First quarter update.
The positive momentum in capital markets continued through the first quarter of 2013, with U.S. and world stock markets posting double-digit returns and strongly outperforming bonds.
The MSCI World Index climbed 10.1% in Canadian dollar terms, led by robust results from the U.S. and Japan. In the U.S., the S&P 500 Index reached a record closing high and finished the quarter with a gain of 12.9% (in Canadian currency). The U.S. market's advance was led by mainly defensive sectors, such as health care, consumer staples and utilities, while those sectors that are most responsive to a growing economy, including technology and materials, were laggards. Several other global equity markets made solid quarterly gains, including those in Australia and the U.K. Japan's Nikkei Index posted the strongest increase for the period, adding almost 20% local currency terms. Stocks in that country benefited from a combination of expansionary monetary policy and fiscal spending, and central bank efforts to weaken the yen in order to boost exports. Markets in Hong Kong and Shanghai, however, were negative for the period, reflecting concerns about China's slower growth rate and anticipated economic reforms.
Canada's S&P/TSX Composite Index was also positive, posting a quarterly gain of 3.3%. Although most sectors added value, Canada's resource-heavy market was affected by lower commodity prices, and the materials sector recorded a loss for the period. Results for the financial sector also were lacklustre.
The bond market was stable during the quarter, generating modest returns. Canadian and U.S. government bond yields were little changed, while yields for corporate bonds continued to decline due to strong demand. Inflation remained low and the U.S. Federal Reserve repeated its pledge to keep interest rates low until the country's unemployment rate declines to 6.5%. As a result, investors had little reason to expect higher interest rates in the near term.
The strength in stock prices over the past five months signals an important shift in investor sentiment. The S&P 500 Index, for example, was up 14.0% in Canadian dollars over the five months ending March 31, 2013. Investors have drawn confidence from the global economy's continued moderate expansion, particularly in the U.S., where corporate profits as a percentage of economic output remain at a record high and employment, consumer spending and housing data have all improved. However, concerns remain over new taxes and spending cuts related to the country's budgetary "fiscal cliff" that may cool consumer and corporate spending. The first quarter also brought a reminder that Europe's debt woes remain an issue, as ongoing recession fears and the 10 billion euro bailout of Cyprus rattled financial markets.
Given this backdrop, we continue to believe investors are best served by a diversified approach to investing - one that provides exposure to a broad range of investments from equities to bonds, depending on their personal objectives.
In closing, we would like to thank you for your business. If you have any questions or concerns about your account, please do not hesitate to contact us.
Peter, Richard, Claudio and Joanna
Do You Have a Plan B?
by Miranda - April 2013, financialhighway.com
While attending Journalism school, I listened as one of my instructors talked about the importance of having "F U money." He explained that preparing for an alternative future was vital if we wanted to maintain journalistic integrity.
My instructor was talking about being able to leave a job if we were asked to do something we didn't agree with. However, the concept also applies to creating a Plan B that you can call on in your financial life.
You Don't Know What's Next
Life is unpredictable. You don't actually know what's coming. My husband was told that, even though one of the universities he adjuncts for wasn't going to hire him, he could teach at least one class a semester for as long as he wanted. Well, now that isn't going to happen - no matter what the department head promised originally.
Now that this ironclad promise has turned out to be less ironclad than originally thought, my husband is trying to figure out what to do next. He missed out on applying for some great jobs because he counted on being able to continue working at a school he liked, with students he enjoyed interacting with.
You don't know what's coming. No matter how well you plan, or what promises have been made, things can change just like that. And you need to be ready for it. In my husband's case, he has another university that's already contracted him to adjunct in the summer and the fall, and he's going to use the extra time on his hands to apply for full-time positions.
But this is made possible by the fact that I am the primary breadwinner, and by the fact that our monthly bills are reasonably small, and that our mortgage is less than 1/5 our income. We can afford the lower income my husband will be bringing in.
Do you have an alternative plan? If you lose some of your income, or if an opportunity you were sure about fails to materialize, would you be in financial trouble?
Or do you have a Plan B?
Creating a Plan B
While it's not fun to think about what could go wrong, it helps to have a Plan B. As you consider the possibilities, here are some items to keep in mind:
- What can you cut? Look at your budget. While you don't necessarily need to trim the fat right now, it's a good idea to consider what you can do if you need to start pinching pennies later. Identify the first items that need to be cut from your budget, so you know what has to go when you run into trouble.
- How big is your emergency fund? Consider your emergency fund. Is it large enough to support you as you try to make your business venture work, or as you look for a new job? Can your emergency fund help you meet your deductible payments in the event of a medical catastrophe?
- What skills do you have? Complete a skills inventory. Look at your skills and knowledge, and think about how you can apply it to different career settings. In many cases, it makes sense to look at how your skills would translate to a different career field. Don't assume that you have to keep doing the same thing over and over again.
- How divorced is your income? Don't forget about your income diversity. Consider developing other sources of revenue so that you aren't in complete trouble if one revenue stream is significantly reduced.
You need to know that you have options to fall back on if something goes wrong. It makes sense to think about what's next, and whether you have the resources to meet it.
From what you would do if your life partner died, to how you would handle a job loss, you need to have an idea of what you would do next. It's important to build your assets so that you have more financial options, and consider alternatives to what you're doing so that you don't get stuck in despair when things don't go your way.
What's your Plan B?
View original article here.
What Type of Budgeter Are You?
by Mr. Budget - March 2013, simplebudgetblog.com
Budgeting is a fine art, and like art, there are many ways it is done. Some people use a ledger book while others prefer a software package like Quicken to help sort out their finances. There are even young families across the globe still utilizing a yellow legal pad and pencil to shape their weekly budgets. Just like the many ways a budget is prepared, there are also different types of budgeters. Below are a few examples and the pros and cons of each.
The Preparer is someone who gets ready to put together their budget right after the last one is completed. A likely user of a financial software package, the Preparer has categorized every expense and income they can think of. When it comes time to put together the next budget, the Preparer knows what goes where, eliminating any questions on what is available for clothing, groceries, or incidental spending.
Pros: There is a name for everything in the Preparer's budget, meaning there are no leftover funds usable for inappropriate spending.
Cons: Because it all has a place in a Preparer's budget, there is no wiggle room for unexpected expenses. Of course, the Preparer has an emergency fund stocked with three to six months of household expenses, alleviating potential issues.
The Improviser also embarks on a budget plan; however, every dollar may not have a specific location. While the necessities are separated out, the Improviser also has a category namedSpending in their ledger. According to the Improviser, this is where the remainder of their funds go for 'just in case' situations like emergencies, unforeseen expenses for groceries or fuel, or that last minute anniversary dinner they completely forgot about.
Pros: The Improviser is flexible. While having numerous categories on their ledger, they are willing to move funds around to make sure enough is available for what is needed during the budget period.
Cons: Improvisers are more susceptible to being without funds if a real emergency comes to pass, meaning they will need to unnecessarily dip into their savings account.
The Lingerer has the budgeting software, but they haven't installed it on their computer. Willing to spend now and record later, the Lingerer may take several days or weeks to record their receipts and determine what is available for items like rent, mortgage, groceries, or utilities. If their bank account balance is looking low, the Lingerer replenishes it from their savings account or other fund used as an investment toward their future.
Pros: At least the Lingerer thinks about putting together a budget and eventually looks at their receipts.
Cons: The Lingerer is the most likely candidate to dumbfoundedly scratch their head when attempting to figure out where all the money in their savings account went. They're also the prime suspects to slap their forehead in idiotic frustration when they finally record their receipts and realize where all the money went. When this occurs, the Lingerer quickly becomes the Preparer.
View original article here.
2012 Taxes: Four tax credits to consider
by Madhavi Acharya-Tom Yew - April 2013, thestar.com
There's money to be saved on your 2012 tax return by claiming available credits. The one new credit is the Family Caregiver Amount. If you have a dependent with impaired physical or mental function, you may be eligible to claim an additional $2,000 in tax credits.
The Star asked Cleo Hamel, a senior tax analyst for H&R Block Canada in Calgary, for some tips on common tax credits.
Children's physical fitness credit: Parents can claim up to $500 per child per year for sports and fitness activity fees paid in 2012. Claiming the full amount results in a tax credit worth $75 for either parent. That's for children under the age of 16.
It has to be a sustained activity of at least 30 minutes for children under age 10, and of one hour for older children, and must run a minimum of once a week for eight weeks. If it's a sports or fitness day camp, it must run for five consecutive days.
The CRA says eligible activities include hockey, soccer, golf lessons, horseback riding, sailing, and bowling. An after-school program or a day camp over summer may not qualify.
"This really has to be a structured activity, specifically for children where fitness is the key focus,' Hamel said.
Parents of children with disabilities up to age 18 are eligible to claim an additional $500, for a total of $1,000.
Children's art credit: Parents can also claim up to $500 per child on art-related activities for a maximum of $75. There are enhanced guidelines for children with disabilities.
The activity must be for a minimum of eight weeks or for a camp, five consecutive days, according to CRA. The program must develop creative, intellectual, or interpersonal skills, have a focus on wilderness, or provide tutoring in academic subjects.
The tax credit is particularly worthwhile for parents who have their children in Girl Guides or Scouts, Hamel said.
Tuition, education and textbook credits:These credits allow students to reduce their income taxes by taking some of their biggest expenses into account. The claims must be based on fees paid during the calendar year, as opposed to the academic year.
Students who owe taxes can claim the credits to reduce their federal tax payable to zero. Unused amounts can be transferred to a spouse or common-law partner or parents and grandparents.
The credit can be carried forward indefinitely, or transferred up to a maximum of $5,000.
Keep in mind that the tax receipt goes to the student first, and then the student must transfer it.
"The biggest thing I hear from parents is, "I don't understand why I'm the one paying the tuition and the student, my child, is the one getting the tax receipt for it,' " Hamel said.
Transit pass credit:These passes are deductible for commuting. You can also claim the cost of shorter duration passes and electronic payment cards if you make a minimum number of trips during one month.
Combine all the receipts and allow the person who gets the most benefit to claim them, Hamel said. Keep the receipts and the passes.
The Healthy Homes Renovation Tax Credit: Ontario residents 65 years or older can qualify for a tax credit to help with the cost of renovating their home.
You can claim up to $10,000 of eligible home improvements and up to $1,500 back (15 per cent). Keep your receipts, and be aware that not all renovation work qualifies. Examples of what would be eligible include non-slip flooring in a bathroom, a hand-held shower and easy-to-operate door locks.
View original article here.
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