Rick Lluis , CFP - Financial Planner

01/15/2021

It's that time of year!

It's TFSA and RRSP season, which means it's a great time to make moves and either add to your investments or start them!

Let's take a look a closer look at the TFSA and RRSP.

TFSAs:
- They allow you to invest and receive income in the form of interest, dividends, and capital gains totally tax free.
- The tax free nature of the TFSA remains regardless of your tax bracket.
-You do not get taxed for withdrawing from it - it is not counted as income.
- As of Jan. 1, 2021, an extra $6,000 of contribution room has been added to everyone's TFSAs (even if you don't have one)
- TFSA contribution rooms are unique to everyone but the current maximum is $75,500 and increasing every year. That's a lot of money that can be making you tax-free income!
- Can be used as an estate planning tool

RRSPs:
- Meant to be a savings account for retirement
- Works for people that expect to make less in retirement than they do in their working years.
- When you contribute to an RRSP you save taxes based on your tax rate. Then when you withdraw that money in retirement you pay taxes ideally at a lower tax rate than when you initially made the investment.
- Can be used to split your income with a spouse and pay less taxes overall as a household.
- Can be used as an estate planning tool

Reach out to me if you want to learn more. Now is great time to get started or revisit your existing investments and financial plans!

Rick Lluis
[email protected]
250-507-5574

11/01/2020

I wanted to share this video about the economic policies of each US presidential candidate. If you've never seen a video by Economics Explained before, I highly recommend subscribing to learn more about the economic world.

The narrator spend the first few minutes explaining how bills get passed and then moves on to explaining the actual policies.

This video was made possible by our Patreon community! ❤️ See new videos early, participate in exclusive Q&As, and more! ➡️ https://www.patreon.com/Economics...

10/20/2020

If you're interested in learning more about responsible investing, sign up for our VIRTUAL webinar presented by RBC GAM!

We will discuss what responsible investing looks like in the current market environment and how you can make a difference.

Thursday Oct. 29th at 11am
Sign up link below

https://rbcteams.webex.com/rbcteams/onstage/g.php?MTID=e15b01b69b225c4f3ef95d07d5e059992

No need to dress up.
Grab a coffee,
Get comfortable,
and enjoy!

10/19/2020

I WILL NEVER NOT KEEP SAYING THIS:

It's about the long term!!!

This graphs shows it all. Yellow line shows MONTHLY returns over the past 20 years for the RBC Select Balanced Portfolio. It's a wild ride to say the least.

On the other hand, the blue graph shows the long-term growth of the same portfolio. Much nicer to look at, right?

There will always be uncertainty in the markets. Trying to time the market or "wait until things settle down" is an exercise in futility.

Start planning for your financial future today because you should've started yesterday.

10/16/2020

What a Blue Sweep may look like

2020 has been full of surprises, which has many investors on edge. And now we're coming up on the US elections, which lend their own list of uncertainties and possible surprises.

Now, it is not lost on me that polls can be highly unreliable. However, polls are giving Biden the higher probability of winning. In light of the growing support, markets have started to grapple with the idea of a “blue wave”, where Democrats sweep both Presidency and Congress.

There are positives to this scenario, such as less uncertainty going forward, enhanced government stimulus, and other market-boosting changes. However, a unified Democratic government isn’t high on everyone’s wish list. Investors have concerns about Biden’s plans to reverse some of Trump's previous tax cuts. This, among other items, would reverse half of the Trump corporate tax cuts that have boosted U.S. corporate after-tax earnings by 7-8%.

But just how bad can tax cuts really be? Let's look at this graph of equity returns in years where there were tax increases implemented. As charted, in the instances of tax hikes since 1950, S&P 500 returns have actually fared well.

In showing this graph, I'm not suggesting that markets prefer tax hikes. Rather, that the data suggests that markets have historically been able to overlook them because of other factors at play.

In this regard, aspects such as an associated increase in government stimulus, economic growth, central bank actions, inflation, and investor sentiment have managed to overwhelm the influence of tax increases in the past.

So what do you do? Well if you're planning for the long term, there is compelling evidence that you need not concern yourself with the outcome of the elections or any policy item when it comes to your long-term investments.

Make sure you have a proper plan (I can help with that) and are able to stick to it (I can also help with that)

09/18/2020

WHEN IS THE BEST TIME TO INVEST?

We have had a little bit of everything in 2020. We started the year with markets at all-time highs. Then the market sold off considerably. Today, many markets are back to near all-time highs.

Unfortunately, most clients lack the confidence to invest in a volatile year like this one. The following are the two scenarios we see over and over:

1. Scared to invest during a pullback

Clients may generally accept the benefits of “buy low, sell high”. But when the market begins to fall, often their first instinct is to sell.

It’s extremely difficult to forecast where markets will go with any kind of consistency. Yet, people are hesitant to invest into a falling market – a strategy that has delivered excellent results.

This is highlighted in the example below. It identifies every 5% drop for the RBC Select Balanced Portfolio. Looking back to 2000, the average return 12 months later when buying these dips is +5.9%. Importantly, this isn’t a market timing exercise. In fact, many of these 5% dips were part of larger drawdowns. But even without any ability to time the market, buying into weakness delivers strong results.

2. During Market Strength

Paradoxically, the other common excuse for not investing is that the markets are too strong. The fear in this case is that a better time to invest will arrive. Unfortunately, this can also be a mistake. Not only do markets often go long stretches without a significant pullback, but being on the sidelines during these times can be costly in terms of missed growth.

In this example, we’ve identified every all-time high for the RBC Select Balanced Portfolio – a similar situation to the one we’re in today. Looking back to 2000, the average return 12 months later when buying in these environments was still a healthy +4.5%, meaning the decision to wait for a better entry point can be very costly.

Ultimately, history shows the time-tested, successful approach is to invest regularly. By investing regularly, investors won’t miss out on attractive buying opportunities or be left on the sidelines in bull markets. It also means they don’t have to worry about timing their entry point back in -- one of the trickiest decisions to get right

08/13/2020

The World is your Oyster🌎

Home-country bias is real. I've been guilty of it in the past. Most Canadian investors like to invest in their own country - and I don't blame them! Canada is our home and we have a resilient economy.

However when it comes to investing, too many of us put too much of our funds into Canada.

Your home, your rental properties, your job, and your retirement pension are all in Canada. Add to that your RRSP, TFSA and other investments in Canada and you're WAY too exposed to the Canadian economy.

Take a look below to see the best and worst performing global economies over the years and see where Canada compares (the red line).

You'll see here that investing in any one market will give you a very bumpy ride. However, if you were to diversify among different countries, your ride would be much smoother towards your goals.

What I'm saying is: don't put too many of your eggs into the Canadian basket!

At RBC GAM, we have investment teams located in key markets across the globe. These professionals are positioned to deliver broad global perspective and deep local knowledge. This gives our clients access to the world through a customized plan - helping to reduce volatility and keep them on track toward their long-term financial goals.

Want to chat global investing? Send me a message or call me at 250-507-5574

07/14/2020

A lot of people I speak to right now are asking me if they should just wait to invest in light of everything going on right in the world.

Take a look below at Matt Carthy's, Senior Analyst at RBC GAM, write up:

Instead of fixating on the ever-elusive "perfect" entry point, try this:

The dollar-cost averaging strategy (DCA)

Whether you're brand new to investing or have some cash sitting on the sidelines waiting to be used. DCA is a helpful strategy for setting a client’s investment portfolio up to its long-term targets. In this respect, a DCA strategy can be an extremely helpful tool in mitigating the effects of market timing.

For evidence of this, let’s go back to the global financial crisis – a historical proxy of today’s uncertain climate. We’ll review the experience of three hypothetical investors each sitting on $100,000 in cash in September 2008. It was from this point the S&P 500 declined over 46% in the ensuing months.

• Investor 1: Gradually entered the market with a 12-month DCA strategy beginning in September 2008.

• Investor 2: Managed to perfectly time the market with a lump-sum investment on March 9, 2009.

• Investor 3: Delayed investing until signs emerged of an improving backdrop. Some of the first glimmers were provided on December 4, 2009, when the U.S. reported the first decline in the unemployment rate during the financial crisis.

(SEE IMAGE BELOW FOR RESULTS)

• Even though markets experienced a significant leg-down after the DCA investor started deploying their cash, the gradual nature of the strategy helped protect the investor’s portfolio. It also ensured it was properly positioned to benefit from the subsequent recovery.

• Undoubtedly, the investor that made a lump-sum investment at the bottom led the pack. But what’s not shown here is how difficult and unnerving it would have been to deploy a lump-sum on March 9, 2009.

• In comparison to perfect timing, a more realistic scenario that involved waiting for some of the economic clouds to part before investing in December 2009 proved costly.

As the COVID-19 pandemic evolves, nobody knows what the future holds. For clients that are feeling overly cautious about re-entering markets, a DCA strategy can prepare them for whatever lies ahead. By gradually deploying any built-up cash, a DCA strategy helps clients make the important first step of getting off the sidelines. What’s more, it also helps provide a smoother investment experience – key to ensuring they stick to their long-term financial plan.

07/10/2020

Food for thought - homeowner edition:

On Wednesday of this week the government of Canada tried their hardest to convince its citizens that plunging deeper into debt would be OK.

Well, I'm not here to argue for or against it. However I would like to offer a thought. This thought is by no means uniquely mine and is more of a hypothetical.

Governments do not have money - it's our (the taxpayer's) money. So as the national debt increases by astronomical amounts, the bill will fall on us, the citizens.

Will the government increase income tax to try and pay for some of this debt? Maybe.

But why not go for where the money is? You see, the average Canadian has a large percentage of their wealth in real estate - in their home. Right now, when you sell your primary residence you don't have to pay capital gains tax. If you're a homeowner who bought years ago and wants to sell now, you get the profits tax free.

Sometimes the gains made by someone selling their primary residence of 5 or 10+ years is massive - hundreds of thousands of dollars in profit.

I'm just here to say: as the government gets more and more desperate for income, they may take aim right at where the money is - your home.

🏠

07/07/2020

WHY IS THE MARKET NOT TRACKING THE ECONOMY?

Everyone likes to see their investments go up in value. However, in the current market, something may not feel quite right. The recent rally has seen equity markets enjoy a strong rebound off the March 23 lows. Yet this is all happening alongside sustained growth in COVID-19 cases and rampant unemployment.

So, what gives?

Firstly let's discuss what the stock market is compared to the economy.

- The Stock Market reflects the consensus view of the health and future earnings potential of publicly traded companies. In the media, the stock market is often cited as the S&P 500, a composite of 500 large US companies. Many of these companies are global - think Microsoft, VISA, Amazon.

- The economy refers to how money is made and spent. This usually represents all activities from consumers, corporations, financial institutions, and governments. In the headlines, the economy is often represented as Gross Domestic Product (GDP)

It's natural to think that the stock market should closely track the economy but if you look at the chart below, you'll see just how little the S&P 500 tracks US real GDP growth.

Lets look at some reasons why:

1. The stock market only represents a portion of the whole economy. Like we said above, it only looks at publicly traded companies whereas the economy takes everything else into consideration as well

2. The stock market is forward looking. People pay a price today based on what they believe will happen in the future. The economy looks backwards. It considers data of things that have already happened.

3. The stock market mostly reacts not on absolute values, but on relative values. This one surprises most people so let's think of how expectations shape your reality. Have you ever found yourself not liking a movie that much because it was so hyped up by your friends? You thought it was good but you were underwhelmed. Same thing goes with the markets. Expected good or bad news is already reflected in today's price. That means that the actual news has to be significantly better or worse than the expectations to make the market move.

Now you know a bit more about the reasons we're seeing what we're seeing today!

As always, if you have any questions or want to discuss your investments or financial plans, just reach out!

Rick

07/06/2020

THE MARKET DOESN'T WAIT FOR THOSE ON THE SIDELINES!

It's easy to look at a chart and pin-point exactly where it "would have been nice" to enter and to exit the market. Seems easy in retrospect doesn't it?

What many new and even experienced investors don't realize is that emotions comes into play when you have to make these kinds of decisions.

Take a look at the chart below - it shows all the different possibilities should you had sold in March after the big decline.

For individuals who have spent years saving towards their long-term goals, this single decision could mean an unrecoverable loss. Rather than completing a near round-trip within three months of the lows, they cashed out. Now their dwindled retirement savings may be earning as little as 1% or less, leaving them up to 30% worse off than if they held in through the volatility.

The probability of you getting out right before the big down move and getting back in right at the bottom are minimal. In fact, you would have probably gotten out sometime AFTER the initial down move due to some panic selling.

Well, because of the subsequent recovery we have had in the past months, you'd be worse off than had you just stayed in and followed your original plan!

In some cases, you'd be much more worse off...

Risk, to me, is the single most important thing in investing. You MUST take risks in order to secure that financial future you dream of, but it must also be taken extremely seriously.

Sometimes the biggest risk in investing is not the investments themselves, it's YOU. It's your emotions getting in the way of your time-proven strategy.

Part of my process is talking you through all the possible risks inherent in investing and of course, making it abundantly clear that you are not to jump ship just because your investments had a bad few months or even year.

This is why working with an advisor is so BENEFICIAL! Sometimes you're your own worst enemy, and I'm there to remind you of that and to keep you accountable to the journey you agreed to be a part of in the first place.

Reach out if you have any questions!

Rick

06/26/2020

Some interesting developments:

The Repo Man, an industry that thrives during the usual recessions, is not thriving right now. People who were on the verge of being visited by the Repo Man before the pandemic are surviving.

Because of CERB, some lower income households are actually doing better than they were doing before the pandemic.

So let's see what happens as restrictions ease and as government payouts start to fade.

Will the economy be ready to stand on its own two feet?

Whatever happens, it's important to have your assets working for you. Making sure you have an adequate budget, a financial plan and investment strategy will help you thrive now and in the future.

-------------------------------------------
"But it is also worth dwelling for a moment on the fact that the recovery so far is far from organic. It has been supported by giant government cheques. Even if the stimulus is only withdrawn gradually – avoiding the much-feared fiscal cliff – we have yet to establish if economic activity can be sustained under more normal conditions."

COVID-19 infections mount