Commentary - Hans H. Mathisen
A Case for Segregated Fund -The May issue of LIFE LETTER outlines the many advantages of investing in segregated funds. Another benefit of this investment vehicle is certain guarantees of principal which are not found in mutual funds. You may want to consider this investment opportunity as part of your portfolio..
Be prepared for emergencies and opportunities -Be prepared for emergencies and opportunities - LIFE LETTER for June emphasizes the advisability and importance of having access to cash. How are you set?
LIFE LETTER MATURE - Advice to a future widow and Why plan your estate are subjects well worth acting on now. Since there are no guarantees in life, it is prudent for all of us to have our affairs arranged properly, sooner, rather than too late.
THE STOCK MARKETS - The major markets are performing far better than anticipated by most financial analysts. At the end of May, 2007, the year-to-date results of the major indexes hint at solid several double-digit results for 2007. The TSX Composite Index is up 8.90%; The Dow Jones increased 9.34%; and the S&P and NASDAQ rose 7.92% and 7.83%, respectively. In Europe , Germany 's DAX is up a whopping 19.5%; Frances 's CAC 40 rose 10.15%; and the British FTSE 100 increased 6.44%. Hong Kong 's Hang Seng rose 3.35%, and Japan 's NIKKEA is up by 3.77%. Overall, your investments are doing very well. We, at Mathisen Financial, Inc. monitor the major indexes and your funds' performances on a daily basis. Please rest assured that we are doing the best we can to make your money grow.
A case for Segregated Funds
Ron and Kathy had some money to invest and looked at a number of options. Neither had the time or desire to research stocks and other securities to build and manage an investment portfolio. However, they like the way mutual funds work as they can pool their money with many other people and have investment professionals manage it for them.
They also learned about Segregated Funds, an investment plan backed by a life insurance company. These plans work very much like a mutual fund, but have certain death benefit and maturity guarantees as well as several unique benefits:
Strong Beneficiary Designations - There are several benefits of having a "strong" beneficiary designation. First, because Segregated Funds are backed by a life insurance company, benefits on death are generally paid quickly, often with few requirements, directly to the named beneficiaries. Settlement is private and usually does not become part of the public record in the courts.
Second, you can name a beneficiary on a non-RSP plan. This is a valuable estate planning tool.
Third, you can name a secondary beneficiary, which is someone who would get the benefits in the event of the death of the primary beneficiary.
You can change the beneficiaries on your plan any time you want. This is usually asimple form that needs to be filed with the issuing company. A change to your Will is not necessary.
Potential For Creditor Protection - As long as the beneficiary designation is in what is known as the preferred class, funds are protected from creditors in most situations. This applies to both RSP and non-RSP funds. The potential for creditor protection is very attractive to most business owners.
Build a Portfolio Without Extra Fees - Ron and Kathy would like to use different funds and fund managers for their investment plans. Often, self-directed plans have an annual fee that can be in the hundreds of dollars. Not so with a Segregated Fund. Some plans even use existing mutual funds inside the Segregated Fund wrapper.
Switch Between Funds and Managers Fee Free - If Ron and Kathy want to make changes to the funds within their accounts, they can usually do this several times per year without cost in a Segregated Fund. Deferred Sales Charges (DSC) Waived on Death -In order to have 100% of their money invested, Ron and Kathy want to use the DSC method. This means that if they withdraw their money before a certain period of time has passed, they will have to pay a small penalty. The DSC is a decreasing percentage of the funds withdrawn. However, these charges are waived on death in a Segregated Fund.
For information purposes only and not intended as an offering of product. See your financial advisor for full plan and funds details. Any amount that is allocated to a Segregated Fund is invested at the risk of the policy owner and may increase or decrease in value. Past performance should not be considered indicative of future results.
Want help with your savings plan?
Hans Mathisen today at (306)242-7042.
Copyright © 2007 Life Letter. All rights reserved
Be prepared for emergencies and opportunities
Randy worked for a small business. When the owner died suddenly, the business accounts were frozen and it took several weeks before they could be accessed to meet payroll. Randy had trouble meeting his financial obligations and had to find a new job.
Jane worked at a small company for many years. When the owner decided to retire, she offered to sell the business to Jane. As she didn't have the funds available, the business was sold to someone else. The new owner let Jane go shortly after taking over.
Joe and Gayle had been renting a house for several years. When the owners decided to sell, they offered it to Joe and Gayle first. Because they didn't have enough for a down payment, they couldn't afford to buy the house and also had to move.
It seems that many people today are so busy living a lifestyle, they forget that emergencies and opportunities need to be dealt with. Randy, Jane, and Joe and Gayle would have been able to deal with their situations more favourably if they had established emergency and opportunity funds.
It's all too easy to start taking one's cash flow for granted and get lulled into the belief that it will go on uninterrupted. Many fall into the trap of trying to save money after all other payments are made. Usually, there is little or nothing left to save this way. Those who are best able to handle emergencies and opportunities that arise are in the habit of paying themselves first. How do you pay yourself first? There are many ways and they include:
High Interest Bank Accounts - This may sound like an oxymoron, but there actually are a few banks that offer high interest savings accounts; some with chequing privileges, too. Bear in mind that any interest earned on money in these accounts is fully taxable. However, most bank accounts are readily accessible, so it can be easy to withdraw funds for things that aren't really emergencies or opportunities.
Guaranteed Interest Certificates (GICs) - Funds can be deposited for a certain period at a fixed interest rate. The interest is fully taxable, even if left on deposit in the GIC. Because GICs are for a fixed period, funds may not be available at the precise time they are needed.
Canada Savings Bonds (CSBs) - Available each year for a short period of time, CSBs are cashable at any time. Interest earings, as always, are taxable each year. If cashed before the end of a month, interest will not be paid for that month.
Universal Life Insurance - These policies can combine protection and savings in one plan. The minimum premium is set at a level to cover the cost of the death benefit. The policyowner can choose to pay more, within certain limits, and these extra premiums accumulate on a tax deferred basis. Generally paid out as part of the death benefit, the extra deposits can also be accessed, depending on the company, by withdrawal or policy loan.
"When prosperity comes, do not use all of it." - Confucius
Want help with your emergency and opportunity funds?
Call Hans Mathisen today at (306)242-7042.
Copyright © 2007 Life Letter. All rights reserved
Mutual confidence is the power that binds together all harmonious human relationships.