Those exceptions are in select precious metals or resource issues. The
bottom fell out of those sectors, and they’ve been lagging for over five
years, with many stocks still underwater in terms of 10-year returns. But
they are already on the upswing, and some of the low-hanging gains have
already been picked. Invest cautiously in these areas, keeping your asset
allocation targets in mind to reduce downside risk somewhat.
Across the funds industry, it has been quiet with very little merger and
acquisition (M&A) activity. After the last 15 years of fund industry
consolidation, we now have the big banks and about eight other very large
mutual fund/investment companies dominating the industry, along with a
handful of smaller, more nimble companies filling the niche markets.
Most of the mid-tier fund companies have been bought out or merged into the
larger outfits we see today. And in the face of increasing competition,
most of these are now actively reducing management expense ratios (MERs)
and fine-tuning high net worth (HNW) programs to make them more efficient.
Because it is so lucrative for money managers, the HNW space is very
competitive, so for the well-heeled investor, at least, it’s a bit of a
buyer’s market when it comes to money management.
On the other hand, real estate, especially in Canada’s large urban areas,
has definitely been a “seller’s market” recently. House prices in Toronto,
Vancouver, Victoria, and a few other urban centres are making life very
difficult for young families (and many others too) looking to purchase
their first homes. In many cases this is where the jobs are and where they
may wish to live. But the question is, can they afford to? In the
20-to-30-year age bracket especially, many are finding it tough to live
where they want using only their own resources.
This has resulted in more loans from “the bank of Mom and Dad” to help them
get into the market. But if you are in fact “the bank of Mom and Dad,” and
you decide to go down that road, make sure you adjust your will to ensure
fairness to other children. For example, if one child has already received
$75,000 to help with a home purchase, but the will splits the estate
equally, there could be some disputes down the road. While we would like to
think this wouldn’t happen, it’s better to have everything laid out
Another option that is becoming more and more common with my clients is
co-ownership of a home, where Mom and Dad may live downstairs and the
children’s family lives upstairs. The parents can travel without concern
about the yard work or home safety, and the kids can get into the real
estate market, so this often works out well. This solution may also give
the parents some “travel money.” Just ensure you have a formal legal
document in place, which lays out the rules of ownership and/or tenancy
under various circumstances.
Co-signing for a home purchase is another option, but then the parents are
legally responsible and liable for the debt. So I am not as keen on this
option. Parents have sacrificed enough to bring children into adulthood.
They should not have the stress of financial worries in retirement
resulting from a mortgage debt that a child can’t pay because of job loss
or other circumstance.
Some observers believe the high real estate values in the areas I’ve
mentioned indicate a “bubble,” which may be due for a large correction. I
disagree. Toronto, for instance, is the cultural and financial centre of
Canada, and growth shows no signs of slowing. That won’t change.
Geographically, Vancouver is a desirable location because it is the warmest
major city in Canada, where it is often possible to ski in the morning and
golf in the afternoon. It has the scenery and the lifestyle and, because of
its vibrant economy, the jobs. These markets will remain in demand for all
those reasons, presenting both challenges and opportunity for investors and
is based in Surrey, B.C. and is registered with
Portfolio Strategies Corporation
as a mutual funds person. He is a regular contributor to the Fund
Library. He can be reached at firstname.lastname@example.org.
Notes and Disclaimers
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