Managed Money Reporter Newsletter Editors: Carl Spiess & Allan McGlade

Issue 215 March 2005

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Featured Articles

• mutualfundreporter.com Named One of Canada's Best 
• Tax Tips - What's your Tax Rate
• Canada Savings Bonds On Sale
• Update on 30% Foreign Content Cap Elimination
• Fun with Numbers - How Much Foreign Content?
• Recommended Site of the Month
   

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Mutual Fund Reporter Website Named One of Canada's Best 

Several weeks ago, the Globe and Mail recommended the site you are visiting (www.mutualfundreporter.com) as one of the best independent sources for fund information in Canada, along with www.macleans.ca and www.moneysense.ca. 

Allan and I are very pleased to continue publishing our news and views for you, our clients, and for members of the public who care to visit our site and read our information as well.  The newsletter has been running since 1986, and has been online since 1996.

The complete Globe article with other site recommendations can be seen as a .pdf by clicking the image above, and it is also on the web at the Globe and Mail's related site:

http://www.workopolis.com/servlet/Content/qprinter/20050228/RCARR28 

We always welcome feedback on our site, and would be pleased to cover any topics you want to read about in future issues.  Please contact us with your comments.

Tax Tips - What's Your Tax Rate?

Over the next few weeks, Canadians will be completing their 2004 income taxes.  All required 2004 tax slips will be mailed by March 31st, as per the Scotiabank website. http://www.scotiabank.com/cda/content/0,1608,CID7622_LIDen,00.html 

Here is a graphic showing why it is important to review your tax bracket, and see what your marginal tax rate is. The marginal rate is the amount of tax you pay on each dollar earned over a particular income level.  Conversely, the marginal rate is also exactly equal to your RRSP refund rate.  So for example, someone earning between $35,000 and $58,000, is in the 31% marginal tax bracket.  Once income is over $70,000, the tax on every additional dollar earned is over 43%.

Dividends and Capital gains income are taxed at lower rates though.  For more information on your tax rate on various kinds of investments, see:

http://www.ey.com/GLOBAL/content.nsf/Canada/Tax_-_Calculators_-_Personal_Tax 

It is for this reason, that we recommend dividend funds for your non-registered investment accounts (see our list of recommended dividend funds).

One final topic this month on the subject of taxes.  If you are wondering about how to claim any taxable distributions from your mutual funds, visit Mackenzie's Tax guide:

http://www.mackenziefinancial.com/en/pub/tools/tax_estate/tax/tax_guide.shtml 

which has terrific information on Mutual Funds and Taxes.

Canada Savings Bonds On Sale

For our more conservative clients, here is a reminder that Canada Savings Bonds are on sale again until April 1st.  The rate, however, is not an April fool's joke - it is really only 2.29% for the 3 year Premium Bond if held for the full 3 years.  For details, please see http://www.csb.gc.ca/eng/ 

We also offer GICs (Guaranteed Investment Certificates) and a variety of other Bonds for clients seeking other fixed income investment options with higher rates.  Rates on 10 year bonds are still over 4.5%.

More on 30% RRSP Foreign Content Elimination

The recent budget proposed eliminating the 30% foreign content limit.  This will simplify RRSP reporting and eliminate the need for RRSP clone funds.  We expect that all clone funds will be merged into their respective regular fund versions in the coming months.  However it appears that the actual implementation of this will still take some time.

The budget passed in the House of Commons on the week of March 7th, but has yet to receive Senate approval and royal assent. Due to the minority government, many fund companies will chose to wait until the legislation becomes law before making changes.  In addition, there is a need for unit holder votes to wind up the clone funds, and the fund companies are appealing to the regulators to waive the requirement for these meetings.  Ironically, if unit holder votes are deemed to be required, it will cost money to wind up the clone funds to eventually save everyone money.

In the interim, some fund companies, including Brandes and Fidelity, have lowered the MERs on their clone funds, until the exact mechanisms for winding up the clone funds can be established.  While the cost differences are minor, we applaud these decisions.

See the press release from Fidelity http://www.newswire.ca/en/releases/archive/March2005/10/c3241.html 

Fun With Numbers - How Much Foreign Content?

We recently updated our foreign content page with research on the optimum amount of foreign content for Canadian investors.  Over the last 20 years, foreign markets have outperformed Canada by over 2% a year.  But foreign investments have higher risk due to currency fluctuations, like the rising Canadian dollar that has lowered foreign returns over the last two years.  

To minimize your overall portfolio risk, while enhancing long term returns above those generated by pure Canadian investments, we recommend Canadians have roughly equal amounts of Canadian and foreign equity exposure.

Please contact us if you wish to have an Asset Allocation review of your foreign content holdings.

Mutual Fund Reporter Recommended Website of the Month

Since the Globe and Mail had nice things to say about us last month, it is only fair that we link to one of  their sites.  www.globefund.com has been a past recommended website of the month, and we continue to recommend you have a look.  In particular, the way they chart funds, showing the actual performance with dividends reinvested (as opposed to just price history) is a very helpful representation of fund performance.