Rick Lluis , CFP - Financial Planner

It's that time of year!

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

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

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

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

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

Rick Lluis
[email protected]
250-507-5574

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

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

https://www.youtube.com/watch?v=Wfun5G0pDos

The Economic Policies of the 2020 Election - Trump vs Biden This video was made possible by our Patreon community! ❤️ See new videos early, participate in exclusive Q&As, and more! ➡️ https://www.patreon.com/Economics...

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

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

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

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

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

rbcteams.webex.com

I WILL NEVER NOT KEEP SAYING THIS:

It's about the long term!!!

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

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

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

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

What a Blue Sweep may look like

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

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

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

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

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

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

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

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

WHEN IS THE BEST TIME TO INVEST?

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

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

1. Scared to invest during a pullback

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

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

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

2. During Market Strength

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

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

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

The World is your Oyster🌎

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

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

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

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

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

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

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

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

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

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

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

The dollar-cost averaging strategy (DCA)

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

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

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

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

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

(SEE IMAGE BELOW FOR RESULTS)

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

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

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

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

Food for thought - homeowner edition:

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

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

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

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

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

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

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

🏠

WHY IS THE MARKET NOT TRACKING THE ECONOMY?

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

So, what gives?

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

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

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

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

Lets look at some reasons why:

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

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

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

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

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

Rick

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

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

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

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

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

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

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

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

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

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

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

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

Reach out if you have any questions!

Rick

Some interesting developments:

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

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

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

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

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

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

MacroMemo - June 22 - June 26, 2020 COVID-19 infections mount

Chances are if you don't actively search for your own news (financial news included), you're being fed the same mainstream fodder as everyone else through your facebook newsfeed or ads on the internet.

Times like these, when the economy and the stock market don't match up at all, you may end up with extremist views. "It's all going to come crashing down!" or the opposite: "We're going to make new highs!".

I encourage you to actively research your own sources in order to read, listen, and watch the experts that actually know what they're talking about. The people whose jobs are to advise on how to invest billions of dollars - not people who get paid by how many clicks they get on their articles!

Like Eric Lascelles, here. He's an actual economist. The Chief Economist at RBC GAM, in fact.

Try listening to him and others like him.

Investment Outlook Summer 2020 video - Eric Lascelles Investment Outlook Summer 2020 video - Eric Lascelles

Want to know a bit more about what I do?

Some may think I only deal with investments when that's actually just ONE of the tools I use in order to provide you with financial planning and advice.

I take a look at your current situation and your future goals to recommend actions you can take NOW to help you get there!

If you want to see that in action I suggest you read the personal finance section of the Financial Post. They always have people write to them in hopes of getting a Financial Planner to help with their issues!

You'll see just how many pieces there are to re-arrange and put together in order to get some people's lives back on track.

Reading these also satisfies my financial nosy-ness😎

Alberta couple’s costly fleet of seven vehicles leaves retirement plans in neutral They can’t afford to spend $800 a month on two trucks, a truck camper, one all-terrain vehicle, two sports cars and a fishing boat

I will be participating in this year's Power To Summit event held by Power To Be.

If you are unfamiliar with this local charity, its main goal is to give access to physical activty based in nature to people with disabilities or some other barrier to access. See below for an excerpt:

"Power To Be began in 1998 with an idea: help people living with a disability or barrier access nature. The idea grew into a community, connecting participants to adventures and supporters to opportunities, collectively redefining our definition of ability.

Based in Victoria and Vancouver, we are a non-profit organization that empowers people to explore their limitless abilities through inclusive adventures rooted in nature. We believe finances shouldn’t prevent anyone from accessing nature, and we work to remove cognitive, physical and social barriers to the outdoors, supporting participants to explore who they are and what they are capable of with the support of our staff, volunteers and each other."

Link below to donate! Scroll down and click my name and then donate. Any amount helps!

Donate to help RBC raise money for Power To Summit Victoria 2020’s fundraising campaign, on June 18, 2020 The team, RBC, is raising money for a great cause by participating in Power To Summit Victoria 2020 on June 18, 2020. They need your help to reach their team goal. Every donation gets them closer!

I came across this comic today.

It's a clever and sobering reminder that the world and the powers-that-be don't necessarily treat others the way they treat you.

The Five Principles of Successful Investing:

I notice a lot of my friends and clients think that you need to be super smart, have insider information, and constantly pick the winners to be a good investor.

Nope...

It's not about being ultra knowledgable or doing really good analysis of every single company...

In fact, it's probably not at all what you think!

Just read the article below and find out what it really takes to be a successful investor!

And once you're all hyped up from realizing that YOU too can be a successful investor - hit me up and we'll chat! 😎

Oh, and happy weekend everyone.

Rick

Five principles of successful investing These five tried and true investment principles serve as a blueprint for building an effective long-term portfolio to achieve your financial goals

Have you noticed something different about your spending the past few months?

A lot of people I've spoken to recently have said to me that the pandemic has opened their eyes to how much they were overspending on the "unnecessaries".

They had no idea just how much they were spending on coffees, lunches, drinks etc. These things are usually small but with time they add up.

Assuming you're still working, on a month were you physically cannot make any of these usual purchases, you can often find yourself $100 or $200 dollars richer...

If you're able to save that $200 every month, global pandemic or not, you'll end the year with an extra $2400 in your pocket. That's without investing it too.

If you want to learn more about how to take advantage of this unique situation we're in, just hit me up.

What Now: Should I Change How I'm Saving and Investing? Do you need to make a change in how you're saving and investing now?

Short one today🤓:

When you get a call from your dentist telling you it's time for a check up, you make an appointment with no hesitation. 🦷

When you get a call from your bank telling you it's time for a check up - do the same thing! You're likely to get great value from a meeting with an accredited Financial Planner. 👩‍💼

Your financial health is just as important as your dental health!

Finally done my free guide to Canadian personal finance and investing! Click the "Sign up" button on my page to get a free copy! 🚀

How to get EXCITED about Investing!🔥🔥🔥

I know most of you don't get fired up from the idea of saving and investing as much as I do...

Saving? Investing? Is that what you do instead of buying all the things I want to buy?💁‍♀️.Well yes but hear me out.

What's the one cause of anxiety that affects almost everyone on planet earth?

MONEY...or more accurately, your perceived lack of it.💲

What if you could effectively eliminate that cause of anxiety?

What if you could greatly increase the chances of being able to afford the lifestyle you want for you and your family?

Well let me tell you how NOT to do those things..

❌You won't be doing it by dropping hundreds on nights out, continuously feeding your online shopping habit, or treating your credit card like free money.

So many things we spend our money on are with one thing in mind:

Instant gratification

What if instead you took some of that money and used it to make more money?

What if you took $100 or $500 a month and invested it instead of spending it on lunches, fancy $6 coffees, clothes you will never wear, or subscriptions you haven't used in months?☕️

Trust me, for many of you, if you took the time to identify what you spend your money on every month, you'd easily find $100 or more in unnecessary expenses.

I know this because I've done it for myself and many clients in the past.🤓

Now go to the calculator below and see how much investing on a monthly basis will get you in 10, 20, 30+ years.🚀

Have fun with it!

You save $200/month right now? Can you make that $300?$500?

See what difference these amounts make over the long term and see just how much money you REALLY have!😎

PS. Use 4-6% for your yearly returns. These are very reasonable.

Investment Calculator Free investment calculator to evaluate various investment situations and find out corresponding schedules while considering starting and ending balance, additional contributions, return rate, or investment length. Also learn more about investments or explore hundreds of other calculators addressing....

Top 3 Ways to Avoid Emotional Investing😱

When things start to go wrong, it's important we don't hit the panic button. It can be tough, I get it.

Looking at big red numbers on your screen can really do damage to your psyche. 🆘

So I compiled a short list for you. Tough economic times will always happen so keep these things in mind.

1. Have the big picture in mind.🌎

What was the reason you invested in the first place? Was it to get rich quick?

I hope not.

If anyone sells investing to you that way, you better run the other way. 🏃‍♀️

You likely got in to build long-term wealth for yourself and your loved ones. When you panic or deviate from your plan, you put all of that into jeopardy.

2. Tune out the main-stream media 👨‍💼

They're there to make you panic. Sensational news generates income. It's in their best interest to blow everything out of proportion.

Honestly, even when things are going well, don't listen to them. Their sensationalism can go the other way and say it's a great time to buy aggressively when it's not.

3. Stop checking your investments everyday

Why do you do this? Just stop. 🥺

Look at a graph of the S&P500 over the last 10 years.

Now 20 years

Now 30+ years.

You see how it fluctuates a bit but keeps climbing up?🚀

How much do you think a SINGLE DAY really matters?
..

Ok that's it! Reach out if you want to get serious about maximizing your net worth.

Until next time!

Rick

Top TWO ways to budget and get ahead! 💲

1. The "Accountant"
- Determine your monthly income
- Look in horror at your bank statements to determine your monthly wasting..ahem..spending😱
- Realize you spent $86.74 on fruit smoothies that month (why?)🥤
- Determine whether you have positive or negative cashflow
- Identify areas where you can decrease your spending
- Invest what's left

Pros:
-Methodical
-Opens your eyes to your spending habits

Cons:
-You save what you don't spend. This often doesn't work for people that can't control their spending.

2. The "Pay-cut"🤢
- AKA paying yourself first
- Invest a pre-determined amount immediately after you get paid
- The more the better - if you can do 30% great - if you can do 50% even better
- Live off what's left until next time you get paid

Pros:
- Requires less work than the "Accountant" way😎
- You're "forced" to live as if you got a pay-cut
- Less likely to fail since you have no other choice

Cons:
- You need to be comfortable with your own spending habits
- You could overestimate how much you put away (whoops)

What's your preferred method?

What are you saving and investing towards!?

Top five mistakes made by rookie Investors😢

1. They focus too much on the returns. Ok, returns are important - it's why we're here isn't it? But have you ever considered the risk you take?

At some point, the returns just ain't worth the additional risk you take to get there. Dive a little deeper than just returns. 🤓🤓

2. They invest money they shouldn't. When you put money in the market, you risk losing it. It's quite simple; if you can't afford to lose the money, put it in a GIC or something else guaranteed. Do not invest it.

3. They don't have a plan. It's all about investing with a goal in mind.

We know that historically the longer you're in the market, the higher the chance of positive returns. But if you know you'll need the money in two years then you won't have the luxury of time. Plan accordingly. 📈📈

4. They listen to people who are not investment or planning professionals.

Now, that doesn't mean that all investment professionals will give you proper advice either. Make sure the investment professional listens to you before making recommendations.

Did they ask you, "Have we talked about everything that is important to you?"

5. They think that every day should be a positive day. 💲💲💲

Even the best investors and fund managers in the world have losing years. A whole year where they lost money! Yet they know that with time, their strategies make them huge returns.

They don't panic and change strategies because of ONE losing year. Do you have that kind of patience?

Investing is a great way to build long term wealth but you need to have the right expectations or at least be willing to be coached - otherwise it's best you just stay away.

Reach out if you have any questions.