A Comment -- General Comments From an Expert (A Commentary)

Markets. Thinks 2013 will be a good year. Just a continuation of what we have seen since 2008-2009. Still seeing a lot of fear in retail investors not wanting to get into equities and the market. Sees this as a progression from the fear spectrum in the market over to getting to risky and toppy in what she sees as a bend in the market. We are still more on the fear side which gives her a bit of confidence that it will be a good year. Sees the central bankers as doing their job in providing as much stimulus as possible to keep things going.

How does withdrawing money from a TFSA affect the contribution than the going forward? Let’s say you put in $5000 a year or 2 ago and it has gone up by 10% and is worth $5500. You take the $5500 out, you still have $5500 worth of room to put back in. You can always put as much back as you took out. Conversely, if you put in $5500 and it dropped by 10% and is now worth $4500 and you take out the $4500, you can only put in $4500.

Individual stocks as a pension strategy compared to annuities, ETFs and mutual funds? You need to remember that all these things are building blocks and there is no single building block that is unequivocally better all the time. Securities are better in that there are no MER’s and no cost to them but you generally need to have a lot of them, probably a large 7 digit portfolio because you have to diversify by sector and geography. Mutual funds are expensive and annuities are not paying much so probably the best building blocks are the ETFs.

US Stocks? Should these go in a registered plan or non-registered? Is there any problem with the dividends being withheld? Generally it is better to hold US stocks in a non-registered account. You might want to look at, not just US stocks, but international stocks and emerging-market stocks.

With a defined pension plan, should other investments be balanced 50/50 fixed income and stocks or 20/80? This depends on how old you are and how big your defined pension plan is. You probably want to get some jazz into your portfolio. If you have half of your money in a pension and half in a discretionary areas, you could probably safely put 100% of your RRSP money into stocks because your defined pension is like a giant bond portfolio.

Is anything lost by transferring stocks from a TFSA to a RRSP? No. You don’t lose anything other than maybe opportunity costs for putting new money back into your TFSA

If money is withdrawn from a TFSA and replaced with in the same year, is it considered an over contribution? Yes. If you take money out, you have to wait until the following calendar year before putting the money back.

Costs when moving funds from a full service broker to a discount broker, or vice versa? There will be a transfer cost of typically $125 plus tax. This is not exorbitant. You need to remember that you always have the option of transferring either in cash or in-kind. If you are happy with the securities that you have, you don’t have to sell it to move from one to the other, you can do it in-kind.

Can you transfer part of an RRSP to a RRIF before turning 71, as well as keeping the RRSP for future contributions (up to age 71)? Yes. Some people like to do that because they can get a tax credit for a tax income for pension income. For example, if you transfer 25% or so to your RRIF. If you have a $400,000 RRSP, you transfer $100,000 to a RRIF and you start taking out your RRIF payments, it gets added to your pension income leaving you with still $300,000 of an RRSP and you can still contribute to the RRSP.

Vanguard Consumer Staples ETF (VDC-N) or Vanguard MSCI Emerging Market ETF (VEE-T) to get capital appreciation? You can almost always get more capital appreciation if you forgo dividends because dividends are paid by large-cap stocks which are mature. Smaller companies will grow more quickly than large mature companies that are paying dividends. They will be more volatile as Risk and Return are related. For capital appreciation, VEE-T would have greater appreciation.

Markets. He expects more the same in 2013 for REITs. Half of returns are from cash flows and the other half from yields. 10-14% range. If you see higher cash flows from REITs then they would be closer to the 14% end of the range otherwise closer to the 10% range. The low interest rates and low growth environment will cause increased demand for real estate. Fundamentals for Real Estate have never been better, and occupancy is the highest it has ever been.

Markets. Has been very strong for some months. Thinks the market is digesting some of the macro issues and it needs some confidence, a psychological lift, to move to a more normalized levels. Feels the market still has a couple of multiple points that it could pick up, which would equate to about 15% before it was fairly valued. Feels stocks are under owned and undervalued right now. Both institutions and individuals have an allocation and asset mix which isn’t normal, (skewed towards the fixed income side) because that is where they perceive safety.

Markets. Constructive on US economy this year. Looking at all the numbers, everything is looking great on the US side. Employment is coming on stream, house prices are moving higher and house sales on the rise. Looking at Canada, you have to look at China and Europe. Europe is China’s biggest exporter and how Europe goes, so goes China. How goes China, so goes Canada. China’s numbers seem to be getting better.

Markets. Last year was in awful year and he thinks for the first half of 2013 it will be much similar to 2012. Energy sector remains the most out of favour sector, especially for Canadian oil and gas because of the ongoing differential issues for oil and the continuing weakness of gas prices. This weakness in the energy sector presents opportunities.

Markets. Believes we are in a secular bull market. Risk taking will be rewarded. Despite all the volatility that we’ve had since 2008-2009, you have been rewarded handsomely for taking risks. Feels we are in a continuation. Expects 10 year bonds will go to 3% so there will be a reversing of slightly easier money. As a result, safety trades, high dividend payers and low growth stocks with high dividends will get hurt. You want to be towards companies that reinvest their capital from retained earnings.