There will continue to be investment scams by greedy individuals who find ways to circumvent the system. How best to protect yourself? Stay informed and stay educated?  As October is Investor Education Month, the following is a list of websites you may find useful throughout the year.

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A great summer read I recommend is The Naked Investor, by John Lawrence Reynolds. It’s a must for every investor’s library. This book details real-life stories on the dark side of the investment world where unscrupulous advisors have taken advantage of the investor, for their own personal gain. It’s a tough read for any advisor and admittedly does not leave me feeling really good about the industry. Hopefully though, this article will give you the impetuous to read this book, so that you can recognize the signs, if something just doesn’t smell right. Investment education is paramount and this book is a great start. Remember it is your money after all.

Here’s a summary of tips from the chapter entitled, “Vulture, Jackals, Ghouls”.

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Every once in while, a really great book comes out. If you only read one financial book this year, I highly recommend The Number by Lee Eisenburg. In a nutshell, The Number is about formulating your personal retirement strategy not just the monetary nest egg. What makes this book so unique is that it isn’t written by an investment guru or anyone remotely involved in the financial industry.

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I have noticed an ever-increasing number of articles on what I would call a looming private pension crisis in North America.

The pensions in question are referred to as defined-benefit (DB) plans. A simplistic calculation method entails multiplying the employee’s years of service by a percentage factor and in turn multiplied by a salary factor. An example might be 30 of years service times 2% per year of service times the average of the employee’s best 3 years salary of say for example $50,000. In this example, it works out to be $30,000 per year. While the specifics depend on the plan, I have noticed that in many of the reports, the term “unfunded liability” keeps popping up.

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RRSP season is over! Now it's time to start thinking about your income taxes! Sometimes I think we forget why we actually do RRSPs.  This is a good time to review the basics.

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Will You Have a Lifetime Income Challenge?

Testing Your Financial Plan using Monte Carlo Simulation

How much can you safely withdraw from your portfolio of retirement assets and not run out of money? It’s an age-old question and the answer for every investor is different. What is needed is a logical method to test your situation. What follows is a summary of the concept called Monte Carlo simulation.

Many people build their financial plan using the 50% probability method. That’s the value you get when you assume all the variables are fixed. One major problem that may happen is that if you assume an average rate of return, you are not taking into account the natural variability (called standard deviation) of different asset classes that happens in the real world. Some years you get higher returns and some years it’s lower, even negative. For example, if you withdraw 8% in year one and also experience an overall market downturn of 12%, you’re down 20% in total in year one. You then need a 25% return in year two just to get even, not taking into account your planned withdrawal. It’s possible but not highly probable. In practice, a Monte Carlo simulation takes into account the variability of returns by running numerous “what-if” scenarios and statistically varying the return of each asset class in your portfolio.

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Business owners face and evaluate risk every day. One tool to consider using is a risk matrix as shown below. The key point is to make sure that your highly critical, low probability risks are minimized i.e. moving from point A to point B.

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Are you in the market to buy a new car? I have a few tips that might help you get a better deal on your next purchase. You may realize that you don’t have to pay MSRP (Manufacturer’s Suggested Retail Price) i.e. sticker price, but if you don’t know the dealer’s cost, how do you know whether you are being treated fairly and getting the best possible deal.  I have purchased numerous cars in my life and readily admit I hate the negotiation process with a salesperson. It’s stressful to say the least.

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Individual pension plans, IPPs, provide an alternative to traditional RRSP savings for some individuals. IPPs are most advantageous for owner/managers or executives of incorporated businesses with a steady income of at least $75,000 and who are at least 45 years of age.

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Have you taken any additional steps towards reducing your income taxes?

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