Registered Retirement Savings Plan,  or RRSP, is a tax-sheltered savings plan that allows you to earn income on a tax-deferred basis. Income earned within the plan is not taxed until withdrawn from the registered plan. Contributions to your RRSP can be deducted (up to your RRSP contribution limit) against your income on your annual income tax return which allows you to reduce taxes payable in the year of contribution.

An RRSP allows you to defer paying taxes on retirement earnings during your prime income earning years. Upon retirement, you can withdraw funds when you may be in a lower tax bracket.

Spousal RRSP
A Spousal RRSP is similar to a regular RRSP, except that a Spousal RRSP is registered in your spouse's (or common-law partner’s) name while you, as the contributing spouse, take a full tax deduction for all the contributions you make to the spousal plan. There are substantial income splitting tax savings available from a properly balanced spousal RRSP and personal RRSP.  Consult your financial advisor for more details.

Registered Retirement Income Fund
By the end of the year in which you turn 71 your RRSP must be deregistered or converted into another registered account type that pays income to you. Registered Retirement Income Funds (RRIFs) are the most popular conversion option for RRSPs.

Funds held in RRIFs are tax-sheltered like RRSPs, however, the federal government requires a minimum annual withdrawal based on your age or the age of your spouse. All withdrawals from a RRIF are included in your taxable income for the year.

With a RRIF, you and your financial advisor have control over your investments. You may change your asset mix or increase your annual withdrawal as your personal circumstance change.

Quick Facts For Investors

Working with your financial advisor to select a fund that meets your financial needs is the most important step in choosing to invest with us. Before you make a final decision, you should also consider the following administrative information in our Quick Facts for Investors section.