The following text may have been generated by Optical Character Recognition, with varying degrees of accuracy. Reader beware!

Page 30 THE HERALD Wednesday February 1989 Now comes the time to begin looking at choices As the March deadline for con tributing to registered retirement savings plans approaches people are beginning to look at the choices they have There are the usual term deposits and guaranteed investment certificates which of attractive rates of interest There are stocks bonds and mutual funds Which of these varied investments will grow most over time is a question no one can answer for sure But with the realestate market still popular more people are turn ing to realestate mutual funds whether realestate funds are pru dent investments in the current realestate market is a question in vestors should ask themselves Realestate funds make up a tiny proportion of mutual fund assets outstanding in Canada less than Your Business Diane Thomson Strvfct one per cent Even so investor in terest is growing slowly but surely People who run these funds swear by them pointing out that the rewards are manifold They of a respectable yield com parable to a stock dividend they offer a chance to earn a capital gain over time and some funds of tax advantages as well To make themselves more at tractive many realestate funds offer a guaranteed minimum return with capital gains as an ad ded bonus Some trade like mutual funds others are sold in the form of trust units which can be listed on the stock exchange TO OR TO LEND When the realestate market is booming realestate mutual funds look irresistible But now with the market showing early signs of faltering and interest rates high investors may find better value in mortgage funds Mortgages after all are the other side of the coin in the real estate market Many banks and trust companies mortgage mutual funds at attractive yields Generally you can expect to earn less on a mortgage fund than you would lending money directly to a person needing a mortgage Of course you save yourself- a lot of trouble and risk A mortgage fund is a pool of mor having different terms to maturity and carrying different in terest rates The return investors earn is blended in much the same way as the yield on a bond fund for example MORTGAGEBACKED BONDS Another way to earn a table yield in the mortgage market is to buy mortgage backed securities a popular new product backed by Canada Mortgage and Housing Corp The MBS concept is one whereby assets such as mor tgage loans are secuntized With securitization a lender with a bundle of mortgage loans decides to pass them on to the public in bitesized chunks The lender does this by issuing paper debt obligations backed by the security of the mortgages it holds Theoretically securitization could allow you to buy a share of your neighbors car loan or your husband s credit card bill In prac it has allowed brave investors to buy a piece of Mexico s debt at a discount You can buy mortgagebacked securities from a stockbroker although they are often in short supply As a rule they offer yields slightly less than you would get on GICs but more than you will earn on government bonds of the same term In the end what you decide to put in your RRSP will depend on what you have already how old you are how much money you have and how much risk you can tolerate It will also depend on whether you have a big mortgage hanging around your neck If so you might decide to forget the for now and pay down your mortgage