July 2011
In the summertime, when the weather is hot.....




As we reach the mid-point of 2011, there is a sense of déjà vu in the air as many of the issues in the news at the end of 2010 such as the European sovereign debt crisis and the slow US economic recovery, continue to dominate headlines. In fact, looking at today's headlines would give the impression that 2011 has not been a good year. On top of the Sovereign Debt crisis and US recovery, we have seen political unrest in the Middle East and Northern Africa as well as a horrific earthquake and tsunami in Japan.

Despite these headlines, there are reasons for optimism as we enter the second half of the year. On the sovereign debt front, Greece has recently passed a sweeping austerity program that allows for the deployment of additional bailout funds which will help create a foundation for long term economic recovery. Further, these measures also provide confidence that other struggling European countries such as Portugal, Spain and Ireland will also be able to get back on track.  

The earthquake in Japan has had a more pronounced effect on the global economy than had been forecast as the technology and the automotive industries were slowed by parts shortages caused by the quake's aftermath. However, Japan has begun to rebuild and these shortages should prove to be temporary and production levels will return to normal.

In the US, concerns have been raised over the level of economic growth; however economic growth is expected to remain positive for 2011 and 2012. While unemployment remains high, further research indicates that the unemployment rate among skilled workers is at or near normal levels. Additionally many corporations have posted strong earnings results and in so doing now have significant cash reserves that could be deployed into the economy over the next several months.

In Canada, our economy remains strong. While there have been concerns over the high cost of energy and its impact on inflation, it is expected that inflation will remain within the Bank of Canada's target range for the foreseeable future. On this front, slower economic activity in the developing world has allowed for a pullback in commodity prices, which should also help alleviate inflationary pressures over the short term.

So while news headlines may paint a gloomy picture, the reality is that the economy as a whole isn't as bad as one might think. From an investment standpoint, while it is unlikely that the double digit returns that equity markets have experienced in each of the last two years will be repeated, the foundation is in place for reasonable returns.  


We wish to thank you for your continued support and we look forward to working with you in the months ahead.


Have a safe and happy summer!  

Peter        Richard       Claudio

Financial Literacy - only half the battle

Filed by Steven Lamb, June 15 2011 , originally published on Advisor.ca 


A recently released study of financial literacy among Ontarians found that most people had a basic grasp of financial concepts yet struggled to apply them to their personal situations.

"We found that certain financial concepts are reasonably well understood by the majority of Ontarians," says Tom Hamza, president of the Investor Education Fund. "But this study is also an important signal for the financial literacy community to focus on the application of knowledge, which seems to be where the real problem is."

Among the positive findings, 90% of survey participants were able to spot signs of fraud, while 79% understood the tax benefits of contributing to an RRSP. The idea that risk and return are linked was familiar to about two-thirds of respondents.

But understanding the concept is a far cry from being able to put it into practice. The study found that many were unable to solve a practical problem regarding compound interest.

Most were also unfamiliar with which investments generate income or preserve capital and which grow assets. This was especially true of respondents ages 50 to 64.

"Literacy is partly about knowing the words and definitions, and that's an important start. But we must focus on also inspiring the practical application of knowledge to help change behaviour," says Hamza. "Knowledge without real-life application is insufficient, and we need to focus on educating people to use what they know."

A separate study conducted by Financial Finesse found that women were "significantly behind in virtually all areas of financial knowledge." Given that women tend to live longer than men, this is particularly troubling.

Only 25% of women said they felt confident about how their investments were allocated, compared with 42% of men. Sixty-three percent of female respondents said they felt they have a handle on their cash flow each month, compared with 80% of men.

Where women and men were most alike was in retirement preparedness, but this is hardly cause for celebration. Only 12% of women and 19% of men said they were confident they would be able to replace 80% of their income in retirement.


When it comes to a financial plan, size doesn't matterl

by Preet Banarjee at the Globe and Mail

Published Friday June 24, 2011 


It's not the size that matters. It's how you use it. I'm talking about financial plans.

Everybody should have one, but one size does not fit all. That's true whether you are a DIY investor or are using a full service adviser.

As the financial advice industry evolves, advisers who traditionally provided just investment advice are increasingly offering comprehensive financial planning. Even if they do not have the certified financial planner (CFP)designation, many will have access to internal financial planning support teams or outsource to external financial planners. These plans can vary in length, with some over 50 pages long. So should you feel like you're missing out if your plan is lacking in girth?


Not necessarily.


If you are new to the workforce, your financial plan will not require the better part of a forest to be sacrificed. Unless you inherit a complex estate when you are young, you will likely have the same goals as everyone else: paying off student debt, saving for a mortgage, monthly budgeting, starting an investment plan and getting the right types and amounts of insurance to disaster proof your life. A plan written for a retirement date 40 years from now makes a lot of assumptions, many of which will turn out to be false simply because no one knows what the future holds. Who knows how many children you will have, let alone spouses?


The focus at a young age should be on putting away as much as you can, investing prudently, getting debts under control and hoping like mad the stars align and allow you to retire early.

But retirement is so far off that your confidence in a 50-page plan at this life stage is likely to be minimal. Most twentysomethings have no clue what the next ten years has in store for them, never mind the next 40. Younger investors are often better off with a plan that helps them establish good long-term habits while focusing on shorter-term goals.

Fast forward a few decades and hopefully those good habits have translated into an estate that needs more expert handling. The range of possible outcomes to your life has narrowed, and as retirement approaches it becomes a priority.


Your financial plan will become more detailed, and hence thicker.   The process for DIY investors is the same: you start off with some rules to live by and over time, you formalize your plan on paper. As a DIYer, your early-life and later-life financial plans might be smaller than the commensurate plans of your advice-seeking counterparts. But as long as your financial plan meets your needs, it doesn't need to be the biggest on the block.


Issue: 7
Financial Markets
In This Issue
Financial Literacy - only half the battle
When it comes to a financial plan, size doesn't matter
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Peter Bailey
Worldsource Financial Management
272 Lawrence Avenue West, Suite 203
Toronto, Ontario M5M 4M1