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How Long is Long Term?

By Carl Spiess, MBA

Do You Have The Discipline To Hold On To A Winner?

How long can you wait for your top performing fund to recover from a downturn? Could you wait 44 months for your fund to just break even?

A glance inside this issue of the MFR shows AIC Advantage fund as one of the top two performing funds over each of the last 1, 3, 5 & 10 year periods. Would you believe that a purchase of this fund in September 1987 took over 44 months to just to break even? That's right, almost four years before the fund even began to show a profit. Also, in calendar 1994, it was the fourth worst performing equity fund in Canada.

Case Example: AIC Advantage Fund

Example of $10,000 invested in AIC Advantage Fund August 1987 - April 1991

It was during this period that many clients holding AIC began to question how long they had to hold on - just how long is long term? In September of 1994 we sent a letter with recent news articles to all clients holding the fund at that time. We strongly suggested that we liked where AIC was invested and that they should stay the course. Now examining the recent 3 year performance of AIC indicates that the buy & hold strategy has obviously paid off for all of those who took our advice and held on for the long term.

During strong markets like we have had in the last 3 years, it is easy to get used to regular annual increases in value. This example shows that this is not the norm, patience is generally required to get those double digit 10 year performance numbers. Investors who are currently questioning the lackluster 4 year returns on their Asian funds would do well to remember the AIC case.

We can provide you with statistically calculated risk numbers for any of the funds you own or are considering. Remember, if you don't think you have the stomach for prolonged downturns, or periods of no growth in some of the more volatile funds, ask us about how to add balance to make your portfolio more conservative.

New Feature: ScotiaMcLeod hooks up with Quicken Financial Software

We are pleased to announce that ScotiaMcLeod is setting up an alliance with Quicken Financial Software, to allow our clients to view their investment accounts online. Look for more details about this exciting feature in next month's Mutual Fund Reporter.

Mutual Funds Continue to Attract Assets Despite Market Volatility

We just received the latest figures from the Investment Funds Institute of Canada. At the end of September total fund assets totalled over $283 billion, up from $20 billion just 10 years ago.

Not Talking About Money Has Its Price

Talking about money isn't easy. In fact, in many families, it's still considered taboo - so much so that one third of respondents to a recent Trimark Mutual Funds/ Environics Research survey said they avoided discussing money matters with their families entirely.

That statistic doesn't surprise psychiatrist and family business consultant Howard Book, who in his many years of practice has found that, "People are far more likely to talk about any aspect of their sex life than they are about their finances."

That's an unfortunate fact to family therapist and broadcaster Rhonda Katz: "People would be surprised at how open talk about money within families or between spouses can head off common crises and minimize family stress."

Financial Control Can Vanish in a Crisis

One reason people don't talk about their finances is that they haven't experienced a money crisis yet. It is easy to avoid money discussions when things are running smoothly, but look at the consequences of sticking your head in the sand about something like job loss or an unexpected requirement for long term elder care. These can create financial turmoil if they're not addressed and planned for. And they're becoming a fact of life for more and more Canadians.

Plan for More than Retirement

Canadians have recognized the need to plan their retirement: In 1996, a third of those eligible contributed to a Registered Retirement Savings Plan (RRSP). But it is necessary to consider financial planning for more than retirement.

Talking about issues like job loss or elder care can raise complex emotional issues. A conversation with elderly parents about their financial well- being is a role reversal: It is the parents who are naturally supposed to look after kids, not the other way around. By the same token, parents of grown children may be reluctant to ask their kids how they're doing.

The children might think that their parents are meddling, scolding, or are unwilling to let go of control. But as an example of the price to be paid for dancing around money issues, consider this: Two separate Trimark surveys reveal that while 65 per cent of respondents reported they would likely help pay for a grandchild's university education, just one percent of the grandchild's parents had actually asked for that financial boost.

New Money Booklet Can Help get the Ball Rolling

With the input of a panel of psychologists and money behavior specialists, including Dr. Howard Book and Rhonda Katz, Trimark Mutual Funds has prepared a booklet, You and Your Family... Talking About Money, which addresses:

• How attitudes towards money dictate spending, saving and relationship patterns
• Why dealing with money issues on a personal level with around you - may be difficult
• How to address some common and emotional money problems
• How to talk about money frankly and openly with a spouse, a child, a parent
• How to create openness about money and finances that can help you take advantage of the multigenerational transfer of assets

If you find discussing money matters difficult, think of the booklet as a real conversation piece. To receive your copy, simply call us at 1-800-387-9273 or call Trimark at 1-800-465-3399.

RRSP Conversion Deadline Nearing

If you turn 69, 70 or 71 this year you are required to convert your RRSP by Dec 31st of this year. In previous years most clients began structuring their investments for a smooth transition into a RRIF or an annuity at age 71. With the change in the rules, however, some people may find that their holdings have to be adjusted to support the earlier payments that are now required.

If you have to convert this year, or will be turning 69 in the next couple of years, and have not converted yet, now is the time to take a hard look at your options. Not all RRIF accounts are the same. We can help you sort out the differences.

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Need More Information?
Call your Investment Team at 1-800-387-9273 or E-mail us at carl_spiess@scotiacapital.com.

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rate(s) of return is (are) the historical annual compounded total return(s) including changes in (share or unit) value and reinvestment of all (dividends or distributions) and does (do) not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.  See more disclaimers ...

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