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November 18th, 2010 Webinar

November 18th, 2010 Webinar

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Sample Seminar slides Sample Seminar slides Presentation Transcript

  • “ Six Mistakes Retirees Make With Their Finances”
  • NAME COMPANY ADDRESS
  • Six Mistakes
      • Not understanding or covering your risks
      • Wrong time horizon
      • Failure to understand stock market
      • Failure to understand investment fees
      • RRIF owner mistakes
      • Bond funds – should you own them?
  • Statistics
    • Canada is trying to get a handle on our aging population
      • Today, 4.7 million Canadian’s are over age 65
      • The 80 plus age group will double in 20 years and triple in 40 years
  • Risks in Your Chance of Are You Life Occurrence Insured House 1 in 240 Yes Burning Car Accident 1 in 8 Yes Medical Yearly? Yes Problem Long Term Almost 1 in 2 NO! Health
  • “ Who will take care of me…?” Your Spouse Your Children Your Close Friends Your Community Are they qualified? Do they want the job? Will the strain of care-giving change your relationship?
  • Why LTC Insurance?
    • Burden of health care is shifting to the individual
    • Long Term Care costs can quickly erode a lifetime of savings
    • Tax-free benefits can save estate from these costs
    • Allows you to remain in own home or in a facility of your choice
    • Disengages the government
  • Return of Premium Nursing Home Policy 70 Year Old Male
    • Policy pays $100/day for 750 days
    • Cost Of Basic Coverage $176/month
    • Return of Premium Option $211/month
    • Money Returned at Death $78,940
    • Financial Return on the Return of Premium Option = 7% per year
  • Are You Prepared? We can all pay the actual costs tomorrow or the premium today
  • Emotions of the Stock Market
  • Emotions of the Stock Market
  • S&P 500 ONE YEAR HOLDING PERIODS
  • S&P 500 FIVE YEAR HOLDING PERIODS
  • S&P 500 TEN YEAR HOLDING PERIODS
  • S&P 500 FIFTEEN YEAR HOLDING PERIODS
  • The stocks which make up the Dow 30 (as of Dec 2006)
    • Pfizer
    • Verizon
    • Altria
    • AT&T
    • Citigroup
    • Merck
    • General Motors
    • DuPont
    • General Electric
    • JP Morgan Chase
    • Coca-Cola
    • Minnesota Mining & Manuf
    • Johnson & Johnson
    • McDonald's
    • Home Depot
    • Honeywell
    • Alcoa
    • Intel
    • Caterpillar
    • Procter & Gamble
    • United Technologies
    • Exxon Mobil
    • Boeing
    • Wal-Mart
    • Microsoft
    • International Business Machines
    • American Express
    • American International Group
    • Disney
    • Hewlett-Packard
  • Note 1: All total returns are calculated using reinvested dividends. Note 2: The effects of commissions/loads are not included. Note 3: All data is believed to be from reliable sources. Note 4: Past performance is in no way a guarantee of future results. Note 5: The above listed mutual funds were selected for comparison due to the fact that they are among the largest U.S. domestic growth equity funds. Note 6: All Data from the Dogs of the Dow™ website
  • Compare: 1 Year 3 Year 5 Year 10 Year 15 Year Dogs of the Dow 30.30% 9.90% 9.90% 8.80% 13.30% Small Dogs of the Dow 42.00% 18.00% 13.30% 10.40% 15.90% Dow Jones Industrial Average 19.10% 8.70% 7.90% 9.90% 13.00% S&P 500 15.80% 10.50% 7.60% 10.00% 12.00% Fidelity Magellan 7.20% 7.00% 4.50% 8.50% 10.90% Vanguard Index 500 15.60% 10.40% 7.50% 9.90% 11.90%
  • An Investor’s Worst Enemy Cumulative return Jan. 1, 1984 through March 31, 1996 A new study concludes that individual investors are their own worst enemies. A look at cumulative returns shows the Standard & Poor’s 500-stock index was up almost 500 percent over a 12-year period. But the return for equity funds sold either through banks or brokers or directly to investors via telephone was much lower. The reason: Investors were moving in and out of these funds, missing market growth periods.
  • Disappointing Funds Example from12/31/95-12/31/96 Money Magazine Article The fund columns shows the annualized return reported by the fund. The shareholder column shows the shareholder average return. The difference results because the average investor invests once the fund has risen (near the top) and then gets out when the fund declines. This is not always the case and is merely an example of what occurred in these funds as reported by Money Magazine during this period. Source: Money Magazine April 1997. Comparison of fund reported results 12/31/95 to 12/31/96 vs. average investor results (investor results as measured by actual investor accounts in these funds during this period and then averaged). Hancock Discovery B is now Hancock large cap growth B
  • Should You Buy Based on Last Year’s Performance? Mackenzie Cundill Value 13% 14% 35% 13% 13% 10% CI Harbour Fund 7% -1% 11% 16% 24% 15% Fidelity Canadian Asset Allocation -1% -6% 14% 11% 14% 12%
  • Should You Buy Based on Last Year’s Performance? Funds 2001 2002 2003 2004 2005 2006 Mackenzie Universal Global Future -23% -26% 8% 1% 6% 20% AGF Aggressive Growth -38% -30% 18% 11% 5% 4% CI Global Science and Tech -38% -37% 27% -1% -8% 11%
  • Avoid “Hot” Funds
    • Of the Funds that Ranked #1 in performance rankings over the past 15 years:
      • “ Over the subsequent three, five, and 10-year periods, a whopping 80 percent of these ‘star’ funds performed worse than the average similar fund.”
  • Avoid “Hot” Funds
      • “ Since 1987, the least popular funds have outperformed 90% of the most popular funds over the following three years”
    • Data from Morningstar Principia Pro Commentary
    • “ Buying Unloved Funds” 2/21/01
  • Even the Experts Struggle:
      • 1995 mutual fund selection guide:
      • 81 funds recommended in 1995
      • Look at the returns to June 30, 2004 (10 years later):
        • 34 of the funds didn’t exist anymore
        • 32 of the funds under performed their benchmark
        • 15 outperformed
        • BUT less than 20% of selected funds outperformed
  • 4 Brilliant! At this price, let’s buy more! 7 I know this looks really bad , But these are only paper losses.. Life of a fund…
    • 1
    • Look at the rack record on this HOT fund
    6 Once this goes up, we are selling out!! 11 I don’t know what is going on. Let’s watch it. 13 Let’s buy in again. 8 Enough! Let’s cut our losses and move to XX fund that is really HOT NOW. 3 Good thing we didn’t wait! 5 We should hold. Only the people who sell lose money! 9 Good thing we sold everything! 10 Told you so. 12 More crazies who are going to get taken to the cleaners! 2 The trend is holding. We should buy!!
  • Investment Executive
  • The Secret Vice The Hidden Costs In Mutual Funds
  • Management Expense Ratios Fund 10 Year Return Expense Ratio Median Labour Sponsored Venture Capital -2.80% 5.50% CI Global Boomernomics GIF Class A -0.50% 5.06% CI Signature Canadian Balanced Seg I 5.70% 4.44% Avg. Global Equity-Seg 1.20% 3.52% Avg. U.S. Equity-Seg 2.90% 3.30% Avg. Global Bal & Asset Alloc-Seg -1.50% 3.26%
  • Management Expense Ratios of Index Funds Fund 10 Year Return Expense Ratio Acuity Pooled Canadian Balanced 13.20% 0.18% Montrusco Bolton Enterprise 12.50% 0.13% Acuity Pooled Fixed Income 11.00% 0.10% Acuity Pooled Conservative Asset Alloc 14.70% 0.10% Acuity Pooled High Income 15.90% 0.10%
  • The Hidden Cost INVESTMENT STYLE TYPICAL TRADING COST Large-Cap Value 0.65% Large-Cap Growth 1.59% Passive (Index Fund) 1.38% Small-Cap Value 1.60% Small-Cap Growth 3.12%
  • Trading Expenses Fund TER Cost of Ownership AGF Dividend Income 2.10% 3.72% AGF Aggressive Growth 2.56% 4.08% AGF Aggressive Global Stock 3.25% 4.70% Talvest China Plus Fund 3.20% 4.27%
  • Common Mistakes in Buying Funds
        • Buying Hot Funds
        • Not Knowing about Fund Fees
        • Paying Excessive Taxes
        • Failing to Understand Differences in Fund Types and risk profiles
        • A Better Way to Select Funds
  • A Study of Investor Experiences Dalbar Study from 1984 to 2003 Findings Avg. Equity Fund Investor Experience The mistakes that advisors make: Fund selection & unnecessary administration rather than the allocation of resources around your objectives. Not having a roadmap to highlight the steps to reach your objectives No system to maintain accountability of all parties involved: the investment managers, administrators and advisor. 3% Average Equity Fund 10% S&P 500 Return 12.2%
  • Common Mistakes in Buying Investments
    • How to Help Avoid
    • Buying at the Top of the Market
    How to Help Avoid Selling at the Bottom of the Market
  • Taxes At Death
    • Earned Income
      • Taxation on RRSPs or RRIFs
        • included as income on final return
      • Capital Gains on rental property, cottage or non-registered investments.
        • Result – Generally in the Highest Tax Bracket
        • Example: $500,000 RRIF
          • Tax Liability on RIF $232,000
  • Total Tax Liability on RIF at Death $232,000 SOLUTIONS?
  • Pre-Paid Taxes Program
    • Sample based on:
      • Male age 66 and Female age 65
      • RRIF is $500,000 earning 5%
      • RRIF is paying out $2,083 / month
      • Use $356 / month to pay for pre-paid taxes program = $232,000
  • Results of Pre-Paid Taxes Program
    • If 2 nd death occurred 1 yr later
      • Total spent on program $4,272 .
    • If 2 nd death occurred 10 years later
      • Total spent on program $42,720
    • Total Pre-Paid Taxes $232,000
    • Total RIF Paid to Beneficiaries $500,000
  • Should you Own Bond Funds?
    • Basket of Bonds:
    • Gov’t of Canada $50,000 4.9% - 2027
    • Gov’t of P.E.I. $50,000 5.6% - 2011
    • Rogers Comm. $50,000 6% - 2011
    • Bond Fund:
    • There is no single maturity date
  • Evaluation Sheet Today’s Date:____________________ Location _____________________________ What topic did you most enjoy or get value from ? _______________________________________________________________________________________ What is your greatest financial concern? _______________________________________________________________________________________ AN OPPORTUNITY TO TAKE ACTION I want to ensure that I have sufficient assets and make them last. I want to protect the assets I have accumulated. I would like a free consultation at your office to have a personal review: Select a day: Monday, January 22 Monday, January 29 Tuesday, January 23 Tuesday, January 30 Wednesday, January 24 Wednesday, January 31 Friday January 26 Thursday, February 1 Circle a time: 10 11 2 3 4 PHONE: Day ________________________________ Evening ______________________________ Please Print: Your Name _____________________________________________ age _________ Your Spouses Name ______________________________________ age _________ Address ______________________________________________________________________________ City, Province, Postal Code ______________________________________________________________
  • People Who Benefit from an Appointment
    • If you are unhappy with your investment performance – or don’t know what it is
    • If you want to explore long term care alternatives
    • If you own annuities that have dropped in rate or that you do not plan to use
    • If you are:
        • Single with an estate above $1 million
        • Married with an estate above $2 million
    • If you have an RRSP or pension plan over $250,000 and want to reduce taxes on your withdrawals