First-quarter economic contraction in both Canada and the U.S. had investors on the defensive last week, pushing the major North American stock indexes into the red for the week. Adding to investor distraction, IMF Managing Director Christine Lagarde again warned that Greece’s default risk had increased sharply. Toronto’s S&P/TSX Composite Index closed the week with a 1.2% loss and the month with a 1.4% loss. The S&P 500 Composite Index ended the week down 0.9%, but remained in the black for month with a 1.1% overall gain in May.
Q – I’ve just graduated from University, and I have a student loan. Some of my friends are thinking of taking a year off to travel. Some have said they intend to simply ignore their student loans because the government will eventually forgive it anyway. I’m not sure this is a good idea. Do you have any financial advice for new graduates? – Molly E., Toronto, Ontario
If you’re on the cusp of retirement, you might be facing a cash conundrum: what to do when your RRSP or defined contribution pension plan matures? You’ll suddenly have a large lump sum of cash to deal with. Some choose to convert to a RRIF (for RRSPs) or a Life Income Fund or Locked-In Retirement Income Fund for the pension plan. An often forgotten third option – an annuity – can in fact provide a guaranteed income stream for life equivalent to the kind once provided by a defined benefit pension payout. Yet an “annuity” has become something to avoid for many retirees. And that could be a big mistake. Here’s why.
Clients often ask me what methods I use to research and analyze funds. This is a numbers business, so first and foremost I look at quantitative factors, as I described in a recent article. But while the numbers are great at telling me what a fund has done in the past, they aren’t always great at predicting whether it can deliver above-average returns with below-average risk into the future. That’s where I turn to qualitative factors, which can be quite illuminating, but which need a bit of intuition and interpretation.