The action of a stock market reflects the way investors see the future of a country.  Since Trudeau came to power the TSX has been flat and foreign investment has fallen significantly. The hardest hit sector has been the energy.  As soon as Trudeau announced the  Carbon Tax, investment in new pipelines and oil fields collapsed.  Very significant companies have also moved their money elsewhere since then.  Roughly 50% of small energy companies have disappeared since Trudeau came to power.  Energy is one of the biggest tax generators for all levels of governments. Ironically, it was not until it looked like Trudeau was going to be given the boot that the TSX and foreign investment started to rise again. 

Since the Liberals were in power the average Joe investor has seen little gains investing in mutual funds and ETF’s because the markets have been flat. Add to that few mutual funds out perform the stock market to begin with. Plus, they are designed to transfer one’s money via fees to management over time.  When you add in roughly the 2% annual management fee, investors are down around 8% if they have held for the past five years.   It will take an 8.7% gain just to break even.  Sadly, Guaranteed Investment Certificates easily beat most mutual funds over that period. Considering most mutual funds are owned by the banks and insurance companies, it is better to invest in the companies that own the funds.  They offer higher yields and have a better history of capital gains.

Interest rates have been at record lows for the past decade.  After paying taxes the average return on GIC’s has been slightly over 1%.  This means it will take 72 years to double one’s money if you re-invest the interest earned.  Not to mention inflation would eat most of those returns, which means even though your capital remains intact, it has lost purchasing power.

Many have also gambled their retirement on real estate.  Most who have bought a principle residency in the past 5 years have either lost capital or are barely breaking even once the costs of ownership are included.  Many investors in real-estate are renting out property at rates that are below the monthly carrying costs.  Even if the place is paid off, you could earn a much higher yield elsewhere.  As we are witnessing today, prices are falling and many are finding it is difficult to sell at their desired price, creating even more risk.  Yes, house prices have increased the past decade exponentially, but todays buyers have disappeared, inventory has skyrocketed, and now prices are falling. This will turn out as a disaster for many.

There are too many retired people taking out those terrible Reversed Mortgages to continue the good life. We are 100% against this. Suppose a home is worth $500,000.  You can borrow up to $225,000. minus expenses (lawyers fees to register the deed plus annual fees).  The term can be up to 20 years.  Over those 20 years the lender adds the monthly payments based on the interest rate of the loan to the outstanding debt.  After the 20 years the debt grows to $500,000.  Hopefully the house grew in value over that period. If it didn’t, the borrower ends up with zero equity at the end.  It would be cheaper to sell the home and invest $250k in a GIC.  Today they would receive around $12,000 a year in additional income without risk. The remaining funds can be used to downsize ones home. 

No matter what age you are, we recommend you start to readjust your spending to take in account an increase in taxes via the Carbon Tax. Ottawa is determined to destroy the Canadian economy by this tax.  If re-elected in the fall they will become very successful at it and all Canadians will have less money to spend..