Don’t bet the farm, but don’t sit the sidelines.
Penny Stocks
Firstly, OTC stocks are not for the faint of heart. Just when you think a stock can’t go any lower—it can. Often, without any logical or apparent reason, you’ve lost half your money in a day’s time. The converse is also possible—a nice little double or triple. It’s like Vegas from the comfort of your web browser. Let’s be clear about this: most penny stocks are not “investments.” There is generally a reason a company isn’t listed on a major exchange, but there are those rare companies that are simply overlooked and have the potential to be huge. We’ve all heard wannabe millionaire stories, “If I had only bought <fill in the blank> when it was $0.05 I’d be rich!” Those kinds of gains usually can’t be found investing in well-established companies. While a company’s stock price may appreciate significantly, the potential has generally been built into the price.
Speculative investing should not be your primary strategy, but should augment a well balanced portfolio and should only be considered if you are comfortable with the associated risks. I will be diligently watching and researching various companies that I feel have potential, but I will disclaim actual endorsement for its purchase. I encourage you to use your best judgment, personal research, and the information provided to build a case for your own investment.
Staying in the game
Most of us lead busy lives that don’t always allow for adequate research and daily monitoring of our portfolios. Most everyone wants to put the money they have to work for them, but are afraid to manage their funds themselves or are simply bored by it. If you have an interest (that’s why you’re here, right?) in choosing your own path to prosperity, then you’ve got to keep it interesting. Here are a few rules for stocks with high risk profiles:
Rule #1: Don’t invest more than you are willing or able to lose.
Rule #2: Don’t rely on anyone for a stock tip that promises to make you rich.
Rule #3: Don’t invest all at once or chase gains.
I would suggest allocating 5% of your portfolio in to speculative stocks. This is not limited to penny stocks, but any that you simply have a gut feeling will turn around for some serious appreciation.
Enhance Investment Returns by Maximizing Tax Efficiency
Help Minimize Tax Through Smart Non-Registered Investment Choices
If you’re like many Canadians, you’re already investing outside your Registered Retirement Savings Plan(RRSP). This is often a wise investment and tax strategy considering that RRSP contribution limits cap theamount you can contribute to an RRSP. As a result, your RRSP may not be sufficient to supply the total amount of money you need for the retirement lifestyle you want. A mix of non-registered investments can make up the shortfall— but only when fully integrated with your overall asset allocation and tax management plan. All investment income and realized capital gains earned outside an RRSP must be reported annually on your tax return. But, you can minimize or defer tax on that income through your choice of non-registered investments.
Interest income receives no preferential tax treatment and thus is fully taxable. Dividend income receives tax preferred treatment in all provinces and territories, but the degree of tax relief varies greatly across the country. Alternatively, just 50 cents of every dollar of realized net capital gains is taxable and, because capital gains are taxed usually only when you sell your investments, you can influence when you pay tax on those gains. You can potentially defer capital gains taxes for years by choosing to sell these investments at a time when it’s most advantageous for you (i.e. in a year when you expect your income will be lower than it is today)
Investment income that is taxed as capital gains can provide a significant advantage to your returns on an aftertax basis as compared to interest income. This is where the benefits of a tax-advantaged fund structure for your non-registered portfolio can provide big rewards. Unlike mutual fund trusts, which trigger tax consequences any time you switch from one non-registered fund to another, Investors Group Corporate Class™ mutual funds are treated as a single entity for tax purposes. This feature allows you to switch between share classes within the structure while deferring capital gains. As a result, you can rebalance your portfolio without the need to worry about immediate tax consequences. Over time, it’s this potential tax deferral feature that allows you to accumulate more wealth than if you had to pay tax on your gains each time you made a switch from one fund to another (assuming the same performance between the share class and an alternative investment). Investing within a tax-advantaged structure such as Investors GroupCorporate Class™ mutual funds makes it easier than ever to access the right tools to help you build your wealth.
Investors Group Corporate Class™ mutual funds feature eight premier investment managers and offersyou the flexibility to move freely among classes. Investors Group Corporate Class Inc.™ also featuresthe Investors Short Term Capital Yield Class and the Investors Capital Yield Class, which aim to providereturns similar to short and intermediate term Canadian fixed income funds, as well as the InvestorsManaged Yield Class, which aims to provide a stable current return approximating that of a money market fund.
If you would like to discuss how the Investors Group Corporate Class™ mutual funds and other taxefficient investment alternatives can help you build your wealth in the most tax-efficient manner possible, please feel free to contact me directly at barak.queija@investorsgroup.com.
