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Mutual Funds

A security that gives smaller investors access to a well diversified portfolio of shares, bonds and other securities.  Each shareholder participates in the gain or loss of the fund.  A security is an instrument representing ownership (stocks), debt arrangements (bonds) or the rights to ownership (derivatives).  A security is essentially a contract that can be assigned a value and traded.

A mutual fund is a professionally managed investment in a group of stocks and or bonds that are selected and diversified to meet the stated objective of the fund.  One method of spreading risk in equity investments is buying mutual funds as opposed to individual stocks.  The funds hold relatively large blocks in many companies and professionally manage the funds entrusted to them.

It’s important to remember that mutual funds are not guaranteed and are succeptible to fluctuations in the market this can result in a decline in your investment, especially in the short term.  This is known as market risk and underlines the importance of being confident in your advisor to choose competent managers. top

GIC

A GIC is a guaranteed investment certificate.  May be cashable or non cashable and often you will see slightly higher interest rates with non cashable.  GIC’s give you downside protection but very little upside growth.  Alternatives should be sought especially in non-registered accounts because of the 100% inclusion of interest in income. top

Segregated Funds

A segregated fund is a fund that you hold inside an insurance contract.  The term segregated refers to the fact that your money is held separate from the assets of the insurance company.  Seg funds are similar to mutual funds in many respects but provide a number of additional features and benefits.  Similar to mutual funds, segregated funds are professionally managed and diversified.  The benefits of a segregated fund beyond a mutual fund are: death and maturity benefit, potential creditor protection, estate planning made easier, consumer protection and less worry for the purchaser.  The guarantees and benefits differ somewhat between companies. top

RRSP

Some people believe that an RRSP is something they invest in.  But in fact an RRSP is an account that you can open called a registered retirement savings plan that you open and choose which qualified investments you want to buy and hold in the plan.  The money that you contribute into the plan, no matter what form of investment vehicle, is a tax deduction.  You are taxed on the money only when you take the money out of the plan usually at retirement when you are in a lower tax bracket.  The other times you may access your RRSP money without tax consequences is if you are withdrawing money from your plan either as a first time homebuyer or as a loan to yourself for continuing education.  In both of these instances for the money to be received tax free it must be paid back into an RRSP within 10 years for the education and 15 years for first time home buyers plan.

The benefit of investing in an RRSP is twofold.  The first is that the money that you contribute is deductible from your taxes.  That means you get to save your gross pretax income instead of from your net income.  If your gross income is 50000 and you contribute your maximum for 2007 which is $9000 (assuming you don’t have a pension adjustment) that $9000 comes off of your gross income before taxes.  The second benefit of an RRSP is that any investment income earned inside of the plan won’t attract any immediate tax implications.  Money invested outside of an RRSP or a side account of an exempt Universal Life Policy is subject to dividend, interest and capital gains tax. top

RESP

It is said that the average cost of a four year degree for a child born in 2007 will be over $100000.  The RESP is the government’s incentive to encourage parents to save for their child’s education.  An RESP is set up for the purpose of saving for a child’s education but can only be in effect for 31 years.  At present there is a lifetime maximum contribution to an RESP per beneficiary of $50000, the yearly maximum contribution has been abolished and the maximum grant allowed per child is $7200 lifetime.  The grant is paid ranging from 20%-40% based on family income. 

Like an RRSP an RESP is a plan that you open and can hold various investments in.  There are different types of RESP’s that you can open.  You can go the route of a trust or mutual funds and gic’s.  As with most savings vehicles an RESP can be set up to have automatic deposits at various time intervals.  Once invested the money grows tax sheltered until such time as the beneficiary seeks post secondary education with restrictions to qualifying fields and times of study.  The money is taxed in the hands of the beneficiary at time of withdrawal.  RESP’s are not tax deductible. top

 

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Mutual funds are offered through Manulife Securities Investment Services Inc. Insurance products and services are offered through Abrams Insurance and Investment Solutions. Banking products and services are offered through referral.