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Author: kiara

Decluttering and rightsizing… get ready for a fresh start!

Written by kiara on . Posted in Blog.

Downsizing or rightsizing is a process that many face due to relocation, health restrictions, lifestyle change, or daily needs. Whether you are moving from a suburban home to a city apartment or lately became an empty nester, the challenge of giving up some of your cherished belongings in order to fit into a new, smaller, living space can be daunting.

With age most people expect that there will come a day when they will have to downsize. As their priorities shift, they may prefer to simplify their lifestyle, cut costs, or be closer to children and grandchildren. Planning ahead and assessing the new needs is crucial in order to pick the right new place and be excited about it. Looking forward to the benefits attached to this change can help deal positively with the emotional and physical stress that is involved with decluttering and moving.

To you each piece is a memory. Get some objective Help!

Moving is not easy at any stage of life, even more so when one has to go through years of accumulated furniture, dishes, pictures, and memorabilia. Luckily, you can hire professionals to help. Not only have they helped many before you and have experience estimating spaces and providing planning and storage solution, unlike family or friends, such professional organizers are less emotionally involved as they do not share your memories. They are capable of keeping an objective and practical approach while concentrating on making your new space functional.

We sought the advice of professional organizers on how to get started and make rightsizing successful.

Susan Rotter and Anna Castelli, Advanced International Organizing Professionals (AIOP) with Make Space For Life suggest to ask yourself some questions in order to be mentally ready for the process:

  • What is important to me? What type of lifestyle do I want?
  • How much time do I spend at home?  If you are a snowbird, a big house may no longer suit your current needs.
  • Do I need space for hobbies?  Equipment for outdoor hobbies or extensive collections may require more space.
  • Where do I want to live?  Consider the neighbourhood, proximity to family, amenities, transportation, type of home (house, condo, retirement home, residence).

Sheindl Rothman, MSW, a trained professional organizer (Positive Spaces) who specializes not only in downsizing but in general residential solutions and craft studios, adds:

  • How much of your home do you really use? Do you use some rooms only rarely (or never!).
  • Is entertainment still a big part of your life?
  • Are you keeping up with home/garden maintenance? A bigger house requires more work… are you ready to exchange it for less back pain and more free time?
  • Where to live? Begin by deciding where you’d like to move. Would you like to move to a warmer climate? Move closer to your children? Some opt for a pied à terre in one place and a principal lodging elsewhere.
  • Buy or rent? You have the option of purchasing your next home (condo, duplex, smaller house) or renting an apartment. There are advantages and disadvantages to both. Some opt for a Senior’s Residence and are very happy to have done so.

All professionals recommend having a floor plan of your new space with room dimensions to allow you a more exact understanding of the living and storage space you will have. Being able to visualize your new space based on actual numbers and realizing that every little corner should have a purpose or function will help with the decluttering and downsizing of your personal belongings.

Where to start? 

Anna and Susan recommend to always keep your goals in mind and work on one room at a time.  Decluttering will as well help with the preparation to sell your home. Sorting and purging through your belongings will give you the opportunity to truly evaluate and ask yourself the following:

  • Do I really need this item?
  • Is the item in functioning order?
  • When was the item last used and will it fit in my new space?

In Sheindl’s experience decluttering decisions depend on your interest in certain activities. If you foresee entertaining less or not at all, you may wish to pass on your good china, crystal glasses, and Sterling silver cutlery. If you will be cooking less or not at all, find a new home for some of your pots and pans. If you’re no longer golfing, skiing, or camping, well, it’s clear what to do.

How can I get rid of the stuff I’m not taking with me?

Once you’ve decided what you’re going to take with you, begin the process of clearing out the rest. There are many ways to do so, depending whether you wish to gift items, sell, or donate. You’ll probably want to begin by asking your children, grandkids, cousins, nieces and nephews, and friends if they want anything special. If you wish to sell certain items, allow yourself enough time and prepare to accept considerably less than you initially paid. You may call a dealer or post certain items online. If you decide to donate, you may contact a charitable organization who picks up, or post online to organizations such as Freecycle.org, or other free sites.

Professional organizers can help their clients with both selling and donating. Some people hold a Moving Sale in their home. There are professionals who can manage this, as well as sell fine art.

How to make smart purchases

If you’re shopping for new furniture, choose quality over quantity and opt for multipurpose furniture pieces that can offer additional storage. Pick durable fabrics, since smaller spaces must be flexible and fulfill a double duty as an office, extra bedroom or play/work space.

Stay positive and calm.

The biggest challenge is letting go emotionally and practically. Getting overwhelmed and feeling anxious won’t help at all. Stay as calm as you can. Eat well, exercise, meditate, use positive affirmations throughout the process, and make time for socializing and fun. Get help if you like, from family, friends, and/or a Professional Organizer with experience in downsizing and moving. A good Professional Organizer will provide a confidential, non-judgmental, and supportive service. A moving company can also pack for you, but they will not help you sort through your belongings.

Start early! The earlier you begin the process, the easier your move will be. Try to follow an ecological approach and resell, donate, or recycle your objects so they can find new homes outside the trash.

Always remember that it is also a journey into an exciting new beginning!

Insights

Big-picture lessons from 2019

Written by kiara on . Posted in Blog.

We would like to share some reflections and big-picture lessons from 2019 to help stay on target in the New Year.

 

Stick to the Balanced Portfolio Philosophy

One of the main reasons our clients know they can trust us is because we stick to our Balanced Portfolio Philosophy. Our Wealth Management Advisors apply this philosophy by creating plans that fit into your present and foreseeable financial situation, your income, your tax, insurance, and estate needs – all suited to personal risk guidelines.

One of the big lessons from 2019 is that it is never too soon to ensure that a portfolio is well set-up for the next economic downturn. Whether that means something on a personal level such as unexpected emergencies, or something societal like weak markets. Paying off debts and building savings can help relieve any unforeseen additional strain on one’s finances. In the meantime, our Wealth Management Advisors will continue to do their best to design custom portfolios that prepare you for any eventuality.

 

Conscious Spending

The tough reality of having to budget and save is that it means we must live within our means. This is something that, in a world of encouraged consumption, can be difficult to confront. One place to start is with the concept of conscious spending. The idea is to encourage oneself to think critically about all purchases and ensuring that if a purchase is needed, it is obtained at the best value.

Average household debt in Canada is 170% of disposable income, meaning that most Canadians spend much more than they make. We have reviewed paying down debt in the past; conscious spending, and thereby leaving as much as possible for savings and paying down debt, is among the most important tactics.

Conscious spending can be anything as small as preferred purchase of “on-sale” items, a critical examination of whether taking another short trip or vacation is absolutely necessary, or evaluating the option of skipping the purchase of expensive theatre/concert tickets for a while and would it be justified in the long run.

Though it is a personal decision how to follow a conscious spending path, it can be made simpler with the help of spreadsheets that one can follow over a period of time. Whichever tools one uses, they should fit into the conscious spender’s lifestyle, while helping to shave away excess expenses and focus where money is spent. Naturally, it is essential that the money saved by spending in this manner be directed toward paying off debt as soon as possible since interest on debt itself is a huge spending sinkhole.

 

Feel Good about your Finances with Non-Financial Goals

High levels of financial stress are abundant, especially toward the end of one year and into the next. As we are dependent on money, it is important to do as much planning as possible to avoid any added stress of unexpected costs. Budgeting and saving are the two simple and valuable ways to go about it. Fancy and complex strategies aside, it is essential that all of us budget and save so that we can be less worried about the future of our finances.

Beyond that, it is important to keep in mind why we want to save, why we want to retire comfortably, and what is our ultimate goal. Accumulating savings is not the end goal. Most people’s ultimate goal is being able to spend time with family and friends, to travel, and as long as their health allows that, to be able to support children and grandchildren without missing out on the freedoms that retirement can offer. It is extremely important to keep that goal in mind as we make our way into and through retirement. Navigating the financial world can be made a little easier and less stressful if we have the help of solid professional advice and if we find ways to remind ourselves that it will all be worth it at the end.

Insights

2019 Year-End Checklist

Written by kiara on . Posted in Blog.

A checklist to help everyone, retired or saving for retirement, get the most out of tax credits, deductions, and benefits and keep important dates in mind.

TFSA Limit 2020
The advantage of a TFSA is that you will pay no taxes on the interest, dividends or capital gains when you withdraw from the plan. The contribution amount for 2019 is $6,000 for a lifetime total of $63,500. Contribution deadline is December 31. The contribution amount for 2020 will be $6,000 for a lifetime total contribution of $69,500. READ MORE

Registered Retirement Saving Plan (RRSP)
The RRSP contribution limit for 2019 is 18% of your earned income, up to a maximum of $26,500. If you have a company pension plan, your RRSP contribution limit is reduced. You can contribute to your RRSP until March 1, 2020 for taxation year 2019.

Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit
You may be eligible for the GST/HST credit, a tax-free quarterly payment that helps offset all or part of the GST or HST that you pay. To receive this credit, you must file an income tax and benefit return every year. READ MORE

Home Buyers’ Amount
You can claim $5,000 for the purchase of a qualifying home in 2019 if both of the following apply:

  • you or your spouse or common-law partner acquired a qualifying home; and
  • you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first- time home buyer). READ MORE

Medical Expenses
You may be able to claim eligible medical expenses that you paid, provided the expenses were made over the 12-month period ending in 2019 and were not previously claimed. This can include amounts claimed for attendant care or care in an establishment. READ MORE

Registered Disability Savings Plan (RDSP)
This savings plan can help families save for the financial security of a person who is eligible for the disability tax credit. RDSP contributions are not tax deductible and can be made until the end of the year in which the beneficiary turns 59. READ MORE

Disability Amount
If you, your spouse or a dependent have severe and prolonged impairments in physical or mental functions and meet certain conditions, you may be eligible for the disability tax credit (DTC). READ MORE

Canada Caregiver Amount
Those caring for a dependent with impairment in physical or mental functions may be able to claim up to $2,182 when calculating certain non-refundable tax credits. READ MORE

IF YOU HAVE CHILDREN

Child Disability Benefit

The child disability benefit is a tax-free monthly payment made to families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions. Your child disability benefit payments are calculated from July of one year to June of the next year using the following information:

For the period of July 2019 to June 2020, you could get up to $2,832 ($236 per month) for each child who is eligible for the disability tax credit.

The benefit starts being reduced when the adjusted family net income is more than $67,426. The reduction is calculated as follows:

  • For families with one child eligible for the benefit, the reduction is 3.2% of the amount of adjusted family net income over $67,426.
  • For families with two or more children eligible for the benefit, the reduction is 5.7% of the amount of adjusted family net income. READ MORE

Canada Child Benefit
We calculate the CCB as follows:
$6,639 per year ($553.25 per month) for each eligible child under the age of six
$5,602 per year ($466.83 per month) for each eligible child aged 6 to 17

These amounts start being reduced when the adjusted family net income (AFNI) is over $31,120.

  • For families with one eligible child, the reduction is 7% of the amount of AFNI
  • Between $30,450 and $65,975, plus 3.2% of the amount of AFNI over $65,975
  • For families with two eligible children, the reduction is 13.5% of the amount of
  • AFNI between $31,120 and $67,426, plus 5.7% of the amount of AFNI over
  • $67,426
  • For families with three eligible children, the reduction is 19% of the amount of AFNI between $31,120 and $67,426, plus 8% of the amount of AFNI over $67,426.
  • For families with four or more eligible children, the reduction is 23% of the amount of AFNI between $31,120 and $67,426, plus 9.5% of the amount of AFNI over $67,426. READ MORE

Child Care Expense Deduction Limits
The purpose of the legislative provisions regarding child care expenses is to pro vide some relief for taxpayers who incur child care expenses in order to work, carry on a business or undertake certain educational activities.

The maximum child care expenses that can be claimed per child each year is limited to $5,000, $8,000 or $11,000 depending on the circumstances. For a child in respect of whom a disability tax credit may not be claimed, the annual child care expense amount varies. See “Income Tax Folio S1-F4-C1, Basic Personal and Dependant Tax Credits”. For more information READ MORE

IF YOU ARE RETIRED

Registered Retirement Savings Plan (RRSP)
You have until December 31 of the year in which you turn 71 to contribute to your RRSPs. If you turned 71 in 2019, convert RRSP into an Annuity or RRIF. READ MORE

Pension income splitting
Those who receive a pension may be eligible to split up to 50% of eligible pension income with a spouse. READ MORE

Guaranteed income supplement
If you received the guaranteed income supplement or allowance benefits under the Old Age Security program, you can renew the benefit by filing by the deadline. READ MORE

Age amount
If you are 65 years of age or older on December 31, 2019, and if your net income was $36,976 or less, claim $7,333. More than $36,976, but less than $85,863 claim a reduced amount. READ MORE

Pension income amount
You can claim up to $2,000 if you report eligible pension, such as RRIF or annuity payments on your tax return. READ MORE

MAXIMIZE YOUR INVESTMENTS

What is Tax-Loss Selling?
Tax-loss selling means selling an investment with accrued losses at year-end, allowing you to offset capital gains realized with other investments. Net capital losses can be carried back three years or carried forward indefinitely. Tax-loss selling there fore enables investors to mitigate the impact of capital gains taxes.

Superficial Loss Rules
When you sell an investment at a loss, if you, your spouse, your company, or a trust in which you have a major interest, purchase and still own an identical investment within 30 days of the sale, then the capital loss is added to the cost base of the purchase. This includes re-purchasing the same company or a fund tracking the same index. Professional advice may be needed to determine whether certain products are considered identical.

Foreign Currency Tax Loss Selling
Foreign currency fluctuations are another important consideration when tax-loss selling. The gain or loss will be different once the foreign exchange is taken into account. It is even possible that when calculating between two currencies, what appeared to be a loss may end up being a capital gain, and vice versa. Before selling to take losses, it is extremely important to calculate foreign currency ex change rates.

Do you have any questions?
Speak with an expert before the year ends and receive advice tailored to your situation

Meet our Team: Philip Blake

Written by kiara on . Posted in Inside Rothenberg.

Phil recently became Branch Manager of the Calgary office. Born in Montreal, and subsequently completing his studies in Vancouver, Phil moved to Calgary and began his career at Rothenberg in 2006. He is a Chartered Investment Manager (CIM®), a Fellow of the Canadian Securities Institute (FCSI®) and has been providing investment advice for over 10 years.

In his spare time, Phil is driven to self-improvement by researching and learning about the latest trends in mental and physical health. He also is an avid outdoorsman, enjoying the serenity of gardening and yard work. Family and personal relationships are very important to Phil, and he regularly visits Montreal to keep in touch.

Phil places great value on a personalized approach when dealing with his clients, as it truly helps them meet their individual retirement goals.

“Taking the time to navigate through all the market noise and maintaining a disciplined, personalized approached is how I guide my clients.”

Maximizing Life Insurance

Written by kiara on . Posted in Blog.

Life insurance enables policyholders to replace the income of a lost loved one in the event of their death. It is a critical safety net to ensure that the surviving family members can maintain their standard of living. Navigating the intricacies of purchasing and maximizing life insurance is complicated, so we have written this article to break down the basics about life insurance as well as some of the best ways to use it.

Term Life Vs Universal Life
First, we need to review the difference between the two major forms of life insurance: term life and universal life. Term life insurance provides basic coverage for a specific amount of time. Its main benefit is that it is cost-effective for a short period of time. Coverage is generally available for 5, 10, 15, or 20 years, or to age 100. Premiums stay the same for the term but term life insurance’s main downfall is cost increases as one ages, since new policies must be purchased after the previous one expires. Therefore, with time, repurchased life insurance(s) may involve paying much higher premiums. Furthermore, there is the risk that by waiting, one’s health may worsen resulting in trouble getting approved. As term coverage runs out, there is the possibility that one has purchased the insurance without collecting a benefit from it.

Universal life insurance lasts for the policyholder’s lifetime and is quite flexible in how it operates in terms of insurance and investment options. Premiums stay the same so long as the policy remains in effect. These premiums build up cash and/or dividends. Universal life is more expensive than term life, but it also offers additional options and coverage.

What applies for both forms of life insurance is the value of purchasing it as early as possible. Whether term or life, the younger a policyholder is, the cheaper their premiums generally are.

Important Questions to Ask
A policyholder’s life insurance portfolio can be as individual as our situations. Some important questions for finding the best setup are: Does the policy meet my current needs? Will the policy provide flexibility for my future needs? What does the policy cost now? What are the policy’s expected lifetime costs? These are all questions that we ask our clients as they consider life insurance options.

Save the Cash Value
Universal life insurances includes an accumulation account, meaning that part of your premium payment is held in an account to earn interest and/or dividends. When the policy pays out, the full amount in the cash account is added to the benefit amount. This means that beneficiaries get the policy’s face value plus the cash.

Buying Several Policies
There are several strategies that use multiple policies—as opposed to one large one—to achieve higher payouts with lower premiums. The most popular strategy is to take out a universal life insurance policy and a term policy. Term life insurance has an expiration date and therefore costs less when taking out large policies. This is because the insurance company’s risk is lower due to the policy lasting a limited number of years. Therefore, they offer better rates. This strategy enables policyholders to insure themselves during the years when there is a mortgage to pay, children to provide for, etc. with a large term life policy, and once it runs out and those high risk years pass, the universal policy is still there to protect them. The result is lifelong coverage with a larger payout during the years the policyholder needs it most.

Do Not Cancel or Let Policies Lapse
Unless absolutely required, never cancel life insurance or allow coverage to lapse. Taking out a future policy will almost always mean higher premiums and doing this often requires a new medical exam. The best way to add more coverage is not to cancel existing policies and purchasing new ones but instead to add onto the existing life insurance.

Using Life Insurance to Maximize Wealth
Once a family has minimal debt and grown children, one might wonder what good life insurance does them. The good news is that life insurance can be used as a way to maximize wealth.

First of all, life insurance is tax efficient because the proceeds from it are paid out tax free. And remember the accumulation fund within universal life policies we mentioned earlier? It can be used to offset future premiums, allowing them to be offset with pre-tax dollars instead of after tax dollars.

Next, life insurance is a risk free asset. Unlike a portfolio of stocks or funds, life insurance policies are guaranteed and therefore lack the downside risk. However, the downside to this is that the money contributed to an investment portfolio can be accessed while the owner is alive, but that is not the case for the face amount on a life insurance policy.

Life insurance is a critical component of our holistic approach to a balanced portfolio. If you or someone you know is interested in exploring life insurance options, please call us at 514-934-0586 (Montreal), 403-228-2378 (Calgary), or email us at inforequest@rothenberg.ca.

Insurance

Inspiring passion for reading in children

Written by kiara on . Posted in Community Impact.

Thanks to the talented Pat Nicholson, we were able to take part in a wonderful initiative to inspire passion for reading in children. It came about when Pat was notified that her books will be used for the StoryWalk® concept at the Montreal West Children’s Library and thought it would be a cool idea to surprise the children in attendance with a free, signed copy of ‘Because I Can Read’ or ‘Parce que je peux lire’. Pat contacted Helen Corrigan and Robert Rothenberg of Rothenberg Capital Management (RCM) and the response was prompt: RCM will purchase books for ALL the children in attendance. Thank you to Pat Nicholson, Montreal West Children’s Library Town of Montreal West for letting us be a part of this and have the opportunity to bring joy to the children and their families.

RESP Strategies

Written by kiara on . Posted in Blog.

As the school year kicks into full gear, it is a good time to discuss the best practices relating to Registered Education Savings Plans (RESPs). First, let’s go over the basics!

RESP Basics

An RESP is generally the best way to save for education for two primary reasons:

1) tax-sheltered investments and
2) the Canada Education Savings Grant.

The total lifetime RESP contribution limit is $50,000 per beneficiary. The beneficiary is the student who will be using the RESP money for their education. Unlike Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP), this limit has no annual contribution limit.

Eligible RESP contributions can earn a 20% matching grant from the government called the Canada Education Savings Grant (CESG) on the first $2,500 contributed to an RESP each year, capping at $7,200 of lifetime CESG per student.

Investment products that can be held in an RESP include the standard ones just like in TFSAs and RRSPs, such as stocks, bonds, mutual funds, ETFs, and more.

When original contribution money is withdrawn from an RESP, it is not taxable! But investment growth and government grants, such as CESG, are taxable to the student when withdrawn. Those taxes apply upon withdrawal, and investment returns, including capital gains, dividends, and interest earned, are tax-sheltered inside an RESP.

Lump-Sum or Regular Contribution?

With the basics rules out of the way, let’s look into some contribution strategies. While contributing the maximum lifetime amount of $50,000 as early as possible may seem attractive to maximize compound growth and have the money grow in a tax-sheltered environment, it means that you are losing out on a lot of CESG money. This is because the CESG only matches 20% of the first $2,500 contributed per year. If you have a large lump sum to contribute to an RESP, another option is to contribute it to a TFSA first and slowly move it over to the RESP as the years go by. Ultimately, the perfect solution for you will depend on your personal situation, which is why our Wealth Management Advisors take the time to get to know your needs and goals.

What if your child doesn’t pursue post-secondary education?

If your child does not continue school after high school and you have been saving in an RESP, then once the RESP’s deadline is reached, the CESG funds received must be repaid in full and your original contributions are returned without penalty. However, the growth on those investments will be taxed upon withdrawal and is subject to a 20% penalty. Because an RESP can remain open for 35 years, there is plenty of time to plan the best way to withdraw funds from an RESP in the event that the beneficiary does not pursue post-secondary education.

One way is to stop RRSP contributions and slowly transfer the balance of your RESP to the RRSP. Transferring money this way means that, up to $50,000, the money will remain tax-deferred and will avoid the 20% penalty. Another way to reduce the impact of this tax and penalty is to withdraw the money during a year when your income is lower than usual.

Finally, it is likely that even if it is not a full university degree, there are plenty of educational programs that could suit your child. College and university courses are not the only ones that quality for funding. Enrolment alone qualifies RESP educational withdrawals, meaning that whether a course is passed or not will not affect your beneficiary’s ability to withdraw funds.

Side Note: Adults

Adults can take advantage of RESPs too! While adults, unfortunately, do not qualify for the CESG grants due to age restrictions, the 35-year tax deferral may be able to help during the years when ou are studying.

There are several rules in place to ensure RESPs are used as intended. But now that you know those rules, you can use RESPs to their maximum potential! We suggest you give us a call: Montreal at 514-934-0586 and Calgary at 403-228-0949 to discuss how to make Registered Education Savings Plans work best for you.

 

Family Wealth Planning, RESP

Meet our Team: Brian Boulais

Written by kiara on . Posted in Inside Rothenberg.

Brian Boulais joined Rothenberg Capital Management in early 2018 as a Wealth Management Advisor in the Westmount office.

Brian has a Bachelor of Administration degree from the University of Ottawa. He holds both the Securities License as a Wealth Management Advisor and the Insurance of Persons license from the AMF. He has also completed the Chartered Financial Analyst program and is a member of the Montreal CFA Society.

Prior to joining Rothenberg Capital Management, Brian worked for a couple of the largest financial institutions in Canada. He decided to move into a position as Wealth Management Advisor that would allow him to meet with clients one-on-one. He excels at assisting clients with investment choices, security, and return on investments. He enjoys customizing portfolios based on the clients’ risk tolerance and ever-changing markets.

Brian’s knowledge and successful experience in asset allocation and risk management is a product of his dedication to provide the best advice, delivered with honesty and integrity. He is committed to providing customized service while focusing on a balanced portfolio approach.

Inside Rothenberg

The value of bonds as a tactical investment

Written by kiara on . Posted in Blog.

Having a balanced portfolio can help make portfolios more risk resistant and allow them to succeed in numerous market cycles. Bonds are one of the most valuable tools investors have to diversify and balance their portfolio. In this month’s blog, we explain what bonds are, how they are traded, why they fluctuate, and most importantly how they can help your portfolio.

 

What are bonds?

Governments and corporations often need to raise money for their operations. These operations can include anything from building infrastructure to launching new products. One of the ways a company or government can raise that money is by issuing bonds. Bonds are effectively IOUs whose face value, the principal, must be repaid on a maturity date. Bonds also include a coupon, which is the interest investors will earn from the bond and which is calculated annually as a percentage of the principal.

The four types of bonds are corporate, government, municipal, and mortgage. Though they are often considered safe investments, their prices can fluctuate for several reasons.

 

Bonds on the Secondary Market

Similar to the way stocks are traded, after a bond is issued on the primary market, it can be traded between investors on the secondary market, especially corporate bonds. Because of the variety of issuers and maturity dates, secondary market bonds are sold over the counter (OTC) instead of on an exchange.

The value of having access to a secondary market is that it gives bonds liquidity, which can be a very valuable addition to their secure reputation.

 

Why the fluctuations?

There are three primary reasons bonds may fluctuate: interest rates, the inflation rate, and economic outlook.

Interest rates and bond prices have an inverse relationship, meaning that when interest rates fall, bond prices rise, and vice-versa. This occurs because, if interest rates rise above a bond’s coupon, purchasing that bond will no longer be an attractive investment. Because potential investors could receive a better rate from banks, there will be less demand for bonds on the secondary market.

The inflation rate also has an inverse relationship with bond prices. Because a rise in the inflation rate means a decrease in a given dollar’s purchasing power, it means that if inflation rates rise more than expected, the return from a bond will be worth less in current dollars. However, the inverse is also true and can lead to a greater-than-anticipated purchasing power from the dollars returned by a bond.

Economic reports and outlook that can affect bonds include the employment rate and GDP growth, among other forecasts. And these forecasts can be the greatest force for fluctuating the bond market, as hope or fear influence investors’ decisions about future investments. If the numbers being reported are much better or much worse than what was expected, a big move in the bond market, as in most markets, can be expected.

Because bonds are seen as a safe investment, during volatile times or when there is negative economic news, investment-grade bond prices will rise. High-yield bonds often have more risk and therefore do not behave in the same way. Investors respect the safety of investment-grade bonds and may therefore choose them over investments with greater risk. On the other hand, when the economy is booming and there is good employment data, bond prices may suffer as investors seek to cash in on the greater market’s success.

 

How this affects you

At Rothenberg, we take a conservative approach to investing. Our Balanced Portfolio philosophy means that we aim to make our clients’ portfolios successful by matching it to their risk tolerance level and hopefully creating stable growth. Investment-grade bonds are a valuable tool in a balanced portfolio.

To learn how bonds can be useful to your specific portfolio, make an appointment with one of our Wealth Management Advisors. Please call 514-934-0586 (Quebec) or 1-800-456-0949 (Alberta).

Fixed Income Securities, Investing

Contact Us

Let us know how we can assist you.

Our Offices

Westmount Head Office
Montreal – West Island
Montreal – South Shore
Calgary

Westmount Head Office

Address
4420 St. Catherine Street W
Westmount, Quebec H3Z 1R2 Canada
Telephone
514-934-0586
Telephone
1-800-811-0527
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Montreal – West Island

Address
6500 Trans Canada, Suite #140
Pointe-Claire, Quebec H9R 0A5 Canada
Telephone
514-697-0035
Telephone
1-800-811-0527
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Montreal – South Shore

Address
4605 Boulevard Lapinière, Block B (Floor 3)
Brossard, Quebec J4Z 3T5
Telephone
450-321-0001
Telephone
1-800-811-0527
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Calgary

Address
1333 8th Street SW, Suite 302
Calgary, Alberta T2R 1M6 Canada
Telephone
403-228-2378
Telephone
1-800-456-0949
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