2018 · leif r. montin montreal [email protected]. alberta. william wood calgary se...

Canadian MoneySaver z https://www.canadianmoneysaver.ca z JANUARY 2018 z 1

CANADIAN CANADIANMONEYSAVER.CA

SAVERIndependent Financial Advice For Everyday Use - Since 1981

DIVIDEND & COMPANY NEWS • ETFS • TOP FUNDS • DRIPS • ASK THE EXPERTS

JANUARY 2018

PM40

0354

85 R

0990

4

$4.95

2018What’s New In Taxes? Brian Quinlan Page 20

Take Advantage Of Sector Rotation And Tax Policy Changes Keith Richards Page 8

Inflation, The Disease Of Money Brian Chang Page 23

MONEY

https://www.canadianmoneysaver.ca

New Tools & Discounts for MoneySaver Readers

We’re excited to announce two new, free research tools to help MoneySaver readers better monitor the markets and help ensure that

you’re choosing the right stocks for your portfolio. MoneySaver readers can now freely use these tools on our newly upgraded companion site, 5iResearch.ca

What the new, free tools will allow you to do: ➥ See the latest market performance summaries for all major markets worldwide ➥ See the top “Market Movers” including the largest gainers and decliners to help spot

new stock opportunities ➥ Our free company research tool is also now available at 5iResearch.ca/companies

and will allow you to see• The latest news on your companies of interest• Company performance data• Key ratios• Interactive charts & comparison tools• A summary of analyst buy/sell recommendations

For Canadian MoneySaver readers, we’re also offering a discount to our premium research, for a limited time, which includes:

➥ Access to over 70 conflict-free company research reports ➥ Learn from the 61,453+ member questions that have been answered and learn

what is at the top of investors’ minds ➥ Submit up to 24 investment questions per year to Peter Hodson and the 5i Research team ➥ Access our Income, Growth and Balanced model portfolios along with newly covered

companies

While the price of the membership has recently increased for 2018, MoneySaver readers can lock-in last year’s price for only

$159.95!

10%Off!

Happy Investing!Peter Hodson

Canadian MoneySaver Editor &Head of Research at 5i Research

For a limited time, redeem this discount by going to canadianmoneysaver.ca/5i

JANUARY 2018

EDITOR-IN-CHIEF: Lana SanicharEDITOR: Peter HodsonCONTRIBUTING EDITORS:Ed Arbuckle, Margot Bai, Robert Barney, Dan Bortolotti, Ian Burns, Bruce Cappon, John De Goey, Donald Dony, David Ensor, Ken Finkelstein, Derek Foster, Benj Gallander, Robert Gibb, Andrew Hepburn, Shelley Johnston, Robert Keats, Cynthia Kett, Ken Kivenko, Camillo Lento, Marie-Josée Loiselle, Alan MacDonald, Brenda MacDonald, Gina Macdonald, Robert MacKenzie, Ross McShane, Ryan Modesto, Caroline Nalbantoglu, Tim Parris, Peter Premachuk, John Prescott, Kyle Prevost, Brian Quinlan, Wynn Quon, Rino Racanelli, Colin Ritchie, Scott Ronalds, Norm Rothery, Stephane Ruah, Allan SmallDavid Stanley, John Stephenson, Brian Tang, Angelo Vicere, Becky Wong.

MEMBERSHIP RATES: All rates for Canadian residents are printed on the inside back cover. Non-residents of Canada may purchase the online edition only – at $26.95 for one year’s service.

Canadian MoneySaver (CMS) is published by The Canadian Money Saver Inc., 55 King Street West, Suite 700, Kitchener, ON N2G 4W1 Tel: 519-772-7632. Office hours: 9:30 am to 1:30 pm EST Website: http://www.canadianmoneysaver.ca E-mail: [email protected]

PRIVACY POLICY: CMS may make its members’ mailing list or e-mail addresses available to carefully screened compa-nies or organizations offering products or services that may be of interest to you. If you prefer not to receive these offers, send us your mailing label with “Do Not Rent” written on it. (Required statement. We do not rent addresses.)

Canadian MoneySaver publishes monthly with three double issues (July/Aug, Nov/Dec and March/April). Canadian MoneySaver is an independent, totally membership-funded magazine.

The information contained in Canadian MoneySaver is obtained from sources believed to be reliable. However, we cannot represent that it is accurate or complete. The views expressed are those of the writers and not necessarily those of The Canadian Money Saver Inc. Neither the information nor any opinion expressed constitutes a solicitation by us for the purchase or sale of any securities or commodities. Canadian MoneySaver is distributed with the explicit understanding that Canadian MoneySaver, its publisher or writers cannot be held responsible for errors or omissions. Shareholders of The Canadian Money Saver Inc, editors and contributors may at times have positions in mentioned investments/securities.

Copyright © 2018. All rights reserved.

No reproduction, transmission or publication of any of the contents of Canadian MoneySaver is permitted without the express prior consent of the copyright owner. To obtain permission to use any part of Canadian MoneySaver, contact Peter Hodson.

® – Canadian MoneySaver is a Registered Canadian Trade Mark of The Canadian Money Saver Inc. Printed in Canada ISSN: 0713-3286

We acknowledge the financial support of the Government of Canada.

Canada Post Publication No. 40035485

JANUARY 2018 Volume 37, Number 4

REGULAR FEATURES Shareclubs 4

Sharing With You 4

Dividend & Company News 5

Model ETF Portfolio 5

Best Annuity Rates 15

Ask The Experts 32

Money Digest 34

Canadian DRIPs with SPPs 35

Top Funds 36

Canadian ETFs 38

SPECIAL FEATURES

Venturing Forth To Learn About Investing Benj Gallander 6

Take Advantage Of Sector Rotation And Tax Policy Changes Keith Richards 8

Three Best Tax Savings To Do In Three Hours Hedley Dimock 10

Four Reasons It Makes Sense To Buy Life Insurance In Retirement Darren Farwell 12

Protect Yourself In An Ever-Climbing Market Allan Small 14

The Six Best Strategies To Minimize Tax On Your Retirement Income Ed Rempel 16

What’s New In Tax? Brian Quinlan 20

Inflation, The Disease Of Money Brian Chang 23

Flying High On Airline StocksAir Canada Appeals To Momentum Investors, US Global Jets ETF For Industry Exposure Richard Morrison 25

Two Stingy Stocks for 2018 Norm Rothery 30

http://www.canadianmoneysaver.ca

mailto:[email protected]

4 z Canadian MoneySaver z https://www.canadianmoneysaver.ca z JANUARY 2018

Sharing With You ShareClubsJoin any of the listed ShareClubs by contacting your local volun-

teer. Like-minded members get together to share financial informa-tion. No cost. No obligation. Just an inquiring mind. The agenda for each group is shared by all group members, i.e. it is not just the responsibility of the contact person. ShareClubs are unlike invest-ment clubs because they are meant to share investing information only. Contact MoneySaver and volunteer to start a ShareClub in your area. When ShareClubs are filled, they are delisted.

VOLUNTEER REGION CONTACT

ONTARIO

Blake Hoo Ajax/Pickering [email protected] Mayo Aurora [email protected] Attobelli Bolton 905-857-6527James Bolen Caledon 416-617-7311Ken Kyer Cornwall [email protected] Piccoli Georgetown [email protected] Sneltjes Guelph [email protected] Hyslop Hamilton [email protected] Matthew Moore Kincardine/Port Elgin 519-371-6592Irving Freilich Kingston 613-544-3257Richard Gerson Kitchener-Waterloo [email protected] Gauld London 519-657-4393Dipen Parekh Milton 647-745-2420Linda Sopoco Delfin Mississauga 905-858-5555Jim Ashley Newmarket [email protected] Matsdorf North York I [email protected] Pun North York II [email protected] Hogenhout Orangeville 519-942-0220Tom Loftus Oshawa 905-725-1979André Albert Ottawa [email protected] Rinzema Peterborough 705-748-2824Paul Mintha Port Hope 905-885-8659Volunteer needed Scarborough [email protected] Danby St. George 519-753-7414Gary Poxleitner Sudbury [email protected] Zhang Toronto-Central [email protected] Closs Thunder Bay [email protected] Lamasz Unionville/Markham [email protected]

QUEBEC

Leif R. Montin Montreal [email protected]

ALBERTA

William Wood Calgary SE [email protected] Tremblay Fort McMurray [email protected]

BRITISH COLUMBIA

Ron Beaton South Delta, BC www.tlshareclub.comLukas Vitalijus Kelowna/Okanagan [email protected] Gidi Maple Ridge [email protected] Hicks New Westminster, 778-875-2615Brian Pearson Prince George [email protected] Karefoe Queen Charlotte Is. [email protected] Lines Salmon Arm [email protected] & Vic Parks Salt Spring Island [email protected] Groom Sidney [email protected] Lee Ctrl. Vancouver [email protected] Gibb Victoria [email protected] Page Victoria/Sanich [email protected] Broatch White Rock [email protected]

NEW BRUNSWICK

John Richards Fredricton [email protected]

NOVA SCOTIA

Volunteer needed

PEI

Frank Driscoll Charlottetown 902-569-3601

PeterPeter Hodson

Two points to make in this column, the first of another year as time continues to tick

by. I have a daughter heading out to university this fall, so I can no longer pretend I am ‘young’. But I digress.

Many MoneySavers have asked us about the name of your magazine. After all, they say, it is far more focused on investments rather than on ‘saving’. Some new readers open it up and perhaps expect to find some coupons for 20%-off products or some such.

However, as you can no doubt deduce, without ‘saving’ you really can never ‘invest’. Sure, you could borrow money if you want to take on a risky investment strategy using margin. But if you had no savings to back this up, you wouldn’t be allowed much margin (you need to put up a certain percentage) and it would be an incredible risky strategy with no capital to fall back on if your investments went sour. No, you need to save first—and then invest.

Put another way, that $500 purchase you bought last year might represent several thousands of dollars, or more, if it was invested instead. My aforementioned daughter brought this point home recently when I gave her $1,500 to invest in a US stock of her choice. After some consideration, she asked if she could just have the money, instead, since she was ‘broke’. Of course, this was not the point of the exercise, and I declined. She is still thinking about what to buy. Meanwhile, her younger brother’s $1500 investment in Google and Apple is already worth about $2200. The more you save, the more you can invest, and the richer you will be, over time. Certainly, something to reconsider when you open up your Christmas credit card bills.

Our second point this month is ‘bubbles’. Whether it is bitcoin, marijuana, lithium or cobalt, there has been a lot of frenzied action in stock markets recently. We won’t predict when any of these bubbles will pop, but we will just make this one comment: Bubbles are created by GREED. Investors see big gains, and want some. Thus, this results in more money flowing into a sector, more gains, and more investor envy, and the cycle continues, until it….stops. Keep this in mind the next time you are tempted to buy into an investment you don’t understand, or are buying ‘because it is going up’. Are you investing, or are you simply being greedy?





















http://www.tlshareclub.com














MoneySaver DIVIDEND& COMPANY NEWSIn this column we list recent news, events, dividend income news and any other relevant information for

MoneySavers. News items are those received after our last publication date.

Canadian MoneySaver MODEL ETF PORTFOLIOETF SYMBOL CATEGORY PRICE # OF

UNITS TOTAL % OF PORTFOLIO

iShares 1-5 Year Laddered Corporate Bond CBO Fixed Income 18.64 506 9,431.84 6.8%

iShares DEX Universe Bond XBB Fixed Income 31.17 166 5,174.22 3.8%

iShares S&P/TSX Canadian Preferreds CPD Fixed Income 14.40 460 6,624.00 4.8%

iShares S&P/TSX Capped Composite XIC Equity: Canada 25.55 980 25,039.00 18.2%

iShares S&P/TSX Cdn. Div Aristocrats CDZ Equity: Canada Div. 27.01 613 16,557.13 12.0%

iShares U.S. High Yield Bond Index ETF XHY Fixed Income 19.84 350 6,944.00 5.0%

Vanguard FTSE Emerging Markets Index VEE Equity: Emerging 34.48 194 6,689.12 4.9%

Vanguard FTSE Developed Europe All Cap VE Equity: Interntional 29.72 304 9,034.88 6.6%

SPDR S&P 500 SPY Equity: U.S. 265.01 29 9,760.32 7.1%

Vanguard Div. Appreciation Index VIG Equity: U.S. Div. 101.12 74 9,503.26 6.9%

iShares Russell 2000 Growth IWO Equity: U.S. Growth 186.77 45 10,673.91 7.7%

BMO Covered Call Utilities ZWU Equity: N.A. Div 14.02 437 6,126.74 4.4%

Vanguard Information Technology Index VGT Equity: U.S 165.01 27 5,658.19 4.1%

Consumer Discretionary Select Sector SPDR XLY Equity: U.S 96.65 43 5,278.06 3.8%

Cash Cash Cash 5,394.07 3.9%

Total Portfolio 137,888.73

Exchange Rate 1.27 $ Gain/(Loss): 37,888.73

Inception value: 100,000.00 % Gain/(Loss): 37.89%

Inception date: October 18, 2013 % Annualized: 8.11%

Prices are at market close on Oct 31, 2017.

Individual prices are in USD$. Portfolio values, $Gain/(Loss), % Gain/(Loss), % Annualized all reflect USD$ values are converted to CAD$.

CURRENT NOTES: none

OTHER NOTES: Keep in mind all investors are different. This portfolio is designed as a guide in setting up your own personal portfolio. Unique considerations and adjustments need to be made to reflect your personal situation. Please perform your own due diligence before making investment decisions. For use by Canadian MoneySaver subscribers only. Not for redistribution.

Please direct portfolio questions to [email protected]

• Mullen Group (MTL) raises dividend by 67%

• TFI International (TFII) boosts dividend by 10.5%

• Laurentian Bank (LB) raises dividend by 1.6%

• Bank of Montreal (BMO) boosts dividend by 3.3%

• National Bank (NA) raises dividend by 3.4%

• Enbrige (ENB) announces a 10% dividend increase for 2018.

• Sylogist (SYZ) raises dividend by 14% and announces a special dividend of $0.05/share.

• Whitecap Resources (WCP) in our Model Portfolio, makes giant acquisition and increased dividend by 10%

• IPL (IPL) boosts dividend by 3.7%

• Telus (T) raises dividend 2.5%

• Canadian Tire (CTC.A) raises dividend by 38%




The Uncommon Investor

Venturing Forth To Learn About Investing

I recently attended the International Metal Writers Conference in Vancouver, which is put on by Cambridge House. This organization was founded in 1993 by Joe Martin and is now

overseen by his son, Jay. The focus of the gathering is on junior miners, almost exclusively on the Venture exchange. They normally have a few of these gatherings every year, including Toronto and San Francisco.

Given that we do not dabble in the Venture, several people asked, “Why are you here?” Besides the hope of signing some subscribers and selling a few of my best-selling books, Joe and Jay have always put on a great show. The gathering always has a number of excellent speakers. Some include Brent Cook, David Erfle, Mickey Fulp, John Kaiser, Peter Schiff and yes, even yours truly, Benj Gallander, and over 30 more. Much of the discussion centres on gold, silver, lithium, graphite and copper and most of these people have much greater knowledge than me in this field. Getting out there in a world that one does not normally spend much time in offers a tremendous opportunity to keep learning.

Most of the attendees are commodity bugs, with gold being the major attraction. People rhapsodized on how they love the action in this sector and no question, companies in this domain can gyrate swiftly in price. A gain of 50+ per cent in a day is not uncommon. Granted, sometimes that means a stock jumps from eight pennies to 12 pennies, but still, that is the equivalent return of a company going from $8 to $12. Oh yes, sometimes their valuations drop like a stone.

While our methodology seeks out companies that have been around for 10+ years but are currently having difficulties, there are many ways to make money in the stock market. In this land of resources, some enterprises do it by discovering properties and either selling them or bringing them into production. Others purchase

Benj Gallander

promising assets and develop them. Of course, this land of the penny stock is also littered with corporations that are not playing much more than a shell game, with speculators effectively forking over money that goes into salaries rather than the drill bit; buyers must be very wary as promoters are rampant.

One gent of this ilk explained it this way a few years ago. “I dress up a company, put it in a mini skirt, make-up and lipstick and then I pimp it out.” Uhm, sure. Ultimately at the end of the day he has had some real success stories. Other enterprises though have been absolute stinkers. One could go as far as to think of them as frauds.

Attendance at conferences like this ebb and flow with the world of commodities. When gold miner Bre-X looked like a find for the ages before morphing into a major fraud, people were flocking to gatherings like Cambridge and PDAC, the latter being the largest mining conference in the world, which happens in Toronto every March. Alas, when this deception was discovered and gold prices were sheared, attendance plummeted.

Lots of the enterprises at Cambridge’s gathering have $0 revenues. One of the major dangers, therefore, is the possibility of dilution if they want to bring a mine to production. That is why we choose to wait until these enterprises have sales before we’ll dive in with our capital. That metric is key to sorting the wheat from the chaff and dramatically reducing risk.

Another way is by following people who have already had triumphs in the commodity patch. Lightning in this sector can indeed sometimes strike twice and even more. Choosing to follow those with a good pedigree can dramatically increase the chances of success.

Times have been harsh for junior miners. At this event, there were still over 100 companies shining up their wares,



MoneyTip

although many that would have had their own booths in the past have teamed up with other small fry to share. Other enterprises have shaved the size of their stands since cutting expenses has been critical to their survival.

But it is worthwhile to note that over 600 enterprises that were once fledglings on the Venture, now make their home on the TSX. For those who need more convincing that sometimes big returns can come from the Venture arena, about 20 per cent of companies on the S&P/TSX composite index are alumnae of the V.

People regularly ask us at Contra the Heard what to do to improve their investment returns. We suggest that they read widely. Getting out and talking to people at

conferences like this is also on our learning list. Though given our methodology the odds of discovering an enterprise here to invest in is much like looking for a needle in a haystack, people with different strategies might indeed find some gold in them thar hills. Certainly, many people have fattened their bank accounts heartily by focusing on this arena and playing it well. Even if they do not, they are bound to learn something, which will help them in other market forays.

Benj Gallander, MBA, Co-editor of "Contra the Heard", Toronto, Ontario. Email [email protected], www.contratheheard.com

Understand Your Risk Tolerance

Risk tolerance is a psychological trait that is genetically based, but positively influenced by education, income, and wealth (as these increase, risk tolerance appears to increase slightly) and negatively by age (as one gets older, risk tolerance decreases). Your risk tolerance is how you feel about risk and the degree of anxiety you feel when risk is present. In psychological terms, risk tolerance is defined as “the extent to which a person chooses to risk experiencing a less favorable outcome in the pursuit of a more favorable outcome.” In other words, would you risk $100 to win $1,000? Or $1,000 to win $1,000? All humans vary in their risk tolerance, and there is no “right” balance.

Risk tolerance is also affected by one’s perception of the risk. For example, flying in an airplane or riding in a car would have been perceived as very risky in the early 1900s, but less so today as flight and automobile travel are common occurrences. Conversely, most people today would feel that riding a horse might be dangerous with a good chance of falling or being bucked off because few people are around horses.

The idea of perception is important, especially in investing. As you gain more knowledge about investments – for example, how stocks are bought and sold, how much volatility (price change) is usually present, and the difficulty or ease of liquidating an investment – you are likely to consider stock investments to have less risk than you thought before making your first purchase. As a consequence, your anxiety when investing is less intense, even though your risk tolerance remains unchanged because your perception of the risk has evolved.

By understanding your risk tolerance, you can avoid those investments which are likely to make you anxious. Generally speaking, you should never own an asset which keeps you from sleeping in the night. Anxiety stimulates fear which triggers emotional responses (rather than logical responses) to the stressor. During periods of financial uncertainty, the investor who can retain a cool head and follows an analytical decision process invariably comes out ahead.

Source: MoneyCrashers



http://www.contratheheard.com


Investor Awareness

Take Advantage Of Sector Rotation And Tax Policy Changes

A s you know, materialized capital gains must be claimed, and losses, if any, can be materialized to offset claimable capital gains on your stocks and Exchange-Traded

Funds (ETF) held in taxable accounts. Normally, people use the year-end to dump their losers and continue to ride their winners.

I think that this year, investors might want to materialize their capital gains in some cases. There is a good chance the Trudeau government, to raise tax revenue to pay for spending, will need to raise the inclusion rate for the capital gains tax level. The talk that I have heard from accountants is a possibility for that rate to go from 50% to 75% in 2018. That’s a huge jump! This tax rate change is not an absolute of course, but it’s a possibility that we should take into consideration.

I’d like to present some thoughts below on combining a seasonal pattern with some tax considerations regarding our winning and losing stocks.

The Seasonals

There is a strategy that makes sense for investors looking to materialize gains or losses on their marketable securities. Markets tend to be strong into the end of a calendar year from this point. The tendency is for the big movers of the year to continue being the leaders until the end of December, while the laggards continue to sell off as investors unload them and materialize the loss. Come January; stock market participants start to look at the prior laggards to uncover some oversold/ underappreciated bargains. Thus, there can be a noticeable degree of rotation from leaders to laggards at the beginning of the year.

This does not imply that the current leaders will experience losses in January – it only implies that there may be less upside on those stocks as investors focus more

Keith Richards

on the laggards during that month. Investment strategies such as the “Dogs of the Dow” strategy were born from this phenomenon. Investors following the Dogs strategy buy the ten highest yielding stocks in the Dow Jones Industrial Average, which tend to be the prior year’s lower-performing stocks of the 30 stocks comprising the Index.

The Strategy

The strategy is to take gains on anything you suspect has run too high (and may be vulnerable to a period of underperformance) as the year-end approaches. Possibly you are concerned about the runaway NASDAQ Index. In this case, if you feel that the NASDAQ market might take a breather in the New Year, you could take some profits on that sector by selling a NASDAQ ETF, a technology ETF or individual stocks as the year comes to an end. This will materialize your capital gain at current rates of inclusion, unless the Trudeau administration makes a capital gains tax change before year-end.

Remember, you can always buy your ETF or stock back. So, if the sold sectors or stocks take a breather or pullback in January, you could easily buy them back at the (hopefully) same or lower price. It may happen that you materialized a gain at a lower tax rate in 2017, which may indeed offset any risk of losing out on some of the upside, should the ETF or stock continue to rise in the first month of 2018. It’s a game of odds, but odds are somewhat in favour for some rotation of the guard from strong to weak sectors for the first month of the year. Some of the losing sectors that might be worth looking at include retail, energy, consumer staples and precious metals for that January rotation.

Watch for a base and breakout pattern on a weak sector as the new year approaches. The energy base breakout has already started. W & T Offshore Inc (WTI) broke through $56 in November – which was a significant



point of technical selling pressure for that commodity in the past. The producers have a large bit of room to play catch-up if oil stays over that $56 level.

The Tax Side

True, you could materialize your losses on underperforming sectors this year and use them to offset any materialized gains. Perhaps you bought precious metals, energy, or consumer discretionary ETFs when they were higher. These losses could be used to offset your gains on the outperformers that you take profit on this year. However, if you believe as I do, that there is a chance of higher capital gains inclusion rates in 2018 – you could choose to claim your losses in 2018.

A realized loss in 2017 might be more beneficial next year if capital gains inclusion rates go up in 2018. Conversely, a capital gain realized in 2018 could be taxed at a substantially higher rate – offsetting any short-term upside gained over that 30-day buy-back period. It’s your after-tax returns that count.

The Takeaway• Seasonal patterns suggest that weak sectors can

sometimes pop in the new year, while strong sectors might take a pause.

• There is a potential for the capital gains inclusion tax rate to rise in 2018. This juicy source of new tax revenue for our “Spend liberal amounts of cash” government is a tempting tax grab that is more probable than some might think.

• If you feel you have stocks or sectors that are overbought, you might want to sell them before year end, then rotate into oversold sectors that are breaking out in January. By doing this, you might benefit from a market rotation into undervalued stocks, and take advantage of gains on potentially overvalued stocks. Further, you might avoid a capital gains taxes increase. While it’s no sure thing that capital gains will be taxed higher in 2018, better safe than sorry, I always say!

• If there is an increase in capital gains tax-inclusive rate, you would also benefit by deferring a tax loss sale until 2018. True, at this point we can still hold off claiming a loss for a later year if you do materialize a loss in 2017.

Keith Richards, Portfolio Manager, can be contacted at [email protected].

Keith Richards may hold positions in the securities mentioned. Worldsource Securities Inc., sponsoring investment dealer of Keith Richards and member of the Canadian Investor Protection Fund and of the Investment Industry Regulatory Organization of Canada. The information provided is general in nature and does not represent investment, accounting, or tax advice. It is subject to change without notice and is based on the perspectives and opinions of the writer only and not necessarily those of Worldsource Securities Inc. It may also contain projections or other “forward-looking statements.” There is significant risk that forward-looking statements will not prove to be accurate and actual results, performance, or achievements could differ materially from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements and you will not unduly rely on such forward-looking statements. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. As we are not engaged in rendering tax or accounting services please consult an appropriate professional regarding your particular circumstances before acting on any of the above.




Wealth Creation And Preservation

Three Best Tax Savings To Do In Three Hours

Now that the Holiday Season is over and you may have blown the budget during the merry times with your family and friends, many readers may be experiencing

a a temporary cash flow shortage. If so, these three tax savings ideas may seem worth checking out.

Let’s start with the one that takes about fifteen minutes for a call or email to be made to a broker by the High Income Partner (HIP) and who has $5,500 contributed to the Tax free Saving Account of the Low Income Partner (LIP). As this is not taxable there is no income to attribute back to the contributor. Children who will be 18 years or older during the year can also be included in this strategy for splitting income.

There are two considerations to keep in mind about this very useful strategy. The cumulative contribution limit of TFSA’s for 2017 is $ 52,000 and as contributions can be made up to this limit at any time this can be quite useful for young family members in single parent situations. The wage earner’s income can be split with them. Withdrawals from a TFSA can be replaced the next year or later along with the new contributions allowed. The other consideration is to be very careful about holding U.S. stocks in a TFSA. A withholding tax is collected by the Internal Revenue Agency before the dividends are paid to foreign investors and it is not recoverable. TFSA’s are thus likely not a good place to be holding U.S stocks.

If the $ 52,000 TFSA income split with the Low Income Partner and children does not maximize the income splitting savings then this second great, all-purpose splitter is likely the way to go: It consists of the HIP loaning money to the LIP and any children over 18 to invest in interest or dividend paying income. The LIP and/or the children pay 1% of interest each year on the loan to the HIP. The interest is required to be declared

Hedley Dimock

on the income tax return each year of the loaner or the technique is null and void. Each family members can deduct the interest paid on their tax return. 1% interest is the prescribed rate in 2016 set by Canada Revenue and you can set It in your loan agreement as the permanent rate for the life of the loan. This move will take about forty-five minutes to set up as a signed agreement between the two people for each loan is needed and I strongly suggest the two people use separate brokers and bank accounts.

The above transactions should maximize family income splitting opportunities over a few years and they work best for couples and families. The third strategy focuses on differentiating among investments and using the tax rates and rules. Everyone can profit here, especially single young people and seniors. While the two hours spent here will give users a solid tax saving start, they will continue to save more money if the investor also uses the tactics to help select their investments using the perhaps unfamiliar tax rules and rates.

The above report of avoiding US withholding taxes on dividends by not including U.S. stocks in a TSFA is a good example of using this strategy to reap wealth creation and preservation rewards. Readers are often not clear as to how the tax varies on eligible dividends or capital gains or even be aware that from $45,282 to $73,145 of taxable income, the tax in Ontario on capital gains is over twice as much as eligible dividends, and regular income is taxed at over four times the rate. Or that with a taxable income over $ 90,563 capital gains are taxed at 3.7% to 12.6% less than eligible dividends. Many Exchange Traded Funds and regular Mutual Funds are heavily invested in U.S. and global stocks that make it worthwhile for readers to check on their real return [after taxes and fees] to their pocket. Instead of using fund, shares in Canadian companies that have over half



MoneyTip

of their income from global sources but with eligible dividends can be an effective, tax-saving way to handle global diversification.

In summary, a lot of MoneySaver readers at all income levels spend little, if any, time monitoring their investment taxes—likely the biggest expense in their lives. Once a year they pop up a computer program and fill it in or just drop their data off with the tax person at the mall to do it for them. It would surprise them to hear that you do not pay tax but earn tax credits on eligible dividends up to $45,282 of taxable income; up to 20% saving on tax rates for choosing among ordinary income, capital gains and eligible dividend investments; the tax avoidance aspect of RRSP’s, TFSA’s, Split Shares of stocks; and the simple income splitting strategies described here. The conclusion here is to do your own income tax and make full use of the tax information and or meet with

your tax person and go over the same activities. Early every year go online to collect the new related tax information [and review the old] or buy/read a current tax planning document. In my own experience of tax avoidance we saved over 50% of our taxes and that paid for a second car and two holidays in the Caribbean and Florida each year. 1

It would be appropriate to check these three activities out with your investment adviser as Minister Morneau has been exploring tax changes to raise taxes that may affect the 2017 year taxes.

Hedley Dimock, MA, EdD, Guelph, Ontario. [email protected]

1 Dimock, H. Reducing Income Tax by 50%, Canadian Moneysaver, June, 2013, pp.8-10.

The Average Investment Manager Can’t Beat The Index According To Warren Buffett

Warren Buffett set aside time at the May 2016 Berkshire Hathaway annual meeting to explain with a vivid illustration exactly why investment managers on average do not and cannot beat the index. In fact, they must, on average and as a population, “tie” the index before costs and trail it after accounting for their fees.

To illustrate, Buffett (and I am paraphrasing here) asked his audience (an arena holding 18,000 people) to imagine that they collectively owned all the companies in America. In my explanation of Buffett’s illustration, I will assume the companies are publicly traded although Buffett did not make that assumption.

The half of the audience on the right side of the arena would purchase their half of all these companies through a very low cost index fund that tracked the stocks and thereafter would hold their position indefinitely for, say, the next 50 years. (But the example works exactly the same whether it is 50 years or 50 days). Each audience member would not need to invest the same dollar amount, but this half of the audience would collectively purchase half of the total stock market value of all companies. They would therefore collectively receive exactly half of all the dividends paid by the companies. And they would collectively

experience exactly half of the capital gains or losses in stock prices over any time period. Each member of this half of the audience would make exactly the same percentage return in any given time period. They would all make the index return, less whatever tiny cost the index fund imposed.

Meanwhile, the left-hand half of the audience would collectively invest an equal amount of money but would do so indirectly, with each person choosing an active manager who would invest for them. The managers would study which companies were likely to see stock prices rise fastest. Each manager would choose different companies and industries to concentrate on. They would use a variety of fundamental and technical analysis techniques to do this. At the end of the day, this half of the audience would also collectively receive precisely half of the dividends from the population of companies and would experience exactly half of the capital gains or losses each year, month, day, and hour of trading.

Some of these active managers and their investors would assuredly do better than others and better than the index average. But that could only come at

Continued on page 19...




Life Insurance

Four Reasons It Makes Sense To Buy Life Insurance In Retirement

Many Canadians have a fairly narrow view of life insurance, thinking of it only as a tool for managing risk, with a primary focus on providing financial

relief to loved ones in the event of an unexpected death

Although this is a great reason to buy life insurance, it is not the only reason. Many of Canada’s most affluent families are not only buying life insurance to manage risk, but are also buying life insurance for tax and estate planning purposes.

Although life insurance is generally less expensive the younger you are, it should be noted that most insurers in Canada allow individuals to purchase life insurance right up to age 80.

Below are four reasons why individuals approaching or in retirement would consider purchasing life insurance.

1. Leaving A Legacy To Children Or Grandchildren

Life insurance isn’t just for people managing the risks associated with raising a family. It can also be a useful tool for leaving a legacy for your heirs. Consider this example. A retired couple may want to leave an estate to their children or grandchildren, however at the same time they want to spend their retirement funds on travel and other entertainment, without feeling like they are spending too much money and hence depleting the estate they plan to leave to their three children. In this example, the parents would like to leave $500,000 to each child. Life insurance can be used in this scenario to provide a tax-free death benefit to each child upon the death of the last surviving parent. This requires purchasing a life insurance policy based on the lives of both parents for a total death benefit payable on a joint last to die basis for $1,500,000. This would ensure that $500,000 per child would be available

Darren Farwell

upon the last parent’s death, hence the term joint last to die. Parents can now enjoy their hard-earned savings, confident that they are still providing significant funds to their children even after they are gone.

2. Cover Potential Estate Taxes Due On Death

Another consideration for a retiree may involve ensuring that family traditions continue after their death. If your family has an income property, a cottage, or another vacation property like a ski chalet, insurance can be a useful tool to cover estate taxes owing on non-principal residences upon the retirees’ death.

For many children and grandchildren, it’s an agonizing decision to give up a beloved family cottage upon the death of a parent or grandparent because the taxes owed by the estate are just too much to pay. Rather than forcing your heirs to decide to pay the outstanding taxes or give up a time-honoured tradition, a life insurance policy could be purchased on the life of the property owner with a death benefit equal to the tax liability. Upon the death of the owner, the life insurance proceeds would be used to pay the outstanding tax liability, and the cottage could then be passed to the next generation.

3. A Tax-Efficient Alternative To Fixed Income Investing

Beyond managing risk and helping to pay estate taxes, life insurance can be a prudent financial investment when compared to traditional conservative investments like GICs or bonds.

Consider this scenario. Mark, a 68-year old male retiree wants to invest $50,000 a year for the next 10 years towards a conservative investment. Mark does not need access to this pool of capital, and plans to leave it



to the next generation. Mark could invest in traditional GICs, however with current GIC rates being so low, he is looking for an alternative approach. As a result, Mark decides to reallocate the $50,000 a year for the next 10 years into a permanent life insurance policy. Assuming Mark dies at age 90, the life insurance policy would pay out a death benefit to Mark’s beneficiaries of $1,045,000, an increase of $545,000 over a 22 year period.

For the GIC investment to provide the same estate value as the life insurance policie’s death benefit proceeds, the GIC would have to earn an average annual before-tax rate of return of 8.67% (assuming a 53.53% tax rate) which is quite high considering current GIC rates of about 2.5%.

4. A Tax-Efficient Way To Contribute To Charities And Causes That Matter To You

To me, this is one of the most exciting ways that life insurance can help people leave a meaningful legacy, not only to their family but to their wider community. You can use life insurance to contribute to causes and charities that matter most to you.

Here’s another scenario to explain the idea. A woman I’ll call Sandy sold her company at age 70. Based on the sale of her company and with all her other investments, she is confident that she has all the money she needs to retire comfortably. As per Canadian legislation, at the end of the calendar year Sandy turns age 71, she must convert her Registered Retirement Savings Plan (RRSP) into Registered Retirement Income Fund (RRIF). Then at age 72, legislation dictates that Sandy must start withdrawing a minimum prescribed percentage from her RRIF each year. The prescribed percentage that must be withdrawn each year is predetermined by the government, based on your age at the time of withdrawal. It’s important to note, that while there is a minimum that needs to be withdrawn each year, there is no set maximum.

The good news is, Sandy is doing quite well, and doesn’t need the income the RRIF will produce. However, due to legislation she will need to commence withdrawals at age 72. Any RRIF withdrawals will be considered taxable income from a Canada Revenue Agency (CRA) perspective, and will be taxed at Sandy’s highest marginal tax rate. Since Sandy doesn’t really need the income, she is looking for a way to reallocate these RRIF payments to a strategy that will help her achieve some of her other aspirations, while at the same time, mitigate the tax consequences these RRIF withdrawals will create.

A proud alumna of her university, Sandy remembered not being able to afford her third year tuition when she was a student all those years ago. She received a bursary in the name of a private family foundation and Sandy was enormously grateful for the hand up to help her complete her studies.

Sandy wanted to do something similar. As a result, she purchased a 10 year pay life insurance policy with an annual premium of $32,000 payable over the next 10 years on her life and named the university as the beneficiary and the owner. She then withdrew $32,000 per year in taxable income from her RRIF and used it to pay the annual insurance premium. Since the policyowner is the charity, this means the insurance premiums are considered a charitable donation as they are made, and the tax savings realized as a result of those donations help mitigate most of the tax that was generated from the RRIF withdrawal.

Upon Sandy’s death, the university will receive a benefit of $430,000 that may be used to support many students for years to come. Through insurance, Sandy is giving a hand up to a new generation of students, just like she received all those years ago.

Insurance: A Good Investment Strategy At Any Age

Discussing the advantages of including life insurance as part of your investment and retirement strategies should be an important component of your financial planning conversations with your advisor. It can be a valuable tool to protect your family and plan for the future.

Darren Farwell is a Senior Wealth Advisor and Director, Wealth Management with The Farwell Group at ScotiaMcLeod®, and an Insurance Advisor at Scotia Wealth Insurance Services Inc., both members of Scotia Wealth Management™. Follow Darren on Twitter @DarrenSFarwell or visit www.thefarwellgroup.com.

Scotia Wealth Management™ consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc. Scotia Wealth Insurance Services Inc. is the insurance subsidiary of Scotia Capital Inc. When discussing life insurance products, ScotiaMcLeod advisors are acting as Life Insurance Agents (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.


http://www.thefarwellgroup.com


Portfolio Management

Protect Yourself In An Ever-Climbing Market

It can be very tempting to get caught up in the emotions of the markets as investors watch some stocks, particularly some higher profile tech stocks, make remarkable gains this year. For

example, Amazon’s stock price increased almost 30 per cent during the period between January 1st, 2017 and July 31st, 2017. UBS predicted in mid-July 2017 that Amazon’s target price could potentially reach as high as $1,600 in the next 12-months in its most optimistic view, up 60 per cent. This kind of double-digit growth is much stronger than traditional historic market growth rates of 7 to 10 per cent and it’s capturing the imaginations of some investors.

At the same time, investors have seen generally sustained upward momentum across North American markets since October 2016, some strong corporate quarterly earnings, coupled with the American administration’s promise of tax cuts and deregulation has had a lot to do with that. Wall Street’s VIX index, which gauges volatility, seems to be continually hitting some of the lowest levels seen in more than 20 years. With volatility at low levels, are investors being too complacent?

Some Have A Fear Of Missing Out

Some investors don’t want to miss out on the action. They start looking for opportunities while cutting corners as their confidence in the markets builds. Some develop a Fear of Missing Out (FOMO), which often means they don’t always make the best decisions. They become less conservative, making choices with less information, sometimes chasing the next hot stock and looking for the quick win. Sometimes, they become less patient with strategies designed to protect them from a potential market pullback.

Investors are feeling the kind of excitement and thrill of investing – feelings of excitement, thrill and euphoria

Allan Small

that are often identified with the point of maximum financial risk on the Cycle of Market Emotions. These are often seen just before a market pull-back.

Investors In The Markets Who Hadn’t Planned To Be There

There also is a segment of investors currently investing in the stock market who hadn’t planned to be there as part of their investment strategy. These investors believe that there is really no other option for them if they want to reach their investment goals. They feel there is no alternative with interest rates at ultra-low levels for several years and the yields on other traditional investment vehicles, such as bonds or GICs, are below the rate of inflation when income tax is taken into account. Where else can they invest to make the kinds of returns they’ve expected to earn to achieve their investment goals?

If there is a significant pullback, it’s difficult to know how these investors who hadn’t been in the markets before will react. Will they see the pullback as a buying opportunity or will they panic and sell, removing their money from the stock market which can lead to a more severe pullback?

People have often talked about the Trump effect on the markets, where investors are excited about the promise of deregulation and significant tax breaks from the American administration. Many point to this as one of the root causes of the climbing markets since October 2016. Some of the deregulation activity has occurred but tax reform may take longer to pass as the administration wrestles with setbacks to steps it had planned to implement as pre-conditions for tax cuts.

Consequently, it’s best to be cautious as you develop your investment strategy.



Follow The Approach Of Cautious Optimism

When making investing decisions, follow the path of cautious optimism in terms of confidence in the market. Choose investments that make sense. Look at the fundamentals of the company you plan to buy and decide whether you think they are undervalued. Don’t just buy on the promise of tomorrow.

Several things to keep in mind as an investor in rapidly rising markets include:

• Keep emotion out of investing – Think of investing as a numbers game, evaluating technical data and deciding if the numbers make sense. Try to avoid getting caught up in the excitement of the moment as that often can lead to mistakes.

• Have a plan – Set targets for your investments and when they reach a certain goal, re-evaluate. You might want to sell some of your holdings and take some profit while reassessing your next steps. Rotate your assets if market conditions have changed from your initial planning activity.

• Diversification – One of the safest and least expensive forms of protecting your portfolio is diversification. This can help you to weather the storm if there is a sudden pullback or market correction.

Recent quarterly results, on the whole, have been positive. Markets continue to grow, but make sure you take the steps required to protect yourself should the stock market take a turn for the worse.

Allan Small is the Senior Investment Advisor, Allan Small Financial Group, HollisWealth®, a division of Industrial Alliance Securities Inc., (www.allansmall.com) as well as the author of How To Profit When Investors Are Scared. He can be reached at (416) 332-3863 or via email at [email protected].

This information has been prepared by Allan Small who is a Senior Investment Advisor for HollisWealth®. The opinions expressed in this article are those of the Senior Investment Advisor only and do not necessarily reflect those of HollisWealth. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Allan Small Financial Group is a personal trade name of Allan Small.

Best Annuity Rates

Best Prescribed Annuity Rates: $250,000 10-year Guarantee

1. Male Single Life Prescribed Annuity ages 65,70,75 and 80

2. Female Single Life Prescribed Annuity ages 65,70,75, and 80

3. Joint Life Prescribed Annuity Male/Female ages 65,70,75, and 80.

Annuity income values were obtained from highly rated Canadian insurers and are for illustration purposes only.

Annuity rates change daily. Income and tax rate will depend when the annuity contract is issued.

Rino Racanelli, independent annuity [email protected]

Male age at purchase

Annual income

Annual Taxable Amount

65 $15,985 $3,211

70 $17,453 $2,180

75 $19,726 $1,653

80 $22,228 $1,432

Female age at purchase

Annual income


65 $15,753 $4,297

70 $16,225 $2,383

75 $18,037 $1,225

80 $20,859 $865

Joint age at purchase

Annual income


65 $16,311 $6,422

70 $15,866 $3,937

75 $16,185 $1,553

80 $18,878 $963


http://www.allansmall.com




Retirement Planning

The Six Best Strategies To Minimize Tax On Your Retirement Income

After you retire, you will be entitled to more tax savings than before you retire.

If you earn a salary, you may have limited tax deductions or tax-saving strategies.

When you retire, the situation changes.

You can essentially determine the amount of income you will be taxed on once you retire. You can decide:

• How much you withdraw from your investments.

• How much you withdraw from your Registered Retirement Savings Plan (RRSP) vs. Tax-free Savings Account (TFSA) vs. non-registered.

• How tax-efficient your investments are.

• When you start your Registered Retirement Income Fund (RRIF), work pension and government pensions (Canada Pension Plan (CPP) and Old Age Security (OAS).

These six best strategies will give you an idea of the flexibility you have to minimize your tax with effective tax planning.

These ideas are most effective if you plan for within 5 or 10 years of your planned retirement date.

1. Plan To Retire In A Low Tax Bracket With The Right Mix Of RRSP And TFSA:

Your taxable income can be very different from the cash you receive. You can have a lower taxable income by having the right mix of fully taxable, low tax and tax-free incomes.

You are fully taxed at your marginal tax rate on income received from your pensions, RRIF withdrawals and interest, but only partially taxed on tax-efficient non-

Ed Rempel

registered investments and there is no tax levied on TFSA withdrawals.

The goal is to have your taxable income below $46,000, regardless of how much cash you get. This is the lowest tax bracket. Even better, if it is under $25,000 for a single person (or under $37,000 total for a married couple), you can also receive the tax-free Guaranteed Income Supplement (GIS).

For example, you want a taxable income under $46,000. Your government CPP and OAS pensions are $15,000 and you have no work pension. That means you can have up to $30,000 taxable income from your investments.

You could achieve this by having no more than about $750,000 in your RRSP and the rest in a TFSA.

With $1 million in investments, if it is all RRSP, you are required to withdraw at least 4%, or $40,000. Of that $30,000 is in the lowest 20-23% tax bracket, while $10,000 is in the middle 30-33% tax bracket.

If you have $750,000 in your RRSP and $250,000 in your TFSA, then you can withdraw $30,000 from your RRSP, all at the lowest tax bracket, plus $10,000 from your TFSA all tax-free.

2. Plan To Retire In A Low Tax Bracket With Tax-Efficient Investments

If you have non-registered investments, the type of investment affects your ability to stay in a low tax bracket.

You can receive income from your non-registered investments as interest, dividends, capital gains, or deferred capital gains, depending on how you invest.

For example, if you want to stay in the lowest tax



bracket and receive $30,000 taxable income from your investments, here is how much cash you can receive:

Income Type

Cash to You

Effect onTaxable Income

Dividends $22,000 138%

Interest $30,000 100%

Capital Gains $60,000 50%

Deferred Capital Gains (Est.)

$120,000 25%

Eligible Dividends are “grossed-up” by 38%. Multiply the dividend by 1.38. That means $22,000 of dividends is $30,000 taxable income.

Interest income is straight-forward - $30,000 income is $30,000 taxable income.

Capital gains: only 50% of the amount of the capital gain is taxed. Multiply by .5. That means $60,000 of capital gains is $30,000 of taxable income.

I’ll explain deferred capital gains in strategy #4. Essentially, they are a mix of capital gains and getting your invested money back. The effect on your taxable income can range between 0% and 50%, depending on how much your investments have gone up so far.

3. Plan To Avoid The Clawbacks

The highest taxed Canadians are seniors with incomes under $25,000. Shocked? This is because, for every dollar of taxable income, the amount of the maximum payable Guranteed Income Supplement is reduced by $.50.

For higher income seniors, their OAS is clawed back at 15% of their income from $75,000-$121,000.

Many other government benefits are based on your taxable income, such as the amount you receive in a GST credit, the amount you pay for your provincial drug coverage, and the rent payable in retirement and long-term care facilities. Governments are increasingly calculating benefit programs based on taxable income.

This means that the tax strategies wealthy people benefit from because of their high tax rates also work for seniors in the clawback income ranges.

Planning to have a lower taxable income with the right RRSP/TFSA mix and tax-efficient investments saves you much more tax if your income will be in these clawback ranges.

If you realize you will be affected by either of these clawbacks, it might be worthwhile to cash in some or all of your RRSPs before age 65 to avoid the clawbacks. This only works if you can withdraw your RRSPs at a low or moderate tax rate.

The table below shows the tax brackets that affect seniors, once you include these clawbacks. Seniors have more dark blue income ranges with very high tax rates:

4. Use A Systematic Withdrawal Plan (SWP) To Get The Lowest Tax On Your Investment Income

The lowest tax rate on investment income is on deferred capital gains at almost any income level.

Capital gains are taxed at preferred rates. With tax-efficient equity investments, you can defer the gain and pay capital gains tax years from now, instead of this year.

To get deferred capital gains, just sell some of your stocks, mutual funds or Exchange Traded Funds (ETFs) each month. This is called a Systematic Withdrawal Plan (SWP). You are taxed on the gain that has built up in the investments so far.

Tax Brackets Before & After Age 65

Marginal Tax Brackets Clawbacks on Seniors Total Age 65+

Bracket Tax Rate GIS Age Credit OAS Tax+Clawbacks

$0-$19,000 0% 50% 50%

$19,000-$25,000 20% 50% 70%

$25,000-$36,000 20% 20%

$36,000-$46,000 20% 3% 23%

$46,000-$75,000 30% 3% 33%

$75,000-$85,000 31% 3% 10% 44%

$85,000-$121,000 43% 9% 52%

$121,000-142,000 43% 43%

$142,000-$203,000 48% 48%

$203,000+ 54% 54%

Tax rates 50+% 35%-50% 25%-35% 25% or less

* Marginal tax rates are for 2017, Ontario, single, approximate.* Income brackets are adjusted for inflation. In 25 years, they will be close to double.



income? The GIS clawback is on the grossed-up dividend. Dividends are a disaster for low income seniors!

Dividend tax on low income seniors is strange - but important to understand. If your income is under $25,000 and you receive a $1,000 dividend, it is grossed-up by 38% and adds $1,380 to your taxable income. The 50% GIS reduction on this $1,380 is $690. This is a 69% GIS clawback, which is reduced by 7% negative tax on the dividend to get an effective tax rate of 62%. The government gets $620 of your $1,000 dividend.

If you can plan to have a lower income and keep some of the GIS, then you should avoid dividends entirely. However, if your income will be at least $25,000 without

the dividends, then you can take advantage of the negative tax.

For example, let’s say you will get $15,000 from CPP and OAS, and $10,000 from your company pension. Your income is already too high to qualify for any GIS supplement. You can now get up to $21,000 taxable income from dividends at a negative tax rate. That would be $15,000 of cash from dividends (before the gross-up).

If your income is above $46,000, there is no real advantage of dividends. They are taxed about the same as a SWP (deferred capital gains) up to $75,000 of income and then the dividend tax rate leaps to 30% if your income is over $75,000.

Dividend investing has the disadvantage that the negative tax only applies to Canadian companies on the stock market that pay dividends. This can limit the diversification

of your portfolio. SWPs with deferred capital gains work with any company anywhere in the world.

Negative tax rates on dividends only exists in Ontario, B.C., New Brunswick and the three territories.

6. Defer Converting Your RRSP To Do The “Eight-Year GIS Manoeuvre”

You can get up to $10,500/year of GIS tax-free ($12,600 for a couple) from age 65 to 72, if you have no taxable income other than OAS. You can still receive non-taxable income, such as from your TFSA or investments.

This is a cool strategy if you have enough in your TFSA or non-registered investments to give you income

If you just bought your investments, then the SWP is tax-free. You are just taking back some of your own money. If you owned these investments for years and they have increased in value, you could be receiving almost entirely capital gains.

For illustration purposes in the chart, I assumed your investments have doubled since you bought them, so half of your SWP is a capital gain and half is tax-free, because it is your original investment.

The chart below shows the marginal tax brackets, including the clawbacks, on different types of investment income. Note that deferred capital gains are always in light blue, low brackets.

5. Invest For Dividends Only If Your Income Is $25,000-$46,000

Dividends from publicly traded Canadian companies actually have a negative tax rate if your taxable income is in this range. That’s right – negative tax.

The danger, though, is that dividends are taxed at an extremely high 62% rate if your income is below $25,000.

You need to be careful because dividends are the highest taxed investment income if your taxable income is below $25,000, but the lowest taxed income from $25,000-$46,000.

Why is the dividend taxed so high for the lowest

Tax Brackets After Age 65 by Type of Income

Marginal Tax Brackets + Clawbacks

Bracket Interest Dividends Capital Gains DeferredCapital Gains

$0-$19,000 50% 62% 25% 13%

$19,000-$25,000 70% 62% 35% 18%

$25,000-$36,000 20% -7% 10% 5%

$36,000-$46,000 23% -4% 12% 6%

$46,000-$75,000 33% 9% 17% 8%

$75,000-$85,000 44% 30% 22% 11%

$85,000-$121,000 52% 41% 26% 13%

$121,000-142,000 43% 25% 22% 11%

$142,000-$203,000 48% 32% 24% 12%

$203,000+ 54% 39% 27% 14%

Tax rates 50+% 35%-50% 25%-35% 25% or less

* Marginal tax rates are for 2017, Ontario, single, approximate.* Tax on deferred capital gains can be between 0% and the capital gains tax rate.



strategies, but I believe these are the 6 most effective that almost anyone can do.

You can effectively decide your own taxable income. You can plan to be in low tax brackets, avoid the clawbacks, and possibly qualify for GIS.

Your tools include your mix of RRSPs and TFSAs, deciding how much to withdraw from your RRIF, TFSA and investments each year, investing tax-efficiently for deferred capital gains or dividends, using tax-efficient withdrawal strategies such as SWPs, using “T-SWPS” to defer capital gains, deferring CPP and/or OAS to age 70, starting CPP early at age 60, deciding on the best time to convert your RRSP to RRIF, and contributing to your RRSP or cashing in some RRSP before you retire.

If you had a salary all your life, you may have had limited tax deductions or tax saving strategies. When you retire, it is completely different. You have many options, especially if you plan for them before you retire.

Ed Rempel, CPA, CMA, CFP®, Certified Financial Planner® Professional. Email: [email protected] Wisdom blog: www.edrempel.com

MoneyTip

for these eight years. You could plan for this by cashing in some RRSP before you turn 65 to maximize your TFSA or build up non-registered investments.

To qualify, you could delay converting your RRSP to a RRIF until the end of the year you turn 71. You can also delay starting your CPP until age 70.

You could also make a large RRSP contribution before age 65 and defer the deduction until you need it during these eight years to give you the maximum GIS.

At age 72, you have to start withdrawing from your RRIF, but you will still receive GIS for one more year, since it is based on the prior year’s income. You will likely lose some or all of your GIS after that.

Deferring CPP to age 70 means you get 42% more CPP for the rest of your life. Delaying converting your RRSP gives it an extra eight years to grow. The Eight-Year GIS Manoeuvre can mean you have a more comfortable retirement after age 71.

Creative Retirement Tax Strategies

The number of effective tax saving strategies is only limited by your creativity. There are more effective

...Continued from page 11

the expense of some of the other active managers and their investors doing worse than average. It is a mathematical fact that this active side of the audience would collectively (though not individually) earn exactly the same returns before costs as the buy-and-hold-the-index side. But their investment management

fees would be far higher and they would therefore collectively and on average trail the index and the index investors after costs.

This illustration and math should be sobering to all of us who deviate from a strategy of merely buying and holding the index. Most active investment managers or advisors might be inclined to disbelieve or deny the math and very few would ever point it out to anyone. But at InvestorsFriend we are highly ethical and have no interest in hiding from this truth.

Equity investors in aggregate and on average do make positive returns over time. Those returns are ultimately attributable entirely to the profits of companies. Over time, there is a flow of money from customers of

companies to the owners of companies. Layered on top of that is trading activity, whereby some investors try to make higher than average returns. This trading-with-other-investors activity is undeniably a zero-sum game (and negative after costs). For one active investor to beat the index by a dollar, another active investor must trail by that dollar.

But it is also undeniable that some active investors will beat the index. Some investment managers will beat the index consistently. Buffett has often pointed out that a certain group of disciples of Benjamin Graham, including himself, went on to consistently beat the market for decades.

I certainly agree with Buffett’s point that given that the clients of active managers as a population will trail the index by whatever fees they pay, it becomes very important for those who choose active investment to look for low-fee approaches.

Source : Investors Friend Newsletter



http://www.edrempel.com


Taxes… A Different Perspective

What’s New In Tax?

Brian Quinlan

Here is a summary of some recent income tax—and some non-income tax—changes.

Tax Rates• Personal. No changes in federal personal income

tax rates for 2017. The 2017 tax brackets have been adjusted to take into account inflation.

• Corporate. The federal corporate income tax rate on the first $500,000 of annual active business earned by a Canadian controlled private corporation (CCPC) is to decrease from 10.5% in 2017 to 10% in 2018 and 9% in 2019.

Investors• Tax-Free Savings Account (TFSA). The annual

contribution limit for 2017 remained the same as in 2016 - $5,500. The cumulative contribution limit is $52,000 as of 2017.

• Lifetime capital gains exemption. The capital gains exemption on a sale of shares of small business corporation increased to $835,716 from the previous $824,176. The capital gains exemption remained at $1,000,000 with respect to sales of eligible farm and fishing properties.

• Straddle transactions. A new “stop loss” rule (i.e., tax loss denial) can come into play where a “loss” leg of a straddle is closed in one year and the “winning leg” is deferred and closed in the subsequent year.

• Flow-through shares. The 15% mineral exploration tax credit has been extended to agreements entered into by March 31, 2018.

Caregivers• In a simplification move, three tax credits (infirm

dependant credit, caregiver credit and family caregiver credit) became one – the new Canada Caregiver Credit.

• A federal tax credit of $1,032 is available when caring for a mentally or physically infirm parent, grandparent, brother, sister, aunt, uncle, niece, nephew or adult child. The credit is $323 when the infirm dependant is a spouse or common-law partner, an infirm dependant when an eligible dependant credit is claimed or an under-18 infirm child. The available credit is reduced when the dependant’s net income exceeds $16,163.

• The dependant is not required to live with the caregiver.

• The credit is not available to adult children that simply have their non-infirm parents live with them.

• The tax credit amounts and the dependant’s net income thresholds are to be indexed annually to inflation.

Retirement• Old Age Security (OAS). The 2017 net income

threshold for OAS repayment or – “clawback” – is $74,778. There will be a 100% clawback when 2017 net income is $121,314 or greater.

• Enhanced Canada Pension Plan (CPP). The phase-in begins in 2019. CPP payments are to be increased from 25% of pensionable earnings to 33% and higher CPP contributions will start in 2019. The contribution rate is being increased – over a period of



2019 to 2025 - to 5.95% (from 4.95%) of salary/wages up to the year’s maximum pensionable earnings. The maximum pensionable earnings for 2018 is $55,900 and expected to be $82,700 in 2025.

Professionals And WIP• Previously, work-in-progress - WIP - (i.e., unbilled

fees) of a professional (e.g., medical doctor, dentist, veterinarian, chiropractor, lawyer, accountant) did not need to be included in the calculation of taxable income. New rules – being phased in over five years – now require WIP at the end of a year to be included in taxable income.

• For a professional with a December 31 taxation year end, 20% of WIP must be included in 2018 taxable income, 40% in 2019 and annual 20% increases to a 100% inclusion in 2022.

Tax Planning And Private Corporations• Tax proposals were released in July 2017 – and

significantly amended in October 2017 – with respect to the taxation of private corporations and their shareholders.

• Full details on the proposals and their implementation are still to come. The focus of the proposals is –

o To take away the personal tax benefit of “income sprinkling” – i.e., paying a dividend to a shareholder that is not active in the operations of the corporation in which they are a shareholder and who is, presumably, subject to tax in a lower tax bracket than that of shareholders that are active in the operations and

o The taxation of “passive” (i.e., investment) income – in excess of $50,000 annually - earned by a private corporation which is eventually paid out as a dividend to a shareholder. Details are to be presented in the 2018 federal budget.

Raising Children• Canada Child Benefit. Payments are to be indexed

to inflation beginning July 2018.

• Child fitness and art credits. These were eliminated at the beginning of 2017.

• 25% investment tax credit for employers creating child care facilities. It has been eliminated.

Students • Education and textbook tax credits. Federal

education and textbook tax credits (not the tuition credit) were eliminated at the beginning of 2017. Unused education and textbook credit amounts from 2016 can be carried forward to be claimed in 2017 and subsequent years.

• Tuition fees. Now eligible for the tuition tax credit are fees for courses for occupational skills when offered by a university, college or other post-secondary institution when these courses are not at the post-secondary level.

Medical And Disability Tax Credits• Medical expense tax credit. Expenses eligible

for the medical tax credit now include the cost of reproductive technologies (such as in-vitro fertilization) where the individual does not have a medical infertility condition. The effect is to extend the medical expense tax credit in this area to same sex and single parents. It is possible to go back ten years to claim the credit.

• Disability tax credit. A nurse is now qualified to certify eligibility for the disability tax credit in their practice area.

Canada Savings Bonds• Sales of Canada Savings Bonds ceased in 2017.

Unmatured bonds continue to be guaranteed by the federal government, continue to earn interest and will be redeemed at the original maturity date.

• Those that hold bonds through the Canada Retirement Savings Plan (i.e., an RRSP) can no longer contribute additional funds. When bonds in the plan mature the funds can be reinvested (if desired) and earn interest until the final interest date of November 1 or December 1, 2021. (The date will depend on the bond’s maturity.) As interest will not be earned after the final maturity date, the funds should be transferred to another RRSP (tax free) or withdrawn (taxable).

Other• Public transit tax credit. It was eliminated on July

1, 2017. A personal tax credit for the first half of 2017 is available.



MoneyTip

• Employee home relocation loans. The deemed interest benefit on the first $25,000 of a loan becomes taxable in 2018.

• Non-accountable allowances provided to members of legislative assemblies and municipal officers. These are to become taxable in 2019.

• Voluntary disclosure program. The “no-name” disclosure process is being eliminated.

• T4s. Employers can now distribute T4s by email when the employee has consented.

• GST/HST. The definition of taxi service now includes “electronic services” (i.e., mobile application or website) such as Uber.

• Life insurance. Tax changes came into effect for life insurance policies issued after 2016. The impact of the changes is to reduce the amount that can accumulate on a tax-preferred basis within an insurance policy.

• Charitable donations. 2017 was the final year for the First-time Donor’s Super Credit. An extra federal tax credit of 25% was available on up to $1,000 of donations where an individual (or spouse or common-law partner) had not claimed a donation tax credit in 2008 or later years.

Brian J. Quinlan, CPA, CA, CFP, TEPCampbell Lawless LLP, Chartered Professional AccountantsTel: (416) 364-0702, ext. 230 Email: [email protected]

Bitcoin Is Going Mainstream Via The Futures Market, And The U.S. Regulator That Allowed It To Happen Has A Message: Buyer Beware.

The U.S. Commodity Futures Trading Commission issued a statement Friday detailing “the risks of virtual currency trading” and urged investors to educate themselves before buying into an asset class that has surged more than 1,700 percent this year.

The warning underscores that even as Washington makes it easier for bitcoin to move out of the shadows, worries remain that the mom-and-pop investors who’ve helped fuel its rise have little idea what they’re jumping into. Some of the biggest names in finance have called the digital currency everything from a massive bubble to an outright fraud.

“Like all futures products, speculating in these markets should be considered a high-risk transaction,” the CFTC said. “Customers should inform themselves as to how the index or auction prices used to settle the contract are determined.”

In addition to warning about the futures market, the CFTC on Friday also listed dangers on the spot market which include: manipulation, hacking of customer wallets, lack of regulation and volatility.

Source: Benjamin Bain bloomberg.com




Inflation Watch

Inflation, The Disease Of Money

Brian Chang

There is perhaps no economic subject more widely discussed today – nor more widely misunderstood – than that of inflation. While government economists are certainly

aware that the unfettered printing of money will in the long run result in higher inflation, what they fail to realize is that rising consumer prices are only one of the many consequences of a sustained and widespread increase in the money supply. The central fallacy and the seed from which nearly all of today’s major economic policy failures stem lies not in the higher prices themselves, but in the non-uniform way in which these higher prices propagate throughout the economy. Rising prices are not the problem per se, but only a symptom of the larger problem.

Let us imagine that some sum of money is simply printed into existence and given to the bankers at Greedy Bank Ltd. At the moment the bankers receive the new funds, prices in the economy have yet to increase at all. The bankers receive the immediate benefit of the new money and enjoy increased purchasing power over what they would have otherwise had if the money had never been created. As the bankers begin to spend their newly printed money on, say, steak dinners, the wages of the cooks at Steakhouse Ltd. begin to rise in line with the prices of the goods they produce while the goods that they purchase have yet to rise at all. At the moment that prices have risen for the food produced by Steakhouse Ltd., the small business owners of Mom and Pop Ltd. must now begin to pay higher prices for steak dinners while their wages have remained unchanged. The owners of Mom and Pop Ltd. are now poorer as a result of the money creation and the bankers and cooks are now wealthier. The standard of living has increased for the bankers and cooks at the expense of the small business owners of Mom and Pop Ltd. Indeed, under this scenario, the owners of Mom and Pop Ltd. may well be among the last

to receive the benefits of rising prices for their goods and the accompanying increase to their wages.

In an exchange economy, it is important to remember that people do not trade money for goods; they trade goods for other goods. Money is simply the common medium used for exchange. A baker who produces bread and wishes to trade it for milk must first sell his bread for dollars which he then trades to the dairy farmer in exchange for the milk. But it should be obvious that the acquisition of milk would have been impossible for the baker if he had not first baked the bread. The transaction by which the bankers of Greed Bank Ltd. exchange newly created money for steak dinners is an exchange of "something for nothing". Since the bankers in this case did not actually produce real goods to trade for these steak dinners, the bankers received "something", and some group, somewhere down the line, is the ultimate recipient of "nothing" in the form of reduced purchasing power.

The fact that the process of inflation leads to the bankers becoming richer to the detriment of some other group can be applied at a more general level. In a modern economy, and indeed in any economy, it will tend to be the case that those groups closest to the source of money creation will benefit the most while those groups furthest away from the new money will suffer the most. Under a process of continual inflation, those groups who permanently position themselves closest to the newly created money will gradually find their standard of living rising relative to their peers. In modern times, this process has contributed to what is popularly referred to as "the rising wealth gap", "the 1 percent", and the "have and have nots". While government economists are no doubt aware of the rising disparity between rich and poor, few if any will realize that many of today's ailments are merely a manifestation of past inflation which they themselves helped to create.



But the problems do not stop there, for the effects of the inflation now take hold in a more insidious manner. The exchange of something for nothing sets in motion a chain of false price signals throughout the economy, undermining everywhere the factors of production, leading to widespread waste and mal-investment, stimulating the overexpansion of ailing business, and destroying the real wealth of successful enterprise.

Suppose for example that Steakhouse Ltd., being in the restaurant business, routinely offers its customers poor service, tasteless food, and over-priced wine. It should be no surprise that Steakhouse Ltd. finds its profit margins squeezed and one day finds itself on the verge of bankruptcy. Because of their close proximity to the establishments of Steakhouse Ltd., the bankers of Greedy Bank Ltd. have a natural tendency to dine at its restaurants and begin to spend their newly created money in earnest. Steakhouse Ltd., seeing the sudden increase in demand now concludes that its food and service is at last being recognized as exceptional and begins to expand its business to satiate the increased demand. Now begins the chain of events that distorts the factors of production in a thousand different ways that cannot be known in advance by anyone, least of all the government economist.

As Steakhouse Ltd. begins to expand it must hire more cooks, thus bidding up the wages of cooks accordingly. Now Crabshack Ltd., which is also in the restaurant business, finds that in order to keep its own cooks it must raise the wages it pays, thus lowering its own profitability. The end result is that Crabshack Ltd., which was in the first place making handsome profits, now finds itself with heavy losses. Where Crabshack Ltd. was before an efficient producer, generating a needed service at a profit, it now finds itself on the verge of bankruptcy and is soon forced to close its doors forever. If we suppose that Crabshack Ltd. served primarily seafood, then its misfortunes will not be lost on the fisherman who provided Crabshack Ltd. with the crab, who now finds business curtailed and is forced to reduce his own fishing fleet accordingly. The beef farmer, on the other hand, with the increased demand from Steakhouse Ltd.’s added steak menu and the rising profits from selling beef, decides it profitable to slaughter more cows that would otherwise have been used to produce milk. But this now raises the cost of milk to the average person who responds by buying fewer eggs, which in turn reduces the profits of the chicken farmer, and so forth until the distortions have at last been propagated throughout the entire economy.

But the catalyst for this whole process, namely the newly created money given to the bankers at Greedy Bank Ltd., will eventually come to an end once the money has at last been spent. Once the mal-investment is finally revealed the process reverses and Steakhouse Ltd., now seeing that the demand for its services was in fact artificial, is forced to shrink production, laying off its cooks and thus bidding down their market wages accordingly. Next is the beef farmer who, having found that he has led too many of his cows to slaughter, must now begin to slash beef prices dramatically to clear the inventory he had thought was legitimately demanded by Steakhouse Ltd.

If the unwinding is allowed to continue then the causal chain that was set in motion will over time be reversed, and resources will once again be re-allocated in their proper proportions. But it can be seen that the human costs of doing so will become immediately apparent to politicians and socialists everywhere. In order to prevent the unemployment that follows the artificial boom created by the inflation, the money supply will again be expanded in favour of some other group, thus re-igniting the misallocation of resources that gave rise to the first artificial boom and subsequent bust. The compounding of error upon error will over time magnify the original problem a hundredfold, making the inevitable bust all the more painful and the transitional unemployment all the more severe.

And yet the above appears to be completely lost on the average economist of our day, who continues to fight the symptoms of the problem with the same bad medicine. It is not the rise in consumer prices which is ultimately significant, but the increase of the money supply which preceded it. The myopic focus on rising prices misses the point entirely, presuming that rising prices are the only harm that comes from the printing of money with reckless abandon. Central planners, because of their misunderstanding of the inflation process, are in fact the very cause of the boom-bust cycle we see today. The fact that they have spent the last decade redoubling their efforts to inflate away the currency leaves no doubt that any sustained economic recovery is merely a pipe-dream of the optimists. Instead, the structure of production continues to rot away, hidden from view, laying the seeds of higher prices which the average economist will at last, finally, be able to recognize.

Brian Chang is an independent investor and former author of The Lonely Trade investment report. He resides in Vancouver and can be contacted at [email protected].



Sector Focus

Flying High On Airline Stocks Air Canada Appeals To Momentum Investors, US Global Jets ETF For Industry ExposureRichard Morrison

My wealthy friend Jim is gloating again these days, this time over his investment in Air Canada (AC/TSX). During a pause between games

of pool in the billiard room of his palatial home, Jim showed me a well-worn logbook —he doesn’t bother with computers — and thumbed backward to an entry he’d made in 2012. The entry showed an initial purchase of 5,000 shares of Air Canada for $9,050 plus a $10 commission. For him, that was a relatively small wager in a company whose shares had not traded above $2 in the previous four years. Today that stake is worth $119,500, with the shares gaining 80% since May alone.

“Warren Buffett must have been watching me,” Jim said. “He sure changed his mind on airline stocks.”

Buffett, chairman of Berkshire Hathaway Inc. and arguably the world’s most successful investor, hated airline investments for years. In an interview with the London-based Telegraph newspaper in 2002, he said he regretted a 1989 airline investment that Berkshire had made, even though it eventually resulted in a gain.

“If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money,” said Buffett. “But seriously, the airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in. You've got huge fixed costs, you've got strong labour unions, and you've got commodity pricing. That is not a great recipe for success. I have an 800 (free call) number now that I call if I get the urge to buy an airline stock. I call at two in the morning, and I say: ‘My name is Warren and I’m an aeroholic.’ And then they talk me down.”

As late as 2013, Buffett still shunned airlines, referring to them as a “death trap for investors” at Berkshire’s annual meeting that year.

Since then, however, Buffett has reversed his stance, and Berkshire has taken huge stakes in the four biggest U.S. airlines: American Airlines, Delta Air Lines, United Continental Holdings and Southwest Airlines. Berkshire added to its airline holdings last year.

In an interview on CNBC’s Squawk Box show in February 2017, Buffett said "It's true that the airlines had a bad 20th century. They're like the Chicago Cubs. And they got that bad century out of the way, I hope. The hope is they will keep orders in reasonable relationship to potential demand."

Today, airline investments are suited only for momentum investors who hope to buy high and sell higher, since their share prices reflect optimism. Air Canada appears a good choice for such investors, while the US Global Jets (JETS) Exchange Traded Fund (ETF) provides exposure to airlines in the rest of the world.

Keeping investors happy has been an elusive goal for airlines, whose managers must deal with aircraft purchase or lease payments, fuel costs, salaries for pilots, cabin stewards and maintenance staff, airport docking fees and a variety of other expenses that don’t change unless they reduce the number of flights. Competition from low- and ultra-low-cost carriers (LCCs and ULCCs), combined with passengers’ instant ability to find the cheapest flights on the Internet, means airlines cannot raise fares to solve the problem.

“A major airline tends to match the lowest airfare by a competitor, even if that carrier is losing money at those fares,” CFRA analyst Jim Corridore says in a November 25 report on United Continental.



For decades, airlines would order new planes to accommodate passengers during boom periods, only to have to file for protection from creditors during busts, often re-emerging from bankruptcy to begin the cycle again. Over the past few years, a variety of factors have combined to help airlines break the cycle and stay profitable. Mergers (such as United and Continental in 2010 and US Airways and American Airlines in 2013) have allowed airlines to reduce overlapping routes, cut staff and negotiate more favourable contracts, jet fuel costs have fallen along with the oil price, and the ability to charge for premium seat selection and baggage has increased revenue.

Air CanadaThe huge run-up in Air Canada’s share price has

coincided with the company’s successful efforts to cut costs, turning the 2008 and 2009 losses the airline recorded into operating margins of 10.8% in 2015 and 9.2% in 2016, said Chris Higgins, senior equity analyst at Morningstar.

“Lower fuel costs, combined with a solid management team, will enable the carrier to remain profitable through a full cycle; this has not occurred in the past, and it points to a fundamentally different company emerging,” Mr. Higgins wrote in a November 3 report.

At a recent price of $24.25, shares of Air Canada appear fully-valued, yet the airline’s record Q3 results show the stock has appeal, at least for short-term momentum investors.

In late October, Air Canada reported strong results in revenue, margins and free cash flow and continued to reduce its debt.

The airline’s third-quarter passenger traffic was up 8.8%, while revenue rose 9.1%, including strong gains in its business-class cabin. Operating income was $1.004-billion, up from the third quarter of 2016, which itself had been a record $896-million. Net income for the quarter was a record $1.786-billion or $6.44 per diluted share on revenue of $4.88-billion, compared to net income of $768 million or $2.74 per diluted share on revenue of $4.45-billion in the previous year’s quarter.

Earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent (EBITDAR) is an important measure in the airline industry as each airline finances its assets differently. EBITDAR makes it easier for investors to compare one airline to another.

Air Canada’s third-quarter EBITDAR was a record $1.388-billion up $140-million over the same quarter a year ago. This year the airline recorded a record third quarter EBITDAR margin of 28.4%.

Based on its latest quarterly results, Air Canada’s shares trade at only 3.6 times earnings of $6.90 per share. The www.GlobeInvestorGold.com site shows that analysts expect earnings to come in at $4.12 per share for 2018, based on estimates from seven analysts, giving the stock a forward P/E ratio of about six times.

WestJetWestJet Airlines Ltd. (WJA/TSX), launched in 1996,

has grown quickly but is still less than half the size of rival Air Canada. WestJet’s market capitalization (shares times share price) of just $3.1-billion looks modest when compared with Air Canada’s $6.74-billion, and employee head count at WestJet is 11,000, vs. Air Canada’s gigantic 27,700 employees.

WestJet has not served investors nearly as well as Air Canada, despite paying a dividend that yields 2.1%. A $10,000 investment made five years ago is worth just $14,000 today, no better than the performance of the TSX Composite index itself, whose diversification makes it much less risky than any single stock.

Like Air Canada, WestJet reported record results in its third quarter. Diluted earnings per share jumped 21.6% over the third quarter over Q3 2016, while Return on Invested Capital (ROIC) climbed to 10.2%. Net earnings climbed to $138.4-million or $1.18 per diluted share on revenue of $1.2-billion, up from $116-million ($0.97). The airline’s load factor climbed to a record high 85.7% in the quarter.

WestJet’s shares trade at 10.8 times earnings of $2.49 per share. The www.GlobeInvestorGold.com site shows that a survey of seven analysts expect earnings to come in at a consensus average of $2.77 per share, giving the stock a forward P/E ratio of about 9.6 times.

US Global Jets ETFInvestors who feel buying into any single carrier can

buy units in the US Global Jets ETF (JETS/NYSE). The fund, launched in April 2015, has US$107-million in assets and carries an expense ratio of 0.6%.

Almost half of the fund is invested in the four largest U.S. airlines, with roughly 12% of its net assets in each of Delta Air Lines Inc. (DAL/NYSE), American Airlines


http://www.GlobeInvestorGold.com

http://www.GlobeInvestorGold.com


MoneyTip

Group Inc. (AAL/NYSE), United Continental Holdings Inc. (UAL/NYSE) and Southwest Airlines Co. (LUV/NYSE). The fund has about 4% in each of JetBlue Airways Corp. (JBLU/NASDAQ), Allegiant Travel Cp. (ALGT/NASDAQ), Hawaiian Holdings Inc. (HA/NYSE) and Alaska Air Group Inc. (ALK/NYSE) and smaller stakes in manufacturers of aircraft components. Air Canada represents just 0.85% of the fund.

As of September 30, 2017, the fund was up 29.5% over the previous year and 7.6% since inception. The fund is one of only two managed by U.S. Global, the other being a tiny gold and precious metal fund.

ConclusionAirlines are still vulnerable to economic downturns, a

spike in fuel prices (if they have not hedged against that eventuality) and weather-related factors such as volcanic eruptions, blizzards and hurricanes, not to mention bad publicity when passengers are forcibly removed from

overbooked flights. In my opinion, airline stocks are best suited to vigilant investors prepared to sell at the first sign of trouble. Air Canada appears a good choice for such investors, while the US Global Jets ETF is less risky as it provides diversification.

Correction

In my last column on railway stocks, I erroneously said Canadian National Railway Co. (CNR/TSX) had a dividend reinvestment plan. It does not. Investors who want to reinvest CNR dividends will have to do so manually. Given that CNR pays $1.65 a share in annual dividends, you should be able to buy 1.65 more CNR shares for each 100 that you own.

Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post. [email protected]

Seven Tourists Per Inhabitant Is Testing Icelanders' Tolerance

If two is company and three is a crowd, then seven must be a horde.

Iceland has become such a popular tourist destination that foreign visitors are estimated to outnumber the local population by seven to one this year. The government is now considering whether the scarcely populated island in the North Atlantic can -- and should -- accommodate even more.

“This sector is maturing and becoming a real industry in Iceland, and with that of course come challenges that we need to be ready to tackle,” Thordis Kolbrun R. Gylfadottir, Iceland’s tourism minister, said in an interview in Reykjavik.

As many as 2.3 million people are expected to have visited Iceland by the end of this year, up from nearly

1.8 million last year (the number of overnight stays totaled 7.8 million in 2016). Tourism is now Iceland’s biggest export and its second-biggest industry after wholesale and retail trade. In 2016 it accounted for 8.4 percent of gross domestic product.

Tourism is now a systemically important industry, prompting concerns from the central bank about the sustainability of such exponential growth rates. A shock to tourism would be a “shock to the economy as a whole,” Sedlabanki said in its October Financial Stability report. The central bank also warned that tourism is putting pressure on the local house market, citing a “surge in short-term private rentals.”

Source: Ragnhildur Sigurdardottir bloomberg.com




Using Wealth Wisely

Philanthropy And Character Development

W orking class parents and wealthy parents have a common goal – they want their children to be happy, successful and to enjoy their lives.

With good parenting, these goals can be achieved, but wealthy parents need to deal with one additional challenge that only their children will face. Wealthy parents need to be aware that a large inheritance often causes more grief than happiness.

Parents can give their children a large inheritance but they can’t give them meaningful lives. That’s something they have to make on their own. The danger is that if children grow up expecting that they’ll always have money and will never have to work for a living, they may fail to get the education they need or to develop the character traits, skills, or the moral values that are essential for a happy and successful life.

Life can be tough and everyone will face disappointments at some time. Young people need to learn perseverance, how to deal with and overcome disappointment, how to deal with failure, and how to pick themselves up and start again. It also helps if they have good self-esteem, self-confidence, and know they are of good character. They should be hardworking, emotionally intelligent, empathic and ideally, they will also have good social and leadership skills. As it turns out, introducing children to philanthropy is an excellent way to help children develop all of these things – particularly the values, high moral standards, emotional intelligence, and empathy that may be important for their happiness and success.

Successful individuals understand that happiness comes from hard work, accomplishing goals and from having a sense of purpose – wealth is a bonus but is not the main source of happiness. Happiness and the good life came from enjoying the journey – not arriving at the destination!

Warren MacKenzie

We are fortunate to live in Canada where we have an unlimited opportunity to succeed. By being involved in philanthropy, young people will come to understand and appreciate that the opportunity to succeed and create wealth exists, in part, because of the three pillars to our society – government, private enterprise and philanthropy. The importance of philanthropy may be overlooked but business can only be successful if the social fabric is intact. If many millions of Canadians were sick, destitute, unemployed, hungry, hopeless, and homeless – our country would not be a place where anyone is likely to create wealth. Philanthropic organizations fill the void that cannot be filled by government and these organizations are needed to help keep our social fabric intact.

Most young people are idealistic. Given an opportunity, they will want to do what they can to make a difference and to improve the world. Getting children involved with philanthropy is an easy way to start conversations with teenagers and tap into this desire to make a difference. These family discussions about charitable work can teach empathy, develop moral values, and build character.

An easy way to start the process is to have children involved in helping the family to select a charitable organization that the family will support. You can explain that as a family you’re going to give back to your community and worthwhile causes - either a specific dollar amount or a percentage of the family income. Each child may have a different idea as to which charity should be selected and there may be a great benefit to learning how to gather the facts to promote a certain cause. Some of the dozens of charities that appeal to young people might include those that provide operations to give disadvantaged children an opportunity to succeed, animal rescue services, environmental protection, orphanages for



abandoned children, safe playgrounds, local foodbanks, or books for kids.

By doing the research to make the selection, looking at reports to see how the money is spent, and by meeting other supporters or volunteers, young minds are broadened and they learn something about business operations. They’ll feel good about what they’re doing and that they’re making a difference, but the most important result may be the discussion that takes place between family members as the charitable decisions are made. The value of communication cannot be over emphasized. Research shows that it is a lack of communication - particularly about goals, responsibilities, budgets and other financial topics – that is the major cause for a transition of wealth not working out as parents hoped it would. Talking about money is the last taboo and this is a good way to start the discussion about our responsibility regarding wealth. These discussions can lead to regular family meetings where financial issues are discussed. For example, why do we donate this amount and not a larger or smaller amount?

We say that the ‘wealth transition’ plan failed if those who inherit the money spend it and little or nothing is left for the next generation. Research shows that failure is common when there is no history of family discussions about money or if the heirs don’t have values, empathy and good moral character. Getting involved with philanthropy at an early age is a way to start the communication process and it helps develop these traits.

Aside from the benefit to society and tax deductions, what are the benefits of getting young people involved in philanthropy?

1. It broadens their minds and they become aware of some of the problems that exist in society.

2. They become aware of their good fortune to live in Canada with opportunities and access to education.

3. They learn how they can help make the world a better place and they feel empowered to do so.

4. It gives them an outlet to channel their idealism in a positive way.

5. It may give them some experience to add to

their resume (making it easier to land their first full time job).

6. They may learn how to read a financial report and how to ask for accountability.

7. It may give them ideas about the career / job they want to do when they are finished school.

8. They will learn how to do basic research to decide which charity is worthy of their support.

9. They will get to understand the importance of philanthropy in order to have a well-functioning society in which they can be successful and create their own wealth.

10. There is a benefit to individual when they stop thinking about their wants – and instead start to think about the needs of others.

Lives can be changed forever by a chance meeting, a new insight into opportunities, or a moving experience. Many young people who get involved with philanthropy say it is the most powerful experience of their lives. It is almost universally agreed that it is the donor (not the recipient) who receives the greatest benefit from a charitable work.

It doesn’t take a lot of money to be charitable. For example, Owen, guitar player and lead singer in for a high school student rock band, spends time most weekends teaching guitar at a community centre for underprivileged youths. As another example, Claire, a physiotherapist, who has experience working with children with cerebral palsy, recently took a three-month unpaid leave of absence from her regular job in Canada to volunteer in an orphanage in China. At the orphanage, she was able to help educate caregivers and help support many children. While Claire has enjoyed many academic and athletic accomplishments she describes this experience as one of her most rewarding.

Warren MacKenzie, CPA, CA, CIM – Senior Financial Analyst at Optimize Wealth Management



The Stingy Investor

Two Stingy Stocks For 2018

The list of Stingy Stocks got its start in the Canadian MoneySaver just after the turn of the century. The idea was to try to beat the S&P 500 by picking value stocks from

within the index itself using a numbers-based approach.

The results have exceeded my expectations and last year was a particularly good one. The Stingy Stocks gained 58.3% on average since my last update. By way of comparison the S&P 500 (as represented by the SPY exchange traded fund) trailed far behind with an advance of 22.0% over the same period. The Stingy Stocks beat the index by 36.3 percentage points. Not bad, if I do say so myself.

While the recent returns have been phenomenal, they represent the third best showing for the Stingy Stocks. This year’s gains were exceeded by back-to-back returns of more than 60% in the years just after the crash of 2008.

Over the long term the Stingy Stocks gained an average of 15.8% per year since the end of 2001. By way of comparison, the S&P 500 (as represented by the SPY exchange traded fund) climbed 7.4% per year over the same period. The Stingy Stocks outperformed the index by an average of 8.4 percentage points annually.

To put that into perspective. If you had split $100,000 equally among the original Stingy Stocks at the end of 2001 and moved into the new stocks each year, your portfolio would now be worth more than $1,038,000 – or more than 10 times your original investment. You can see the full performance record in the accompanying table. (I hope you’ll excuse me for not including commissions and other trading frictions in these figures because they vary depending on the investor.)

It is important to remember that the method has had its ups and downs over the years. It is not a guaranteed

Norm Rothery

path to success. Investors who follow it should be prepared to take the good with the bad.

When hunting for Stingy Stocks I look for companies that are cheap compared to their fundamentals and relatively safe.

On the value front, I like stocks that trade at price-to-sales ratios of less than one. Typically only a few pass the test and this year was no exception.

Cheap stocks are great but I also want some assurance they won’t go bust. The firms in the S&P 500 tend to be large and relatively stable compared to smaller firms. But, because size is an insufficient measure of safety, I also look for companies with little debt and lots of assets. Such firms are stronger than those perched on mountains of debt.

Three ratios are useful when looking for companies with little debt. A touchstone is the debt-to-equity ratio which is calculated by dividing a company’s debt by its shareholders' equity. The amount of debt that a company can comfortably support varies from industry to industry. I prefer conservative companies with debt-to-equity ratios of 0.5 or less.

The next balance sheet figure to consider is the current ratio which is calculated by dividing a company’s current assets by its current liabilities. Current assets are assets, such as receivables and inventory, that can be turned into cash within the next year. Current liabilities are payments that a company must make over the next year. Naturally, an investor would like a company’s current assets to be much more than its current liabilities. After all, you can be pretty sure that a firm’s creditors will demand prompt payment of the current liabilities. On the other hand, some current assets, such as inventory, might not turn out to be worth as much as expected. I prefer conservative



companies with current assets at least twice as large as current liabilities.

Finally, a company’s earnings before interest and taxes should be large in comparison to its interest payments. The ratio of earnings-before-interest-and-taxes to interest-payments is called interest coverage and I like this ratio to be at least two or more.

The debt ratios I’ve selected are useful in determining a firm’s ability to shoulder debt, but they are not perfect. For instance, some obligations may not be fully reflected on a company’s balance sheet and are, sensibly enough, called off-balance sheet debts. They can be a source of considerable trouble. That’s why, as with all screening techniques, you should embark on a more detailed investigation of each stock before making a final investment decision.

Continuing the safety theme, I also want a company to show some earnings and cash flow from operations over the last year. After all, a business is less likely to go

bust when it is profitable and has cash coming in the door.

That’s a daunting list of requirements. Only two stocks passed the test this year and two others passed last year.

The paucity of picks caused me some consternation. Indeed, I seriously considered retiring the Stingy Stock method this year and you might be reading my last update on the topic. But I’ll think about the situation, and potential replacements, over the next few months. Nonetheless, I thought that it would be churlish of me not reveal the stocks that currently pass the test.

Before I do, I want to strongly encourage equity investors to hold well-diversified portfolios with a bare minimum of 20 stocks. If you're keen on this year's Stingy Stocks, please use them to supplement an already diversified portfolio.

The two Stingy Stocks for 2018 are Foot Locker (FL) and Signet Jewelers (SIG). Foot Locker is a shoe and apparel retailer. Its shares traded at $44.97 on December 8, 2017 when its earnings multiple was just north of 10 and its dividend yield was 2.8%. Signet Jewelers

boasts of being the largest specialty jewelry retailer in the US, UK, and Canada. Its shares traded at $53.22, or 8 times earnings, in early December when it yielded 2.3%.

As always, before buying any stock, be sure to do your own due diligence. Make sure that its situation hasn't changed in some important way. Read the latest press releases and regulatory filings. Scan news stories for developments. Be certain that it fits properly into your portfolio.

We’re now well into a long bull market. So, be careful out there.

Norman Rothery, PhD, CFA, Founder of StingyInvestor.com, Toronto, Ontario. Email [email protected]. Visit www.stingyinvestor.com

Stingy Stock Past Performance

Period Stingy Stocks S&P500 (SPY)

2001 – 2002 -1.9% -22.1%

2002 – 2003 33.8% 23.0%

2003 – 2004 29.8% 13.4%

2004 – 2005 29.2% 8.2%

2005 – 2006 28.9% 12.6%

2006 – 2007 -5.5% 7.4%

2007 – 2008 -40.1% -37.5%

2008 – 2009 64.5% 26.0%

2009 – 2010 69.4% 12.4%

2010 – 2011 -16.1% -0.3%

2011 – 2012 10.9% 20.8%

2012 – 2013 37.8% 29.7%

2013 – 2014 6.9% 14.4%

2014 – 2015 -1.4% 5.4%

2015 – 2016 8.4% 7.5%

2016 – 2017 58.3% 22.0%

Total Gain Since Inception 939% 211%

Date: December 8, 2017



http://www.stingyinvestor.com

32 z Canadian MoneySaver z https://www.canadianmoneysaver.ca z NOVEMBER/DECEMBER 2017

Q For dual Canadian/US citizens holding Canadian mutual funds or Canadian exchange traded funds is a US tax reporting nightmare (forms 3520 and 3520A etc) unless they are in a RSP. Is it possible instead to purchase US (low fee) exchange traded funds in a Canadian brokerage account (for example a TD Waterhouse account) and avoid the most ugly paperwork? I understand that all the normal FBAR reporting will still be needed and there will be withholding, but could this provide easy ability to invest broadly in US or other markets with fairly small investments?

CMS Reader

A You certainly are on the right track to simplify your Canadian and US tax filings if you use US based ETFs or individual stocks and bonds. If you do that you will eliminate most FBAR reporting and any 3520/3520A type reporting as well. Most any brokerage firm can purchase US ETFs, stocks and bonds. If you do use TD on the Canadian side to hold your securities, your brokerage account will be considered foreign and will require the FBAR reporting. If you use TD Ameritrade in the US you will eliminate that FBAR reporting but have to report to Canada with the T 1135 so you’re kind of stuck with foreign reporting. In my books for a dual citizen living in Canada I always say you generally get the worst of both tax systems rather than the best, in order to get the best of both the Canadian and US tax systems it’s better to live on the US side of the border if that works for you.

ROBERT F. KEATS, MSFP, CFP®, RFP (CANADA), CFP® (CANADA), KEATS CONNELLY & ASSOCIATES

Q I've read Mr. Arbuckle's family wealth planning article (for the second time) in the July/Aug 2017 edition and found it very informative. The question that arises for me is when one transfers half of property ownership to your spouse as noted in the article there is no capital gains incurred. Am I interpreting this correctly? The cottage property in question is registered in my name only and we are considering selling it. Your comments would be appreciated.

CMS Reader

You must accompany your inquiry with your Membership Number (ID) and telephone number or e-mail to have your question reviewed. Inquiries are responded to directly and the Q&A may be published here later. Hundreds of Q&As are found on www.CanadianMoneySaver.ca

A You are correct that you can transfer a half interest in your cottage to your spouse on a tax free basis. However, when the property is ultimately sold, the gain on her half interest will be taxed back to you and therefore you will pay tax on the total gain of the final sale.

If you can demonstrate that the cottage was purchased with funds that were provided equally by you and your wife from your own sources then the gain could be split based on the co-contribution of each of you to the purchase price of the property.

If the cottage property is a second residence to you and your wife in addition to your home, then either property could be chosen as your principal residence in years where both were owned. It might be better to choose the cottage as your principal residence in some years. The test as to which is the best choice is to calculate the gain per year and choose the property with the higher gain for those years as your residence.

It’s perhaps worthwhile to play around with the numbers under different options. It could make a big difference. The principal residence exemption is complicated.

ED ARBUCKLE, CPA, FCA, TEP, J. E. ARBUCKLE FINANCIAL SERVICES INC.

Q Mr. Hodson, in your "Sharing With You" commentary [in the CMS] September 2017 [edition], you make a good point about, "Are you still watching the TSX index and comparing it to your portfolio?". However, my question then is, how do I benchmark the performance of my advisor to make sure that he or she is doing a good job for me?

CMS Reader

A It can be tricky, but there are options.

One can use the TSX 60 index, which has a different set up than the TSX Composite.

Or, depending on the set up of one's portfolio, one can use a 'blend' of several different indices (i.e half TSX, half US if that is the make up of your portfolio).

There are indices for almost anything.


http://www.CanadianMoneySaver.ca

Canadian MoneySaver z https://www.canadianmoneysaver.ca z NOVEMBER/DECEMBER 2017 z 33

If your portfolio is not keyed towards resources and financials you can work with your advisor to determine an appropriate benchmark. It is in their interest (if they are any good) to ensure you can monitor the portfolio properly.

PETER HODSON, CANADIAN MONEYSAVER EDITOR & HEAD OF RESEARCH AT 5I RESEARCH

Q I am wondering if charitable donations "in kind" can be made from a TFSA, and would the tax implications, and stock valuation be the same as if made from non registered stock portfolio?

CMS Reader

A I don’t see the benefits of donating shares “in kind” from a TFSA, as any capital gains on TFSA assets are tax-free anyway. Accordingly, I’d rather donate shares in my holding company (in which you get a deduction rather than a credit) or from an open account, both of which let you avoid any capital gains on the shares gifted in kind and value the shares based on their fair market value at the time of donation.

I have a couple other quick suggestions to add on the charitable donation front if you’re looking to do donate. I love donating shares that have increased in value and using the money you would have gifted in cash instead to buy back the shares that you just donated or something similar. If you have not donated your entire position in a stock or other publicly-traded security, I would suggest buying something similar rather than identical. If you just repurchased the share you just donated, then the purchase price for the repurchased shares get averaged in with the shares just donated. This waters downs the benefit of donating similar shares in the same investment going forward, as it’s like you’re donating some of the repurchased shares that have only had a little while to grow in value again until your next donation, as well as some of the pre-existing shares that still have a large unrealized cap gain attached to them. You’d get more bang for your charitable buck if repurchased a different share from the one donated so future donations from the original investment give you more tax relief since none of the cost of the repurchased investments get averaged into the total purchase price for the original investment in that instance.

Those of us that are more forward thinking, you might want to look at REITs, or other investments like corporate class mutual funds (if you are okay with their MERs)

that pay return of capital. To recap, return of capital or “ROC” payments are treated as the tax-free refund of your original investment, as there are enough write-offs in the investment to generate these tax-free (or mostly tax-free payments). For REITs with no taxable portion of their yearly payments, the only time you’d pay tax is when you’ve got all of your original investment back or you sell your investment in life or at death. Thus, you could own a bunch of REITs and start donating them to charity when you’re sucked out all or most of your original investment contribution and most of the remaining value would be taxed as a capital gain on sale. Donating at that point would still give you the capital gains relief described previously but also provide you with a stream of tax-free income before then through ROC payments. On a similar note, if you received and “free” shares from an insurance company like Sun Life when they converted into a company owned by shareholders whose entire value would be taxed as a capital gain on sale (unless you’ve been using subsequent dividends to buy more shares, in which case you’d get credit for the value of these new purchases), consider donating them if they’re still in your non-registered portfolio.

I’m planning on writing an article on corporate charitable donations from a holdco in the future, as this can be a huge tax win. For now, pending any changes to the rules in light of the new rules that will apply to passive income in companies, you still avoid the entire gain on a company donation and you would get a tax deduction that may be around 50% regardless of your personal tax rate. Even better, the current rules not only allow you to avoid the entire unrealized gain on the shares donated while giving you credit for their value at giving time; they also create bonus room in the capital dividend account of your company equal to the value of the unrealized gain at donation time. In other words, not only does your company get a rather large deduction and avoids paying tax on the unrealized gains: it also gets to pay you out a tax-free dividend equal to the value of the entire unrealized gain. In the normal course of things, if you sold the company-held investment instead, you’d pay high tax on the taxable 50% of the gain (although you’d get a nice chunk of that back when you paid yourself a taxable dividend from the company), but would also be able to only pay out 50% of the gain tax-free, having to pay the other 50% out as a taxable dividend.

COLIN S. RITCHIE, BA.H. LL.B., CFP, CLU, TEP AND FMA



This column offers excerpts from published and online sources to provide other viewpoints.

EXCHANGE INCOME (EIF) FIGHTS THE SHORT SELLERS WITH SOLID NUMBERS:

POSITIVE PERFORMANCE VS. NBF/STREET

EIF reported Q3/17 revenue of $253.4 mln (vs. $258.2 mln est. & $224.6 mln Q3/16), EBITDA of $72 mln (vs. $65.9 mln est. & $60 mln Q3/16) and DCPS of $1.17 reflecting a 45% payout ratio (vs. $1.10 / 48% est. & $0.93/54% Q3/16). Results were ahead of consensus, the Street forecasting $250.6 mln top line and $67.5 mln EBITDA.

AVIATION/AEROSPACE PORTFOLIO MEANINGFULLY OUTPERFORMS

A&A Q3 revenue was $204 mln (vs. $213.6 mln est. & $178.8 mln Q3/16) and EBITDA $72.2 mln (vs. $64 mln est. & $57.6 mln Q3/16). The sizable y/y increases are attributable to: 1) ongoing positive momentum from LTM capex spend into RegionalOne, with revs & EBITDA +40% and +35% y/y, respectively; 2) Provincial EBITDA +12% y/y due in part to its improved yields and increased volumes from its airline operations; 3) top line +11% y/y and EBITDA +26% from the legacy airlines, owing to better vols in the Kivalliq and NW Ontario markets and improved utilization from rotary/fixed wing aircraft related to elevated fire suppression / evacuation demand. Partially mitigating the y/y increase was higher pilot training costs (management indicated it is being felt industry-wide) and lost

First Nation demand from communities affected by evacuations.

■ MANUFACTURING EBITDA LIGHT DUE TO WESTOWERCANADA

Mfg Q3 revenue was $49.4 mln (vs. $44.6 mln est. & $45.9 mln Q3/16) and EBITDA of $5.6 mln (vs. $6.3 mln est. & $6.4 mln Q3/16). The weakness was attributable to WesTower Canada (lower capex spend by carriers as they prepare for the transition to another generation of technology), offset in part by gains at Stainless, Overlanders, Ben Machine and the Alberta operations.

■ REITERATE POSITIVE BIAS

Q3 results help validate that: 1) EIF’s legacy airlines are not collapsing; 2) RegionalOne’s capex spend continues to generate an outsized return; 3) Q4/Q1 weakness was temporary as advertised; and 4) the dividend is sustainable. We will update our forecasts after tomorrow’s 8:30 a.m. EST cc (888.231.8191), reiterating an Outperform rating and $42 target (implies ~7x 2018 EV/EBITDA).

Source: NBF Financial



CANADIAN MONEYSAVER SUGGESTED CANADIAN DIVIDEND REINVESTMENT PLANS (DRIPS) Ca

nadi

an M

oney

Save

r SU

GG

ESTE

D C

AN

AD

IAN

DIV

IDEN

D R

EIN

VEST

MEN

T PL

AN

S (D

RIPs

)

TSX

Com

pani

es S

ymbo

l52

-Wee

kCl

osin

gPr

ice

Div

Yiel

dEP

SP/

EPa

yout

Rati

o %

5-Yr

Div

iden

d G

row

thH

igh

Low

Agni

co E

agle

Min

esAE

M$6

8.76

$46.

91$5

5.08

$0.5

61.

02%

$1.2

843

.043

.8%

-7.3

%

Algo

nqui

n Po

wer

AQN

$14.

40$1

1.09

$14.

24$0

.61

4.28

%$0

.68

20.9

89.7

%16

.0%

Alta

Gas

ALA

$35.

15$2

6.87

$28.

84$2

.19

7.59

%$1

.07

27.0

204.

7%8.

6%

BCE

Inc

BCE

$63.

00$5

6.95

$62.

28$2

.87

4.61

%$3

.38

18.4

84.9

%5.

2%

Bk o

f Mon

trea

lBM

O$1

04.1

5$8

8.63

$100

.91

$3.7

23.

69%

$8.4

511

.944

.0%

4.7%

Bk o

f Nov

a Sc

otia

BNS

$85.

50$7

3.31

$83.

60$3

.16

3.78

%$6

.90

12.1

45.8

%7.

0%

Cana

dian

Tir

eCT

C.A

$171

.91

$137

.07

$164

.18

$3.6

02.

19%

$10.

4315

.734

.5%

16.5

%

Cana

dian

Uti

litie

sCU

$42.

44$3

5.17

$38.

83$1

.43

3.68

%$2

.34

16.6

61.1

%10

.1%

Cdn

Impe

rial

Bk

(CIB

C)

CM$1

22.5

6$1

03.8

4$1

19.6

5$5

.20

4.35

%$1

1.23

10.7

46.3

%6.

5%

Cons

tella

tion

Sof

twar

eCS

U$7

91.0

0$5

75.2

2$7

85.0

0$5

.20

0.66

%$2

8.00

28.0

18.6

%5.

8%

Emer

aEM

A$4

9.48

$44.

40$4

8.13

$2.2

64.

70%

$2.5

418

.989

.0%

9.1%

Enbr

idge

EN

B$5

8.28

$43.

91$4

9.34

$2.6

85.

43%

$1.9

725

.05

136.

0%16

.4%

Exch

ange

Inc

ome

Corp

EIF

$45.

00$2

5.80

$36.

45$2

.10

5.76

%$2

.15

16.9

597

.7%

5.2%

Fort

is

FTS

$48.

73$4

0.18

$47.

44$1

.70

3.58

%$2

.52

18.8

367

.5%

6.1%

Hyd

ro O

neH

$24.

66$2

1.32

$22.

73$0

.88

3.87

%$1

.10

20.6

680

.0%

13%

Impe

rial

Oil

IMO

$48.

72$3

5.15

$39.

45$0

.64

1.62

%$1

.24

31.8

151

.6%

5.7%

Inte

rPip

elin

eIP

L$3

0.07

$22.

14$2

7.62

$1.6

86.

08%

$1.3

919

.87

120.

9%9.

4%

Keye

ra C

orp

KEY

$42.

57$3

4.07

$34.

64$1

.68

4.85

%$1

.43

24.2

211

7.5%

9.1%

Man

ulif

e M

FC$2

7.54

$22.

39$2

6.86

$0.8

23.

05%

$2.1

412

.55

38.3

%9.

0%

Nat

iona

l Ban

kN

A$6

4.39

$51.

41$6

4.14

$2.4

03.

74%

$5.7

711

.12

41.6

%8.

5%

Pem

bina

Pip

elin

esPP

L$4

6.17

$39.

04$4

5.28

$2.1

64.

77%

$1.5

129

.99

143.

0%4.

4%

Roya

l Ban

kRY

$102

.50

$89.

94$1

02.4

7$3

.64

3.55

%$8

.04

12.7

545

.3%

8.8%

Sun

Life

Fin

anci

alSL

F$5

3.25

$43.

51$5

2.43

$1.8

23.

47%

$4.0

912

.82

44.5

%3.

5%

Sunc

or E

nerg

ySU

$46.

66$3

6.09

$44.

25$1

.28

2.89

%$1

.69

26.1

875

.7%

21.1

%

Supe

rior

Plu

sSP

B$1

3.34

$10.

80$1

1.92

$0.7

26.

04%

-$0.

27n/

an/

a0.

6%

TD B

ank

TD$7

5.09

$61.

50$7

2.85

$2.4

03.

29%

$5.9

012

.35

40.7

%10

.4%

Telu

s T

$48.

94$4

2.13

$48.

13$2

.02

4.20

%$2

.64

18.2

376

.5%

10.3

%

Tran

sCan

ada

Corp

TR

P$6

5.24

$58.

90$6

2.99

$2.5

03.

97%

$2.9

821

.14

83.9

%6.

7%

WSP

Glo

bal

WSP

$60.

18$4

3.56

$59.

35$1

.50

2.53

%$2

.71

21.9

055

.4%

0.0%

CHA

RT N

OTE

- P

rice

s as

of

Dece

mbe

r 8,

201

7. S

ourc

e: T

D W

ater

hous

e/Bl

oom

berg

LP.

Sto

ck p

rice

s ch

ange

dai

ly. C

heck

for

cur

rent

pri

ces.

The

se C

anad

ian

com

pani

es li

sted

on

the

TSX

are

our

reco

mm

ende

d co

mpa

nies

a D

RIP.

Wit

h th

e DR

IP, y

ou c

an re

inve

st a

ll yo

ur d

ivid

ends

to

purc

hase

add

itio

nal s

hare

s at

no

cost

. Som

e DR

IPS

offe

r a d

isco

unt

so t

hat

addi

tion

al s

hare

s ar

e bo

ught

at

a di

scou

nt t

o th

e av

erag

e m

arke

t pr

ice.

Som

e di

vide

nds

are

paid

in U

S do

llars

and

we

have

adj

uste

d nu

mbe

rs a

nd ra

tios

acc

ordi

ng t

o re

cent

exc

hang

e ra

tes.

Div.

5yr

gr:

We

have

add

ed t

he fi

ve-y

ear d

ivid

end

grow

th ra

te t

o ou

r cha

rt, i

nfor

mat

ion

obta

ined

from

Blo

ombe

rg L

P.Ea

rnin

gs a

re fo

rwar

d ea

rnin

gs e

stim

ates

. Sin

ce o

ur la

st u

pdat

e Al

taGa

s, B

MO,

CTC

.A, E

NB,

FTS

, IPL

, NA,

SLF

and

Tel

us h

ave

incr

ease

d di

vide

nds.

Yi

eld

= Di

vide

nd d

ivid

ed b

y cu

rren

t pr

ice.

Pay

out

rati

o =

divi

dend

div

ided

by

earn

ings

per

sha

re (

EPS)

. Th

e di

vide

nd p

ayou

t ra

tio

is s

impl

y ca

lcul

ated

by

divi

ding

the

com

pany

’s d

ivid

end

by i

ts f

orw

ard

(est

imat

ed)

earn

ings

. If

a c

ompa

ny w

ith

a lo

w p

aym

ent

rati

o ex

peri

ence

s an

ear

ning

s de

clin

e, i

t m

ay c

onti

nue

to p

ay t

he s

ame

divi

dend

. Or

, at

leas

t, it

may

wea

ther

the

dow

ntur

n w

itho

ut c

utti

ng t

he

divi

dend

. A h

igh

divi

dend

pay

out

rati

o of

100

% in

dica

tes

that

the

div

iden

d pa

yout

is e

qual

or a

bove

the

com

pany

’s e

arni

ngs.

The

refo

re, o

ne s

houl

d be

ver

y vi

gila

nt a

nd p

lace

the

sto

ck o

n yo

ur “

wat

ch”

list.

Calc

ulat

ion

for

inte

rest

equ

ival

ent

of d

ivid

end

yiel

d fo

r el

igib

le s

hare

s: (

100

- m

argi

nal r

ate

for

divi

dend

s) d

ivid

ed b

y (1

00 -

mar

gina

l tax

rat

e on

reg

ular

inco

me)

. Fo

r ex

ampl

e, a

n On

tari

o ta

xpay

er w

ith

ordi

nary

inco

me

of $

65,5

14 u

ses:

(10

0 –

11.7

2) d

ivid

ed b

y (1

00 –

31.

15)

is a

ppro

xim

atel

y 1.

2822

. The

refo

re, a

sto

ck w

ith

a Ca

nadi

an d

ivid

end

yiel

d of

5.0

% h

as a

n eq

uiva

lent

inte

rest

retu

rn o

f 5.0

x 1

.282

2,

whi

ch is

app

roxi

mat

ely

6.41

%.



TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF D

ECEM

BER

4, 2

017

Fund

Nam

e1

Mon

th

Retu

rn

(mth

-end

)

3 M

onth

Re

turn

(m

th-e

nd)

6 M

onth

Re

turn

(m

th-e

nd)

YTD

Ret

urn

(mth

-end

)1

Year

Ret

urn

(mth

-end

)3

Year

Ret

urn

(mth

-end

)5

Year

Ret

urn

(mth

-end

)10

Yea

r Re

turn

(m

th-e

nd)

15 Y

ear

Retu

rn

(mth

-end

)

Yiel

d 12

M

oM

ERM

gmt

Fee

Tota

l Ass

ets

($M

il)

INTE

RNA

TIO

NA

L EQ

UIT

YTr

imar

k In

tern

atio

nal C

ompa

nies

I0.

126.

093.

6024

.33

23.5

416

.39

19.8

58.

639.

211.

22-

-34

2.89

Sun

Life

MFS

Int

erna

tion

al V

alue

I1.

849.

152.

4720

.73

23.0

513

.65

17.9

5-

-1.

530.

03-

1468

.20

Inve

stor

s In

tern

atio

nal S

m C

p Cl

J D

SC0.

779.

836.

0521

.58

22.9

316

.59

17.7

8-

-0.

002.

551.

8056

2.97

Uni

ted

Inte

rnat

iona

l Eq

Alph

a Co

rp C

l W-0

.82

4.48

-0.5

019

.93

21.8

415

.51

16.8

2-

-0.

680.

24-

672.

29Co

unse

l Int

erna

tion

al G

row

th S

r P2.

6510

.08

4.96

26.2

527

.50

14.7

916

.80

--

1.72

0.17

0.00

356.

04M

awer

Int

erna

tion

al E

quit

y Se

ries

O2.

139.

124.

0425

.59

27.2

114

.76

16.4

38.

13-

1.60

0.04

-62

23.1

7CI

Bla

ck C

reek

Int

erna

tion

al E

quit

y F

-1.1

64.

68-0

.97

19.0

220

.99

12.6

916

.42

--

0.33

1.36

1.00

1463

.15

CIBC

Int

erna

tion

al S

mal

l Com

pani

es1.

4410

.88

10.7

633

.72

32.8

815

.75

16.2

14.

037.

590.

002.

912.

5042

.02

RBC

O'Sh

augh

ness

y In

tern

atio

nal E

quit

y O

-0.2

86.

183.

8019

.17

20.5

811

.32

16.0

63.

95-

3.75

0.02

-38

0.67

Inve

sco

Inte

rnat

iona

l Gro

wth

Cla

ss S

r I0.

968.

543.

9521

.47

23.3

711

.18

15.7

26.

6910

.11

0.00

--

696.

74GB

C In

tern

atio

nal G

row

th0.

656.

984.

5424

.59

26.0

114

.55

15.4

36.

279.

550.

141.

881.

5019

9.16

Fide

lity

Intl

Gro

wth

Sr O

0.87

8.17

2.25

23.8

125

.12

13.1

815

.39

4.69

6.87

1.90

--

48.8

2De

sjar

dins

Ove

rsea

s Eq

uity

Gro

wth

0.36

8.26

8.66

36.8

737

.59

12.6

015

.39

--

0.38

2.86

2.29

850.

73M

anul

ife

Wor

ld I

nves

tmen

t Cl

ass

F2.

228.

663.

5024

.51

25.8

413

.63

15.3

36.

90-

0.00

1.22

1.00

1373

.79

Uni

ted

Intl

Equ

ity

Valu

e Co

rpor

ate

Cl W

0.60

5.65

0.43

15.6

917

.41

12.4

515

.29

3.84

-0.

500.

24-

474.

92PH

&N

Ove

rsea

s Eq

uity

Pen

sion

Tru

st S

r O2.

0311

.82

8.81

28.1

829

.07

13.2

015

.23

5.49

6.31

2.32

0.09

-82

.58

SEI

EAFE

Equ

ity

Clas

s O

1.08

8.95

4.59

21.1

123

.81

12.0

614

.92

4.00

5.95

1.85

0.15

-94

7.48

Uni

ted

Inte

rnat

iona

l Eq

Alph

a Co

rp C

l F-0

.96

4.05

-1.3

418

.02

19.8

113

.57

14.8

7-

-0.

691.

941.

5067

2.29

Mer

itas

Int

erna

tion

al E

quit

y Se

ries

F1.

226.

593.

2020

.13

20.9

413

.53

14.5

4-

-2.

941.

490.

9017

4.58

TD E

mer

ald

Inte

rnat

iona

l Equ

ity

Inde

x1.

018.

022.

9718

.22

21.9

410

.44

14.1

04.

286.

422.

550.

03-

4237

.86

HIG

H Y

IELD

FIX

ED I

NCO

ME

Fide

lity

Amer

ican

Hig

h Yi

eld

Seri

es O

-0.0

14.

89-1

.56

3.88

5.77

10.3

812

.04

11.1

3-

5.94

--

3579

.86

SEI

US

Hig

h Yi

eld

Bond

Cla

ss O

-0.3

53.

86-2

.38

2.80

4.69

9.90

11.5

6-

-5.

580.

11-

558.

98RB

C Em

ergi

ng M

arke

ts B

ond

Sr O

0.03

3.60

-1.9

74.

575.

809.

819.

78-

-4.

950.

11-

838.

79Co

unse

l Hig

h Yi

eld

Fixe

d In

com

e Sr

I-0

.05

2.61

-0.0

34.

916.

738.

738.

46-

-5.

540.

241.

0554

.84

Man

ulif

e Gl

obal

Tac

tica

l Cre

dit

Adv

-0.2

61.

121.

125.

256.

487.

368.

00-

-4.

952.

021.

7038

5.75

CI S

igna

ture

Hig

h Yi

eld

Bond

Cor

p Cl

OT8

0.02

1.95

1.41

6.78

8.90

7.17

7.44

--

0.28

0.17

-9.

28Ex

cel H

igh

Inco

me

F0.

811.

81-2

.89

6.08

8.30

7.03

7.34

--

5.38

1.72

0.95

215.

99Se

ntry

Glo

bal H

igh

Yiel

d Bo

nd I

-0.3

82.

201.

727.

179.

306.

237.

19-

-6.

890.

10-

176.

00Co

unse

l Hig

h Yi

eld

Fixe

d In

com

e Sr

F-0

.15

2.31

-0.6

03.

845.

547.

417.

10-

-4.

341.

481.

0554

.84

NEI

Nor

thw

est

Spec

Glb

Hig

h Yl

d Bd

Ser

I0.

451.

103.

137.

729.

166.

316.

877.

50-

5.78

--

316.

60TD

Hig

h Yi

eld

Bond

- F

-0.1

70.

901.

344.

175.

455.

836.

746.

43-

4.66

0.96

0.85

1214

.68

PH&

N H

igh

Yiel

d Bo

nd S

r O0.

482.

172.

866.

477.

986.

936.

718.

148.

665.

640.

03-

4129

.70

Blue

Bay

Glob

al C

onve

rt B

d (C

AN)

Sr O

-0.7

61.

411.

096.

327.

393.

986.

71-

-0.

240.

22-

1140

.85

Fulc

ra C

redi

t Op

port

unit

ies

1.03

2.12

0.86

5.45

9.87

8.20

6.54

--

0.00

-0.

7562

.00

Guar

dian

Hig

h Yi

eld

Bond

Ser

ies

I0.

051.

63-0

.54

3.50

4.88

4.42

6.34

7.91

7.33

5.60

0.24

-13

8.09

Inve

sco

Glob

al H

igh

Yiel

d Bo

nd I

-0.2

11.

202.

186.

347.

616.

056.

324.

985.

325.

16-

-37

5.75

Man

ulif

e H

igh

Yiel

d Bo

nd F

T6-0

.63

0.93

1.53

5.81

7.76

4.26

6.16

--

6.12

1.25

0.90

158.

13LO

GiQ

Stra

tegi

c Yi

eld

Ser F

0.68

3.02

6.63

12.5

415

.21

5.33

6.16

--

7.82

1.47

1.00

102.

46Ex

cel H

igh

Inco

me

A0.

711.

52-3

.43

4.99

7.09

5.83

6.15

--

5.78

2.83

1.95

215.

99H

SBC

Glob

al H

igh

Yiel

d Bo

nd P

oole

d-0

.41

0.98

2.02

6.65

8.48

4.84

5.97

8.71

-5.

400.

07-

313.

96



TOP FUNDSTO

P FU

NDS

RAN

KED

BY F

IVE-

YEAR

RET

URN

AS

OF D

ECEM

BER

4, 2

017

Fund

Nam

e1

Mon

th

Retu

rn

(mth

-end

)

3 M

onth

Re

turn

(m

th-e

nd)

6 M

onth

Re

turn

(m

th-e

nd)

YTD

Ret

urn

(mth

-end

)1

Year

Ret

urn

(mth

-end

)3

Year

Ret

urn

(mth

-end

)5

Year

Ret

urn

(mth

-end

)10

Yea

r Re

turn

(m

th-e

nd)

15 Y

ear

Retu

rn

(mth

-end

)

Yiel

d 12

M

oM

ERM

gmt

Fee

Tota

l Ass

ets

($M

il)

CAN

AD

IAN

EQ

UIT

IES

Maw

er C

anad

ian

Equi

ty S

erie

s O

-0.1

16.

886.

489.

8311

.65

9.27

14.7

29.

44-

2.10

0.01

-28

92.2

8Ed

gePo

int

Cana

dian

Por

tfol

io S

erie

s F

0.69

6.71

5.69

11.0

814

.76

10.3

514

.48

--

0.00

1.00

0.80

1742

.17

PH&

N V

inta

ge S

r O0.

195.

855.

856.

098.

425.

8913

.88

4.21

7.47

1.88

0.07

-68

.05

Man

ulif

e Cd

n In

vest

men

t Cl

ass

F-0

.19

6.78

6.06

9.25

10.9

18.

3313

.70

--

2.47

1.24

1.00

397.

45Ca

ldw

ell C

anad

ian

Valu

e M

omen

tum

0.23

7.93

6.56

13.1

814

.04

13.2

513

.48

--

0.00

-1.

5026

.03

Beut

el G

oodm

an C

anad

ian

Equi

ty C

lass

I-0

.03

7.49

7.69

9.78

11.3

57.

4812

.90

8.05

-2.

430.

07-

6914

.62

Trim

ark

Cana

dian

Opp

ortu

nity

Cla

ss I

-1.0

69.

359.

905.

917.

555.

0512

.44

6.79

-1.

64-

-42

.83

Fide

lity

True

Nor

th S

erie

s O

0.60

6.02

4.00

6.97

8.55

6.99

12.3

76.

6911

.06

1.59

--

4794

.59

HSB

C Eq

uity

Ins

titu

tion

al0.

537.

747.

8110

.18

11.7

18.

9512

.24

5.97

-2.

160.

050.

0053

2.58

Inve

stor

s Qu

ebec

Ent

erpr

ise

J DS

C-0

.25

6.25

6.11

8.63

9.64

9.57

12.2

2-

-0.

002.

401.

6037

6.20

Leit

h W

heel

er C

anad

ian

Equi

ty S

erie

s A

-0.2

16.

568.

038.

149.

846.

8812

.08

6.68

-2.

07-

-30

09.6

0N

EI E

thic

al C

anad

ian

Equi

ty S

erie

s I

2.94

6.41

2.35

4.93

10.2

76.

5211

.93

6.49

-2.

38-

-97

3.26

Fran

klin

Bis

sett

Cdn

Equ

ity

O-0

.65

6.18

4.39

6.31

8.00

6.47

11.7

48.

3210

.37

1.91

--

3361

.73

Mer

itag

e Ca

nadi

an E

quit

y Po

rtfo

lio F

-0.0

55.

835.

237.

108.

726.

2211

.39

5.87

-0.

001.

430.

8540

.22

Quad

rus

Cana

dian

Gro

wth

(GW

LIM

) N

0.61

6.92

5.10

8.51

10.3

96.

7411

.36

--

1.95

--

201.

31U

nite

d Ca

nadi

an E

quit

y Al

pha

Corp

Cl W

0.39

7.09

4.66

5.97

7.96

5.58

11.3

5-

-0.

700.

22-

976.

37BM

O Ca

nadi

an S

tock

Sel

ecti

on N

BF-0

.75

5.43

5.23

9.58

11.2

28.

0611

.32

--

1.19

0.63

0.50

146.

63Si

onna

Can

adia

n Eq

uity

I0.

767.

998.

6310

.08

11.5

08.

2311

.07

6.16

-0.

560.

00-

386.

62Re

solu

te P

erfo

rman

ce18

.58

5.48

25.4

758

.57

45.5

938

.05

11.0

00.

90-

0.00

2.94

2.80

-Su

n Li

fe M

FS C

anad

ian

Equi

ty I

-0.2

95.

875.

527.

359.

316.

1410

.88

--

1.55

0.06

-9.

64

CH

ART

NO

TES

For

info

rmat

ion

on t

he c

ateg

ory

defi

niti

ons,

ple

ase

visi

t ht

tp:/

/ww

w.c

ifsc

.org

/en/

inde

x.ph

p. F

ront

loa

d fu

nds

(Frn

t) c

harg

e a

fee

to i

nves

tors

whe

n un

its

are

purc

hase

d; d

efer

red

load

fund

s (D

ef)

char

ge a

fee

whe

n un

its

are

rede

emed

. Fro

nt lo

ads

may

be

redu

ced

(in

per c

ent

term

s) a

s th

e si

ze o

f the

inve

stm

ent

incr

ease

s;

defe

rred

load

s m

ay d

ecre

ase

as t

he t

ime

elap

sed

betw

een

purc

hase

and

rede

mpt

ion

leng

then

s. S

ome

fund

s ha

ve e

ithe

r a fr

ont

load

or a

def

erre

d lo

ad (

FnDf

). O

ther

s

have

no

load

fee

(Non

e). D

efer

red

sale

s ch

arge

s al

so k

now

n as

a b

ack-

end

load

, the

se d

efer

red

char

ges

typi

cally

go

dow

n ea

ch y

ear y

ou h

old

the

fund

, unt

il ev

entu

ally

they

reac

h ze

ro. D

efer

red

sale

s ch

arge

s gi

ve in

vest

ors

an in

cent

ive

to b

uy a

nd h

old,

as

wel

l as

a w

ay t

o av

oid

som

e sa

les

char

ges.

n Y

ear R

etur

n -

The

aver

age

annu

al

com

poun

d (a

nnua

lized

) ra

te o

f ret

urn

the

fund

has

per

form

ed o

ver t

he la

st “

n” y

ears

. It

assu

mes

rein

vest

men

t of

any

div

iden

d or

inte

rest

inco

me.

1 Y

ear R

etur

n (Y

r

endi

ng D

ecYY

) -

An a

nnua

l ret

urn

is t

he fu

nd o

r por

tfol

io re

turn

, for

any

12-

mon

th p

erio

d, in

clud

ing

rein

vest

ed d

istr

ibut

ions

. Tax

Eff

icie

ncy

- Ca

lcul

ated

by

divi

ding

the

fund

’s t

ax-a

djus

ted

retu

rn (

pre-

liqui

dati

on)

by it

s pr

e-ta

x re

turn

, and

can

onl

y be

cal

cula

ted

whe

n bo

th p

re-t

ax r

etur

ns a

nd t

ax-a

djus

ted

retu

rns

are

posi

tive

.

Dist

ribu

tion

Fre

quen

cy -

The

inte

rval

at w

hich

regu

lar c

apit

al o

r inc

ome

divi

dend

s ar

e di

stri

bute

d to

fund

uni

thol

ders

. Yea

r end

Qua

rtile

s - T

he q

uart

iles

(1 to

4)

give

the

indi

vidu

al fu

nd it

s po

siti

on re

lati

ve t

o al

l oth

ers

in t

he fu

nd t

ype

cate

gory

. For

exa

mpl

e, if

the

fund

’s q

uart

ile v

alue

is “

1” fo

r the

Dec

201

0 ye

aren

d, t

his

mea

ns

the

fund

’s ra

te o

f ret

urn

for t

he 1

2 m

onth

s en

ding

Dec

31,

201

0 is

in t

he t

op 2

5% o

f all

fund

s in

its

fund

typ

e ca

tego

ry.

Sour

ce -

Mor

ning

star

Pal

Trak

, Mor

ning

star

Can

ada,

(80

0) 5

31-4

725,

htt

p://

ww

w.m

orni

ngst

ar.c

a.


http://www.cifsc.org/en/index.php








Specialty ETFsTOP EXCHANGE TRADED FUNDS RANKED BY FIVE-YEAR RETURNS AS OF DECEMBER 4, 2017 Fund Name Ticker Mkt Tot Return

YTD(Current)

Mkt Tot Ret 1 Mo

(Current)

Mkt Tot Ret 3 Mo (Current)

Mkt Tot Ret 12 Mo

(Current)

Mkt Tot Ret 3 Yr

(Current)

Mkt Tot Ret 5 Yr

(Current)

Mkt Tot Ret urn Since Incept

(Current)

iShares Edge MSCI Min Vol USA ETF XMU 13.56 3.05 8.99 16.23 15.46 20.36 18.70

iShares US Fundamental ETF Comm CLU.C 8.37 3.26 10.74 10.74 12.83 20.25 17.51

BMO Eq Wght US HlthCare Hdgd to CAD ETF ZUH 26.16 3.37 4.08 25.90 8.66 19.97 -

PowerShares QQQ ETF QQC.F 31.20 1.97 6.47 32.27 14.02 19.82 18.49

First Asset TecGntsCovCallETF Comm(CADH) TXF 33.72 -0.18 9.44 33.47 16.17 19.50 16.44

iShares Japan Fundamental ETF CADH Adv CJP.A 9.42 -2.16 9.30 17.42 8.36 19.36 -1.95

iShares US Fundamental ETF Adv CLU.B 7.56 2.59 9.03 7.56 11.15 19.19 16.51

BMO China Equity ETF ZCH 36.74 -0.85 5.80 30.73 12.51 18.73 9.21

iShares Global Water ETF Comm CWW 21.83 2.67 11.62 21.95 14.30 18.29 7.19

iShares MSCI World ETF XWD 16.04 2.12 9.93 18.11 12.39 17.39 13.02

iShares Global Water ETF Adv CWW.A 20.13 2.93 12.00 19.43 13.19 17.11 6.27

First Asset Mstar NatlBk Québec ETF Comm QXM 13.69 1.20 7.50 14.71 9.04 16.51 14.71

iShares Edge MSCI Min Vol Global ETF XMW 12.59 2.52 7.38 13.96 12.69 16.35 15.19

BMO India Equity ETF ZID 31.78 0.97 8.09 31.35 9.88 16.26 7.79

BMO Low Volatility Canadian Equity ETF ZLB 11.53 0.75 5.56 13.40 9.97 15.83 15.06

Horizons Active Global Dividend ETF Comm HAZ 13.68 2.03 10.19 16.49 11.12 15.52 -

iShares Equal Weight Banc&Lfco ETF Comm CEW 11.75 1.45 9.91 14.77 9.75 15.51 9.00

iShares Global Healthcare ETF CADH XHC 17.23 1.54 2.26 19.02 5.55 15.07 14.75

iShares Global Agriculture ETF Comm COW 16.19 3.60 15.39 19.54 11.75 14.97 8.63

PowerShares FTSE RAFI US Fundamental ETF PXU.F 12.78 3.11 7.68 15.27 8.01 14.81 13.78

iShares Equal Weight Banc&Lfco ETF Adv CEW.A 10.49 1.61 10.02 14.05 8.83 14.75 8.12

BMO Global Infrastructure ETF ZGI 7.44 1.50 2.37 9.54 7.10 14.54 14.88

iShares Edge MSCI Min Vol EAFE ETF XMI 16.01 1.49 5.72 16.68 11.51 14.18 -

BMO Equal Weight Banks ETF ZEB 12.91 0.76 10.59 19.06 9.91 14.17 12.63

iShares International Fdmtl ETF Comm CIE 18.26 0.96 8.88 21.99 10.01 14.17 2.76

iShares US Fundamental ETF (CAD-H) Comm CLU 12.67 3.13 7.75 15.33 7.73 14.10 6.24

iShares India ETF XID 25.43 -0.73 4.43 24.90 8.69 13.78 -

iShares Global Agriculture ETF Adv COW.A 12.74 2.30 13.73 17.24 10.62 13.65 7.65

BMO Equal Weight Industrials ETF ZIN 15.70 -1.09 6.16 15.70 8.49 13.11 13.34

iShares China ETF XCH 28.56 0.84 7.92 20.87 10.92 12.25 -

First Asset CanBanc Income Class ETF CIC 11.18 0.65 8.77 15.82 9.21 12.18 -

First Asset Canadian REIT ETF Comm RIT 10.77 1.70 3.62 13.75 13.68 11.47 -

First Asset Mstar Canada Mom ETF Comm WXM 8.53 -0.12 4.44 7.96 3.24 10.50 10.25

Horizons Active Cdn Dividend ETF Comm HAL 6.86 0.56 6.40 11.58 6.26 10.27 -

iShares Jantzi Social ETF XEN 9.32 0.61 7.78 10.79 6.17 9.88 4.23

iShares Global Real Estate ETF Adv CGR.A 1.50 0.00 -0.32 3.85 5.61 9.80 5.76

iShares Canadian Fncl Mthly Inc ETF Adv FIE.A 10.70 1.15 8.61 14.94 6.57 9.64 4.48

iShares Global Infrastructure ETF Adv CIF.A 1.70 -0.66 5.09 3.99 3.75 9.41 -

iShares Canadian Value ETF XCV 8.28 1.05 8.66 10.02 6.08 9.16 6.10

iShares Canadian Fundamental ETF Comm CRQ 5.96 0.82 8.17 6.64 6.33 9.00 6.30

©2017 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial advisor which cannot be verified by Morningstar, (3) may not be copied or redistributed,(4) do not constitute investment advice offered by Morningstar, (5)are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supple-mental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent,and disclosure statement.


Back Issues Each back issue @ $5.20 with GST/$5.59 with HST for ON, NB, NL & NS residents. We currently have back issues available from January 2014 to Nov/Dec 2017. All back issues since January 2001 (plus article archives) are available online to print members by adding an online upgrade. Use the order form above or order online at https://www.canadianmoneysaver.ca. (GST/HST REGISTRATION # R105201230)

NEW/RENEW MEMBERSHIP • GIFT • ONLINE EDITION

MONEYCANADIAN CANADIANMONEYSAVER.CA

Independent Financial Advice For Everyday Use - Since 1981 SAVERTo order, use the form below or go online at www.canadianmoneysaver.ca

FILL OUT, DETACH AND MAIL THIS PAGE WITH YOUR PAYMENT AND INFORMATION TO THE CANADIAN MONEYSAVER AT THE ADDRESS BELOW. PLEASE PRINT CLEARLY:

YOUR NAME ______________________________________________________________________ MEMBERSHIP NUMBER (ID) ____________________ (if applicable)

ADDRESS ___________________________________________ ________________________ CITY________________________________________________________

PROVINCE ____________ POSTAL CODE _______________________ TELEPHONE (____________) _____________________________________

E-MAIL _________________________________________________________________________________________________________________________

GIFT DESCRIPTION: __________________ YOU ARE RESPONSIBLE FOR GIFT ANNOUNCEMENT TO: (NAME) __________________________________________________

ADDRESS ___________________________________________ ________________________ CITY________________________________________________________

PROVINCE ____________ POSTAL CODE _______________________ E-MAIL ______________________________________________________________________

***FOR ADDITIONAL GIFTS, PLEASE SUPPLY SEPARATE LIST OF RECIPIENTS STATING GIFT DESCRIPTION, RECIPIENT NAME, ADDRESS AND EMAIL. THANK YOU.***

PREPAID ORDERS ONLY BY: CHEQUE/MO CARD # _____________-______________-______________-______________ EXP _____/_____

Cheques should be made payable to The Canadian MoneySaver Inc. 55 KING ST W, SUITE 700, KITCHENER, ON N2G 4W1 TELEPHONE: 519-772-7632 EMAIL: [email protected] WEBSITE: https://www.canadianmoneysaver.ca

Enter QUANTITY in boxes belowPrint and/or Online, 1-Year and/or 2-Year,

and fill in $ Total Price.

PRINT EDITION OR ONLINE EDITION includes 10% off the second year New/Renew/Gift

CHOOSE THE PROVINCE IN WHICH YOU RESIDE:

1-Yr Online 9 Issues

1-Yr Print9 Issues

2-Yr: Online18 Issues

2-Yr: Print18 Issues

PRINT1-YEAR

PRINT2-YEAR

ONLINE1-YEAR

ONLINE2-YEAR $ TOTAL PRICE

ON $22.59 $30.45 $40.67 $58.08 HST incl. $__________

NS, NB, NL, PEI $22.98 $30.99 $41.39 $59.11 HST incl. $__________

AB, QC, MB, BC, SK $20.98 $28.30 $37.79 $53.97 GST incl. $__________

PRINT PLUS ONLINE EDITIONS with 50% off the second service New/Renew/Gift1-Year - 9 Issues 2 Year - 18 Issues Quantity: 1-Year 2-Year

ON $41.75 $82.70 HST incl. $__________

NS, NB, NL, PEI $42.49 $84.17 HST incl. $__________

AB, QC, MB, BC, SK $38.80 $76.85 GST incl. $__________

ONLINE UPGRADE

ON, NB, NL, NS, PEI $1.57 per issue times the number of issues remaining in a current print membership to reach a common expiry date.

HST incl.x Number of Issues ____________ $__________

AB, QC, MB, BC, SK $1.46 GST incl. x Number of Issues ____________ $__________

You may purchase gift memberships to Canadian MoneySaver for Canadian residents. Please select price that includes applicable taxes based on where you reside in Canada.

50%off the second service with the purchase of a combined print & online membership





Choose Your Funds With Confidence

Time to Renew?

Give as a Gift?If your mailing address is printed BELOW this box,

your membership is about to expire. Renew today and assure continuous service.

Use the form on the reverse side or the renewal envelope bound inside this issue to renew.

No other renewal notice is sent.

Give as a gift and share the wealth of financial knowledge and expert advice

with a friend or family member.

You can also renew or order online at www.canadianmoneysaver.ca

Don't miss a single issue!

MONEYCANADIAN CANADIANMONEYSAVER.CA

Independent Financial Advice For Everyday Use - Since 1981 SAVER

Bringing You The Best ETFs And Mutual Funds

*Provided in digital formats only. All prices are subject to applicable taxes.

ADD VALUE TO YOUR PORTFOLIOETF & Mutual Fund UpdateThe ETF and Mutual Fund Update letter helps guide investors through an overwhelming array of fund choices to help find the investment product that is best for you. On a monthly basis, our letter will discuss which funds might make you money, are worth the fees and which ones should simply be avoided.

1 Year of Newsletters $79.952 Years of Newsletters $142.95 (10% off)

Contact us by e-mail at [email protected]

NOW SAVE

25%VISIT LINK BELOW

Monthly IssuesSubscribers receive 12-monthly issues of the ETF and Mutual Fund Update as well as access to all past letters.

Recommended ListsPick top-quality funds with confidence from one of our ETF or Mutual Fund Recommended lists, updated quartely.

Q & A ServiceRead what other fund investors are asking via our Question & Answer service, courtesy of our partner, 5i Research.

Diversify Your PortfolioUse ETFs to build a low-cost and diversified portfolio using either the Canadian MoneySaver or Couch Potato portfolios.

Fund SpotlightLearn about new funds and how they can add value to your portfolio in our monthly Fund Spotlight.

Stay CurrentStay up to date with topical articles covering anything from the fund industry to sector trends to global market news.

For more details visit https://etffundupdate.ca/?ecdsc=CMS



http://www.etffundupdate.ca

https://etffundupdate.ca/?ecdsc=CMS

2018 · leif r. montin montreal [email protected]. alberta. william wood calgary se...

Documents