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Past interviews
A match made in Heaven
Jade Hemeon
June 9, 2000
Don't judge a book by its cover
David Cooke
June 2, 2000
A comeback for old tax haven
Ned Goodman
May 26, 2000
Strength in numbers
Grant Forster
May 24, 2000
Resources will rock
Roger Mortimer
May 15, 2000
Thou shalt not speculate
Larry Sarbitt
May 5, 2000
More is better than less
Stephen Kangas
May 1, 2000
Bite the bullet
Dan Hallett
April 25, 2000
The New Economy is not what you think
Stephen Waite
April 14, 2000
Rough sailing
Bob Haber
April 10, 2000
Taxing times
Garth Turner
March 24, 2000
Tax tips for everyone
Jamie Golombek
March 17, 2000
She could see it coming
Veronika Hirsch
March 10, 2000
Changes bring opportunities
Chris Jenkins
March 3, 2000
Good guys finish first
Allan Brown
February 25, 2000
For better or for worse, it's a Fidelity fund again
Bob Haber
February 11, 2000
Wealth Management for Everybody
George Mancini
February 4, 2000
Spanning the globe for entrepreneurs
Andrew Waight
January 28, 2000
Boomer fund manager
Ray Steele
January 21, 2000
The only way to go
Duncan Stewart
January 14, 2000
Silicon Valley East, way east
Bhim Asdhir
January 7, 2000


For more past issues, please check our full Fund People archives
  
Focus
Tax and investment tips
Highlights
  • Important budget changes
  • Things to watch out for
  • Value funds set for comeback

    • Taxing times

    LEVI FOLK, RICHARD WEBB AND PETER DIPLAROS
    Friday, March 24, 2000

    Popular author, lecturer and television host Garth Turner had some words of caution as well as encouragement for taxpayers when we finally caught up with him. He also plants the seeds of an investment strategy for the coming months.

    Garth is not one to mince words. So when asked if Canadians are doing anything incorrectly with their investments, he does not hesitate to answer. "A lot of investors are surprised by capital gains distributions taxes and I can’t understand that," he said. Capital gains distributed by growth mutual funds outside of a tax-sheltered plan are subject to taxation by Revenue Canada. The problem is, many people do not remember and therefore do not plan for it when it happens. Garth hears about this problem a lot during his seminar tours. "Investors should be aware of this, and should either budget for the extra tax or avoid funds that produce large distributions."

    Garth would not recommend avoiding growth funds altogether, especially for RRSP investors. "The traditional staple for Canadians has been fixed income investments," he says. "I think Canadians don’t have enough growth in their RRSP."

    These days there is another, more tangible reason to own growth investments beyond their long-term potential. In this year’s budget, the government changed the capital gains tax mechanism. "It’s the same rate, and it is still taxed as income, but the difference is that only two thirds of it is taxable." For someone in the top tax bracket, this means a tax rate of 31 per cent on capital gains, making them more tax-efficient than dividends or income funds. Growth is now a better bargain than income, taxation-wise.

    Speaking of budgets, Garth also warns about the unused contribution room in your RRSP. This refers to the ability to carry over unused contributions into the following years. "The government will not keep this option open forever. In a budget some time soon, they will eliminate this benefit." Garth is a big advocate of catch up loans and other methods of topping up your RRSP. "People should do it, and if they don’t have the cash, they should borrow to do it," he says. RRSP loans are cheap, he claims, and there is a way to contribute "in kind," which involves transferring existing assets into your RRSP.

    "Too bad you can’t put your home into your RRSP," he jokes. The best way to catch up is to make monthly contributions, Garth maintains. "You can congratulate yourself that you’re planning in advance," he says. "In the years to come, you will be substantially ahead." Making your contribution early or during the year as opposed to the first sixty days after the year has passed will net you thousands of dollars extra upon retirement, experts agree.

    "The most important piece of advice I could give investors right now is to remember value as well as growth," Garth says. Some assets, like financial services stocks, are very much undervalued, and are ripe for a comeback, he believes. "AIC Advantage, for example, is a good pick right now," he adds. If the recent activity in the markets continues, value funds stand to benefit after a long period of neglect.

    Levi Folk, Richard Webb and Peter Diplaros are Investment.com mutual fund specialists and editors of the Fund Counsel newsletter. They can be reached by e-mail at peterd@hqinvestment.com.

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