Will Trump Raise the Roof?

Debates regarding the US debt ceiling are likely to kick into high gear in the coming weeks as the debt-limit suspension expires mid-March. Scrapping the US debt ceiling will no doubt be absent from President Trump’s list of top priorities for his first 100 days in office, but it perhaps ought to be included. The US is due to hit its debt ceiling in March and if the past two debt ceiling debates are anything to go by, the US will likely face a tough negotiation to suspend or raise the ceiling. This negotiation will fall at a time when President Trump is trying to push through a series of tax cuts and stimulus measures that are central to his platform. The debt ceiling has for decades been a

9.78% Investment Return in the Past 6 months - What About You?

Financial news is often dominated by market milestones. You may even get notified on your phone within seconds of the Dow or the S&P/TSX Composite hitting a record. All this market sound and fury can make even the most staunch “buy-and-hold” investors begin to question their financial strategies: “Should I ride the wave and buy more stocks?” “Is the market overvalued? Is it time to move money into bonds?” “What’s in store for 2017?” “Now what?” We believe that milestones such as Dow 20,000 or S&P/TSX 16,000 are the perfect occasions to remind yourself to stick to your investment plan. Because, quite frankly, the question you should ask isn’t “Now what?” as much as “So what?” It’s not abou

Crash Course on Low Interest Rates

The first thing we learn about fixed income investing is that when bond yields go up, bond prices go down, and vice versa. And since the United States presidential election, bond yields have gone up as global markets have assessed the implications of the Trump presidency. The markets were clearly surprised by the election outcome and have shifted gears to contemplate higher future inflation as a result of anticipated aggressive fiscal policy coming out of Washington. This all makes perfect sense. If inflation is seen as being higher in the future, investors will demand more compensation to lend money via the bond market. Combine this with a U.S. Federal Reserve that is seen as more likely to

Mutual Funds, ETFs and Bears…? Oh God.

Investors face many choices and potentially adverse conditions while walking down the yellow brick road of investing. Using active or passive funds is one of those choices, and bear markets are one of those adverse conditions. I often hear that active funds are like ruby slippers that can spirit investors to safety even as passive funds are buffeted by the bear market’s whirlwind. However, given the principles of the zero-sum game, can this really be the case? Active and passive and bears, oh my! Lots of opportunity, limited success To help answer this question, we examined the record of flexible-allocation funds since 1997. These funds represent active management in the purest sense because

Federal Budget 2017: Less is More... more or less?

Finance Minister, Bill Morneau, delivered the majority Liberal government’s second Federal Budget on March 22, 2017. There were no increases in either personal or corporate tax rates. Like last year, speculation that the capital gains inclusion rate would increase was false. The Budget focused on closing tax loopholes, cracking down on tax evasion, providing tax relief for the middle class, and eliminating measures that are ineffective, inefficient and that disproportionately benefit the wealthy. But even in these areas, there really wasn’t that much! Surprisingly, of most interest, may be what is not in the Budget. For example, the Budget signals that a review of tax planning strategies usi

You Can't Eat Your Home ... Right?

IN A RECENT SURVEY of Canadian homeowners, only four in 10 respondents were confident they would have enough savings to maintain their lifestyle when they retire. One reason may be that, for many, a significant portion of their wealth at retirement is tied up in their home. And selling their house to free up that money simply isn’t what they want to do. If that sounds like your situation, you may want to consider accessing the equity in your home to help boost your retirement income. One of the most common ways to do this is through a secured line of credit (also called a home equity line of credit). A secured line of credit lets you borrow what you need, when you need it, at a very favourab

Should I Rent Out My Basement?

BABY BOOMERS – one of the wealthiest generations in history – are heading into retirement. They’re ready to kick back and finally enjoy the fruits of their labours. Yet despite the lure of an early and active retirement, for many, the picture isn’t as rosy as expected. In fact, a record number of retired or soon-to-be-retired Canadians owe more than ever before. According to Statistics Canada, 70 per cent of people aged 55 to 64 were carrying debt in 2012, an increase from 61 per cent in 1999. In the over-65 crowd, debt rates climbed to 42 from 27 per cent over the same period, with the average debt load increasing by 94 per cent. How did this happen? One contributing factor is that we’re li

Travel Insurance Is Damn Tricky

WHETHER IT’S HEADING SOUTH to a beach, embarking on an overseas adventure or just crossing the border for a weekend shopping trip, most Canadians enjoy travelling. And, given winter’s icy grip, it’s no wonder many of us look forward to getting away at this time of year. In January and February 2016 alone, Canadian residents went on 8.7 million out-of-country trips.1 What’s surprising, though, is that only 47 per cent of Canadians say they always purchase travel insurance, according to a survey by the Travel Health Insurance Association of Canada (THiA). The ins and outs of coverage Knowing what travel coverage you may have or need is not always easy. For example, some travellers may assume t

Vancouver Life In 7 Paragraphs

House-rich, but savings-poor Homeowners may face difficult decisions at retirement. THE LATEST HOMEOWNER DEBT SURVEY reveals many Canadians find it difficult to pay for today and plan for tomorrow. Faced with rising housing costs, homeowners struggle to balance daily expenses, debt repayment and saving. Demands on dollars Only 4 in 10 are very confident they’ll save enough for retirement. More than 1 in 3 were “caught short” of cash to meet monthly expenses at least once in the past 12 months. Fewer than 2 in 3 expect to be mortgage-free at retirement. House-rich but savings-poor 26% expect home equity to make up more than 80% of their wealth at retirement. 17% think home equity will be

Real World Bike Race

The first half of the race was literally a breeze. We enjoyed tailwinds in excess of 60 km/h, making my normally average (though respectable) cycling times look heroic. I arrived at the midpoint in good shape and shattered my personal record in the process. The second half wasn’t quite so comfortable. After a welcome break, we set off again and … uh-oh. Those tailwinds were now headwinds, and with interest, as the wind picked up with regular gusts of more than 100 km/h. The funny thing about a tailwind is that it makes lots of riders look fast. It’s easier to stay on course, and everyone is happy! With a headwind, it’s easy to get knocked off course by a sudden gust or find yourself progress

Retiring in Reality or Virtual Reality?

The 1999 science fiction film The Matrix portrayed a simulated reality that threatened humanity. But today’s futurists foresee a different — and benevolent — virtual reality that in ten years could be as ingrained as mobile communications are now. It all makes me wonder about virtual reality’s application to retirement. Although definitions of virtual reality (VR) vary, one is that it seeks to produce a realistic and immersive simulation of a three-dimensional environment, which can include senses such as hearing and touch. The most common way to produce this effect is through a headset that covers the eyes and ears. Today’s headsets are a bit clunky, but design innovations are rapidly makin

The only "raise" that you're not excited about

The U.S. Federal Reserve Board met on March 14 and 15. As expected, the Fed raised its key interest rate target by 25 basis points (0.25 percentage point). As the United States is at more or less full employment and Inflation, which has slowly accelerated, hovers near the Fed’s 2% target, this should not come at as a surprise. We can expect two to three rate hikes by year-end, which would put the federal funds rate at 1.25%–1.50%, a level consistent with the Fed’s — and Vanguard’s — assessment of the U.S. economy’s strength. The more interesting, and puzzling, economic analysis concerns what is happening in the U.S. equity market. Wall Street has been on a tear, as has the TSX. The U.S. mark

Hindsight is 20/20, especially when it’s someone else’s

As the saying goes, hindsight is 20/20 — and you can’t benefit from it after the fact — But why not try to benefit from someone else’s hindsight? The Vanguard Centre for Investor Research found in a new study that recent retirees were largely satisfied with their financial situations in retirement, but, if they could, would still do some things differently in preparation. With the benefit of retrospect, 43% of Canadian survey respondents “agreed” or “strongly agreed” that they would have saved more — a higher percentage than garnered by any other answer. But perhaps it’s too simple to suggest that retirement savers should just follow the example of others. Many people know at some level that

How to Invest Your Money

To create your Financial Empire, you need to run your personal cash machine on the side — with no employees. Let me explain. It doesn’t matter if you’re a janitor at a low-end mall or if you’re the Director of a million dollar business — there is one key thing that will hold true in order for you to build & maintain your financial empire: “You will need to have a cash generating side business.” Now, am I saying you should be running an actual physical business? Maybe! You could spend your time building a business that will generate a lot of cash flow for your financial empire, but that takes a lot of time. The easiest way for any individual person to achieve this is to set up some sort of in

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CLEMENT CHUNG, CFP, CLU

Certified Financial Planner

Fee-Based Financial Planning
Burnaby & Metro Vancouver

©2018 by Clement Chung.