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May/June 2005

Commentary - Hans H. Mathisen

Are you over insured? - LIFE LETTER for May, asks this question. During my 27 years in the industry, I've never had a client's beneficiary return the cheque to the life insurance company "because the cheque was too large". But, please, read this and decide where you and your family stand. And, if you are still not sure, please call me. Maybe I can help.

How to create your own equity linked GIC - The major banks have promoted this investment option for several years, but with many restrictions.
LIFE LETTER for June shows how you can create your own equity linked GIC. I can show you how you can get a few extra basis point interest on your GIC and I can also recommend the best performing and most secure segregated funds for you, with either a 75% or a 100% guarantee of your principal equity investment. Your call is invited.

SPECIAL REPORT - This example is one method you may be able to apply to your own situation, in view of your age and the amount of your RRSP account. Please call me for more details and current interest rates. And the available investment choices.

THE STOCK MARKETS - For the first five months of 2005, the TSX Composite (+3.90%) leads the Dow Jones (-2.93%), the S&P 500 (-1.66%) and the NASDAC (-4.93%). The major European indexes are as follows: FTSE 100 +3.11%; DAX +4.81%; CAC +7.84%. Hong Kong is down 2.55% and Japan's NIKKEI has declined 1.85% year to date.

WALTON INTERNATIONAL - New properties are becoming available. Please give me a call. I'll put you in touch with Mr. John Chomyn, our Walton representative.

This is the bi-monthly update on four of my own mutual fund portfolios:
PORTFOLIO #1: March 7, 2003 to May 31, 2005: the return is 32.1%
PORTFOLIO #2: April 28, 2003 to May 31,2005: the return is 38.3%
PORTFOLIO #3: Nov. 29, 2004 to May 31, 2005: the return is 7.8%
PORTFOLIO $4: Nov. 29, 2004 to May 31, 2005: the return is 5.6%

Please feel free to contact me about my investment approach and strategy.

Hans Mathisen





Are You Over-Insured?

It's not too difficult to figure out how much insurance to have on most of the things we own. We want enough to replace anything that is destroyed, lost or stolen. But how much insurance is the right amount on a human being?

Art and Julie want their lifestyle to stay the same when either of them dies. They went through the following three-step calculation with their insurance advisor to measure their life insurance needs:

Immediate Cash Needs - Your debts should not last longer than you do, so the first cash need is debt elimination. This includes the mortgage balance, car and consumer loans, credit card balances, lines of credit and any other debts you have. The next cash need is estate costs. These include funeral and burial expenses, legal and probate fees, and the ever-dreaded income taxes. If you have young children, funds should be provided for education and childcare expenses if the survivor continues to work. An emergency fund should also be set up to take care of any future unpredictable expenses. Many people have a favorite charity and/or family member that they help out financially. Funds should be earmarked for this. Any child support or maintenance orders from a previous relationship have to be properly funded.

Income Needs - The surviving spouse, children or life partner still have to maintain their standard of living. The income needed by the survivors needs to be determined. Any ongoing income, such as wages, employer provided benefits, investment income and government benefits, is deducted from this amount.

Finally, an amount is arrived at that will provide the income needed using an interest rate you choose. You can decide to create a sum of money that will provide interest income only or a smaller amount that will run out after a certain period of time.

Immediate Cash Needs and Income Needs are added together to arrive at the total amount of money required. From this amount is deducted:

Assets usable by family/partner - We all have some assets and insurance that will offset our family's cash needs. They include Cash (savings accounts, T-Bills, Canada Savings Bonds, etc.); RRSPs (normally transferred tax-free to surviving spouse and allowed to grow until retirement); Stocks, Bonds, or Other Investments; Principle Residence (usually not included as survivor still needs a place to live. A portion of the value can be used if plans to downsize); Real Estate (other than home); Life Insurance (includes personal policies, group coverage, mortgage and creditor insurance); Farm or Business Assets; Canada/Quebec Pension Plan Death Benefit ($2,500 in 2005); and. Other Assets.

After going through the process of measuring their needs. Art and Julie were able to make an informed decision on the amounts and types of life insurance to provide for each other and their family.

Life insurance should to be coordinated with your other assets and benefits to meet your long and short term objectives. The result is an overall plan that you understand, meets your needs and saves you money.


Isn't it time to review your life insurance needs?

Call Hans Mathisen today at (306)242-7042.
or email -

Copyright 2005 Bowen Financial Inc. All rights reserved

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How to Create Your Own Equity Linked GIC

Andy and Sarah like the idea of an equity linked GIC for some of their investments. This type of GIC guarantees the return of their initial deposit at the end of the term. The investment return on their money is based on the performance of an investment fund or, more commonly, a stock market index.

Andy and Sarah were frustrated with the choices available to them because:

1. Not always available. Those companies offering equity linked GICs usually only do so at certain times of the year, often during the so-called "RRSP Season." Sales have been suspended in the past because of a period of poor market performance. This is often the best time to be investing.

2. Limited term choices. Usually these GICs are only offered for a three or five year term. If Andy and Sarah wanted a different maturity date, it was not possible because of the rigid terms available.

3. Limited equity links. Because the company offering the equity linked GIC makes the investment choice, Andy and Sarah have no say on how their money is actually invested.

They want more choice and control over their investment, both in length of investment period and the type of investment linked to the GIC. Andy and Sarah wonder if there is a better way to get the best of both worlds.

With the help of their financial advisor, they were able to design their own equity linked GIC.

The process went like this:

Choose a term. Generally, the longer the term the better. Time gives the equity investment a better chance of good performance. A minimum of five to seven years or longer is recommended.

Invest in a GIC to grow back the original amount. By calculating a deposit that will grow back to the amount they started with, Andy and Sarah can guarantee that the worst they can do is get their money back. For example, let's say they have $75,000.00 to invest for a period of seven years. If the GIC rate for a 7-year term is 4% compounded annually, they would deposit $56,993.84 today so it will be worth the original $75,000.00 in seven years.

Choose an equity investment. The remaining funds ($18,006.16) can then be invested how Andy and Sarah choose. They can use investment funds, individual stocks or anything else they want. One choice they could make is segregated funds. These are investment funds that have a return of principal guaranteed by a life insurance company. If they choose a segregated fund with a 100% principal guarantee in ten years, they could actually guarantee themselves a minimum rate of return on their investment of about 2.85% (based on a 4% GIC rate again) compounded over ten years.

Andy and Sarah like the possibility of having all of the upside and none of the downside of an equity linked GIC. And they like designing their own.

Want to set up your own equity linked GIC?

Call Hans Mathisen today at (306)242-7042.
or email -

Copyright 2005 Bowen Financial Inc. All rights reserved

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Mathisen Financial, Inc.
335 Redberry Road
Saskatoon, Saskatchewan S7K 4W5
Bus. (306) 242-7042 Fax. (306) 242-4314