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Page II HILLS OUTLOOK Saturday Money matters Investing after Black Monday By J BRUCE MOORE Herald Special Since Block Monday October Ihe financial markets and the factors affecting them continue to attract major media attention The Investment marketplace as Canadians have historically known it was a matter of knowing what ef feet US policies and procedures would bring to bear on Canada This perception is no longer ac curate as Indicated by media reports The marketplace is now global Activities in Washington have an immediate and sometimes calamitous effect In London Tokyo and Toronto What should you do with your in vestment funds with current en of conflicting forecasts for interest rotes the dollar and recessions One suggestion Invest in your Prepay your mortgage through an annual lump sum pay monthly principal reduction payments higher monthly mortgage Every homeowner with a can save money In interest costs This can be used for more useful purposes such as investment for your retirement To illustrate Savings from tgage prepayments A semi annual mortgage with per cent Interest compound semi annually can be discharged over years with monthly payments of You would end up paying or more than twice the amount borrowed In In terest payments Consider the first years payment of BO 12 only is applied towards reducing the principal amount til has been used Tor interest charges Look at It another way If the you saved over the 15 year term JSJ3 per month was in vested in a self directed retirement plan earning per cent Interest com pounded semi annually Your cumulation upon retirement would his better than paying Canadians cannot deduct interest on money borrowed to buy a house so home very If your mortgage rate is 12 per cent and you are in a per cent tax bracket you must cam double the amount of per cent on your money to meet your payments Quite a burden It would be beneficial to this tax expense as early as you can Increaw your monthly payment by just ISO more each month and you will save in our example above in interest costs What more you will own your home years earlier The merest you save tan be utilized for more bencf pur You could Invest In a selfdirected where your contributed funds are pretax dollars and your funds grow tax free Taxes and inflation always ravage our savings Assuming Inflation of per cent and assuming your present income is In years you will need to earn 398 Just to preserve your purchasing power Because funds grow tax free within a RRSP your before lax and after tax rate of return are identical For example you purchased worth of Canada Savings Bonds this year your return is or the ret year If however you arc in a per cent tax bracket and the are held outside a and ignoring the SI Interest expense deduc lion your return Is If you deduct Inflation of say per cent your rate of return is negative and your principal is being eroded It makes sense to always consider ways to reduce your Interest charges by prepaying your and to determine how one can continue to reduce taxes and keep ahead of inflation Despite the uncertainty and volatility of today s market per asset planning and manage ment cannot be ignored Bruce Moore a member of The Investment Decision Group at Wood tor more information on this art or for virtually free In to protect your capital please call EOT and or truer John or Cop Take aim on financial independence By Mark Serfolnskl CA NC Financial independence is a goal more of us would achieve if we had a proper plan and the necessary pool of money to take advantage of Start by letting your goals Figure out what you really have to have and what you marly warn because financial independence means giving up something today to have the money you need tomorrow Set mediumterm yean and longterm from now till you retire goats Assign them a priority Next construct a budget It the only way to build that pool of money you need to reach your financial goals And be realist don cut yourself loo short or build too much budget fat both arc prescription for failure Your job it to set a path to reach your goals buy a house in two years determine the you II need and how much you must save each month to have that amount in two yean Then check your progress regularly on track Ifyouarenot calculate required to gel back on track then take the corrective action Be tough on yourself Once you have your pool of money you can begin investing for financial in dependence Let review some possi SENSE By Sheldon Became of I op 0Bition Finance Minialcr Michael Wilsons life lime capita gains exemption for individuals not be long lived so taxpayers should take advantage white they can Except with a family farm the exemption is being phased in so you can claim the exemption against capital gains of in 000 in 87 in 88 000 in 89 and the full 500 in 1990 and subsequent years On the sale of a family farm the whole 500 000 can be for a particular year arc of tic tax return Taxable capital gamsAllowable rap losses A form called T657 ova lablc from the lax free used to calculate the exemption You must also fill Schedule 3 Summary of Dis positions of Capital Property in 1986 RRSP If you axe going to invesi choose taxdeferred investments I RRSP firu There arc two tea ons you can count on the Canada Pens on Plan to keep you in your old age andconinbutionstoanRRSPg vc you an important tax saving Stocks and Bonds Unless you know a lot about stocks and bonds and have time to study the markets carefully on a continuing basis avoid them For most the risks of losing outweigh the chances of big gains Mutual Funds A better bet Your is less because your money pooled with the money of others buys into hundreds of different stocks A caution past performance is no guarantee of future performance A House One of the best menu To get one you need a plan to save the Remember you don have to start with your dream bouse Buy a house you can afford which will help protect you against inflation and trade up as your income Work at paying off your mortgage a risk free return on your money and when you redone you can turn to other investments Difficult or Painful to get on your feel DENTURE THERAPY CLINIC TRENTON 18 CHURCH STREET GEORGETOWN 8772359 Our powered Gentle Lift rises with you to give thai extra security and stability needed to reach a standing position at the same time easing the painful pressures experienced at hip and knee joints whether caused by severe arthritis heart or other major medical problems The power recline feature also provides comfortable TV wat chine or sleeping positions CHRISTMAS SPECIAL save ONLY At Sate Savins OPEN Mon 9 a ni fi p THE MILNE HOMECARE AND W PRESCRIPTION CENTRE 83 Mill St Georgetown 8731010 Yes you can move your to get more NQ Is your earning 1 1 ft or less Today many many people are re ivlng lift or less rale of return on their RRSP investments Oh sure many cases they arc locked up guaranteed rates for a specific period usually five years or less but on average even year GIC have only averaged 10 over the past 10 years desp te the Tact there were a few months in 1982 where you could get high as 17ft But overall those high were lable only for a short as they soon Tell rap dly to the more normal rales available today and still fall But what if you can get more re turn for your Are you forced to stay w the RRSP you have that may be paying less than others have proven to do Die answer is No you arc not forced to stay where you arc You your RRSP to another the industry word for this transfer is rollover by simply using a Government transfer form They can and It be by the new insti tion you wish to take over your sting RRSP Or you can have two or more RRSP different inMilut No matter where you use your the tax deductions always be the same fully related to ITS YOUR MONEY Rocket your taxable income Why would you want to move to another insi tut on Well If it is in deed only giving you a rate of return of ft or less and you feel com that another could return 15ft I it be wise change The mathematics say you should change If you are years old and put S3 per year into an RRSP chances are you II save at least J 000 in taxes each year or mi depending on your tax bracket In effect it makes the true cost of that RRSP to be or less rather than the actual S3 you in vested But from age to age a per of 30 years the person receiving lift rate of return would have a value of whereas the per son receiving a rate of return would be worth St It a fact That S837 The question arises Which amount would you rather have for your retirement SI 499 I guess the answer Can you get 15ft average rate of return Well the past has certainly proven so There arc many good ty mutual funds that have long term records of and better over the past 10 and 15 year per Some have 10year records of 20ft Admittedly some years those funds achieved and better and other years only a small or vc return But the average of 15ft is real If you are getting 1 1 tor less r on your maybe a transfer rollover should be cons dered Your comments question a are welcomed Simply write Paul J Rockel Regal Financial Centre 153 Union St E Water loo Ontario N2J 1C4 andor or a copy of hta book Why I In vest In Mutual Funds forward payment of 95 retail 95 PAULJ ROCKEL is President Regal Capital Planners Ltd and the Independent Financial Services Association of Canada