As was announced here recently, Motley Fool co-founder David Gardner has launched a new weekly financial podcast called Rule Breaker Investing.
I’ve long been a fan of Chris Hill’s weekly Motley Fool Money podcast, which generally runs close to 40 minutes and makes a nice weekend catchup on the financial week just past. He also spearheads a shorter podcast called Market Foolery, which runs Monday to Thursday. (Full disclosure, I once appeared on that podcast and also write for Motley Fool Canada).
Minister of State for Social Development, Candice Bergen.
The last of the seven eternal truths of personal finance that ran in the Financial Post in June was “Don’t say no to free money from the government.” After it ran, I heard from a spokesperson for the federal government’s Ministry of State for Social Development. He pointed out that it might have been appropriate to mention the RDSP or Registered Disability Savings Plan, which helps families with disabled family members save in a tax-efficient manner. I agreed it was an omission and offered to run the guest blog that follows. — JC
By Candice Bergen,
Special to the Financial Independence Hub
If you have a disability or if you have a child with a disability, you should know about the Registered Disability Savings Plan (RDSP).
The purpose of the plan is to help Canadians with disabilities and their families to save for the future. The federal government also provides generous grants and bonds to help with long-term savings if eligible.
Across Canada, approximately 100,000 people are already benefiting from the program; however, estimates show that there are still more than 400,000 people who are eligible but have yet to take advantage of this plan. That’s unfortunate because it’s very easy to set up an account. In fact, all you need is a Social Insurance Number, be a Canadian resident and qualify for the Disability Tax Credit.
Once an RDSP is set up, anyone—friends or family included—can contribute to it. You can open a RDSP at a participating financial institution, such as a bank or credit union.
You can contribute as much as you want to a RDSP each year, up to a lifetime limit of $200,000. The earnings from the Plan build tax-free until taken out of the plan.
As The Economist reported this week, assets of exchange-traded funds (ETFs) have now surpassed those of hedge funds. In one of its “Leaders,” the British weekly described hedge funds as a “fatal distraction” for pension funds. It also ran a longer piece on the same story, saying ETFs are roaring ahead of hedge funds.
Back in 1999, ETFs had only 10% of the assets under management enjoyed by hedge funds. Today, according to research firm ETFGI LP of London, UK, assets in the global ETF industry were US$2.971 trillion (that’s Trillion with a T!), compared to US$2.969 trillion for hedge funds. But of the $36 trillion (US$) invested in pension funds worldwide, only $3 trillion are in hedge funds. It noted that CalPERS, a huge US pension fund, has “concluded putting money in hedge funds is not worth the bother.”
I talked to ETFGI managing partner Deborah Fuhr (who left BlackRock four years ago) after the Economist article came out this week. She said the ETF industry likely became bigger than hedge funds back in May of 2015, when ETF assets reached US$3 trillion but as Hedge Fund Research only provides quarterly data rather than monthly, it could not be confirmed until now.
It’s a big milestone for ETFs but there’s still a long way to go before ETFs catch mutual funds. Fuhr says global ETFs have just 8.4% of the assets claimed by the mutual fund industry.
Stocks versus Bonds
Here at the Hub the past week we had a study in contrasts, with two financial expert/authors running guest blogs with quite disparate views on asset allocation. Continue Reading…
The magazine argues that while the tech boom may get bumpy, “it will not end in a repeat of the dot com crash.” Certainly, the past week was mostly positive for growth stocks like the four that make up the so-called “FANG” acronym: Facebook, Amazon, Netflix and Google. Amazon turning a profit: who knew?
True, none of the FANG stocks pay dividends but the older tech giants that do, like Apple, IBM and Microsoft, experienced haircuts this week.
As the Globe & Mail and Financial Post both reported Tuesday, a new study by the Fraser Institute finds that an expansion of the Canada Pension Plan (CPP) may not raise incomes of retirees because people will save less on their own.
The report, which is to be released today, found that private savings fell as CPP contribution levels rose between 1986 and 2008. CPP contribution rates were 3.6% of earnings in 1986 (half from employers, half from employees) and rose to the current combined level of 9.9% by 2003.
Impact varies with income and age
The study found the impact of higher CPP contribution rates varies with income and age. So for households with annual income under $34,140, a one percentage-point increase in contribution rate resulted in a 1.56-percentage-point fall in private savings. But middle-income households earning up to $59,920 cut their savings by 0.72 percentage points: less than the full amount of the CPP increase. And high-income earners making over $59,920 were found to have almost no change in their saving rates as CPP rates rose.
The report’s co-author, Charles Lamman told the Globe that relatively few Canadians are under saving for retirement: mostly the elderly, widows and singles, and those without a work history that makes them eligible fort the CPP. So for those people, a CPP expansion would not be helpful.
The Financial Post version of the story can be found here. The Post also ran a piece by the report’s authors on its FP Comment page: Shifting Retirement Savings. You can also view a video commentary on the report on the Fraser Institute’s website, here.
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