Comments on: 2008: A Retrospective

By: 2009: A Retrospective | Canadian Capitalist

2009: A Retrospective | Canadian Capitalist — Wed, 23 Dec 2009 15:59:13 +0000

[...] a difference a year makes! If the biggest story of 2008 was how quickly markets had tumbled, this year’s biggest story is likely to be how quickly [...]

By: Thomas

Thomas — Thu, 08 Jan 2009 02:59:01 +0000

Lessons learned? Mine was that a portfolio of long only public bonds and equities is a pretty risky strategy.

By: charles palma

charles palma — Tue, 06 Jan 2009 16:44:16 +0000

Going up is slow but going down is faster than a bullet when you don’t manage things well. You will start slow and grow slow but you can lose everything in 1 day.

By: brad

brad — Fri, 02 Jan 2009 13:29:52 +0000

Thanks, oxcc, in fact that’s the direction I’m learning toward myself. I won’t be able to max out my RRSP contribution room, but I can make a significant dent in it and can take advantage of dollar cost averaging. I’d rather do it at my own speed than go into debt.

By: 0xcc

0xcc — Fri, 02 Jan 2009 13:19:07 +0000

Brad, you could consider stretching out your contribution over all of 2009. While you won’t get the big tax refund this year you could also avoid the interest costs. I personally feel that the markets aren’t going to have a stellar 2009 so I don’t think you will lose much by averaging in over the year. Then you will also get a nice refund in early 2010 for your 2009 contributions.

By: brad

brad — Fri, 02 Jan 2009 11:30:43 +0000

Thanks to everyone for the additional comments.

@Phil and Econ Student: I’m not looking for short-term returns on investment; my RRSP is by definition for retirement so really all I care about is what my equity shares are worth when I’m closer to retirement age and start shifting more of my assets into safer investments. So I am totally comfortable with the idea that I might invest $50K today and it could be worth $20K at the end of 2009. I do have some diversity in my portfolio, but most of that is in my retirement funds in the US (where I lived most of my life, I’m a dual citizen). So far my Canadian RRSPs are 100% equities but I’m planning to diversify a bit starting in 2009. I’ve only been living in Canada for six years.

I like the idea of negotiating for a lower rate, I will try that.

And yes, it wouldn’t take me very long to pay off a $15K loan. But there’s no way I’m going to be able to save $35K between now and the end of February! That’s far beyond my means. If I want to max out my RRSP room for 2008, the only way to do it is to take out a loan.

I’m still not sure I’m going to do it, but you all have given me some good things to think about, and I’ll ponder it some more before making a decision. Thanks again.

By: A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com

A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com — Thu, 01 Jan 2009 23:38:34 +0000

[...] The Canadian Capitalist has a succinct summary of the year that was 2008. [...]

By: Four Pillars

Four Pillars — Thu, 01 Jan 2009 23:00:30 +0000

Happy New Year!

By: TEMPLE

TEMPLE — Thu, 01 Jan 2009 20:34:49 +0000

Hi Brad,

I think you should max your RRSP contribution and put all the money in stocks. Like some other posters, I am not a big fan of indexing, but if you are not going to delve into the minutia of equity investing, indexing is statistically your best option in getting the best possible positive return from the stock market with the least amount of work. In fact, with indexing, you will probably do much better than most investors who do not index. So, indexing is a sound choice.

Also, I don’t think you should diversify your RRSP. I think you should be 100% in equities. You own real estate and bonds will be a drag on your long term returns. You have a long time horizon and I think anyone with a high income and a long way to retirement needs stocks to charge up portfolio returns.

Also, if a 50K RRSP deduction won’t move you into a lower tax bracket, how difficult will it be for you to repay a 15K loan? I assume that your income must be considerable for this to be the case. As such, taking on debt over the short term is not very risky. Also, EconStudent makes an excellent point regarding negotiating for a better loan rate.

Regards,

TEMPLE

By: EconStudent

EconStudent — Thu, 01 Jan 2009 20:08:48 +0000

Brad: I agree with Phil S about using GIC.

The situation as I understand is this: 50k into RRSP and you end up with 15k loan of 3.5% interest.

I would divide up your investment in RRSP like this:

35k into equities
15k into GIC/bonds

As a result, you won’t have to be worried about the value of the loan’s investment falling below principal.

Since you have such a high income (highest tax bracket), there is no worries about a 15k loan. Try negotiating with the bank for a better interest rate than 3.5%. Bank of Canada will lower rates soon and best of luck getting a great loan.