Canadian Tire’s stock – and dividend – are on a roll + MORE Feb 14th

TORONTO — When Patrick French was about 18 years old, he got a hot tip about a gold mining stock.
The problem was he was a student with no money, but he still wanted to cash in on the “can’t miss” opportunity for his RRSP.
So, he took out a $4,000 loan.
“I broke some fundamental rules for what was promised to be a brilliant idea,” said French, director of retirement and financial planning at investment firm Edward Jones.
“Within 12 months, the stock was effectively worthless. It was one of those things where at the time, it was a very expensive lesson — invaluable really.”

Ten RRSP questions answered »

Not only did French lose his investment, he lost his RRSP contribution room. He also now had more debt.
Today, French tells clients more often than not, it’s a bad idea to incur debt, or ignore debt, to invest in an RRSP.
“You have to believe that you can consistently earn a higher rate of return than you can by paying down the debt,” he said…

The stock’s modest yield often gets short shrift, but the retailer has built a solid record of dividend growth

TORONTO — It’s been 60 years since the RRSP was introduced as a retirement savings tool. But that doesn’t mean Canadians have learned all the lessons of the past. Here’s a look at five common mistakes investors make with their RRSPs:
Dipping into the funds
Carol Bezaire, the vice-president of tax, estate and strategic philanthropy at Mackenzie Investments, says the No. 1 blunder is dipping into an RRSP for expenses other than retirement income.
“People are making random withdrawals out of it for vacation or whatever,” she says. “And what they end up with in April is an unexpected tax bill.”
Financial institutions withhold some of the withdrawal— between five and 30 per cent depending on the province and total sum—and, depending on a person’s marginal tax rate, there may be more owed come tax time.
The two exceptions are for the first-time homebuyers’ plan and lifelong learning plan. No tax is withheld for withdrawals for those purposes and investors don’t count them as income…

Q: What do you think the fees for investment management at, let’s say, RBC, TD, BMO, or any of the big banks should be for a portfolio of $1.2 million?
I’ve tried to find them on the internet, but nobody tells you what they are.
—Steve
A: Investment fees are sometimes a mystery, Steve. Quite frankly, some people in the investment industry like it that way.
Fee disclosure rules are changing this year though and many Canadians probably noticed this on their December 31, 2016 statements, with new fee and performance information now appearing that has not been so explicit in the past.
There has been more of a push towards fee-based investment advice in recent years as well, where a pre-determined fee is charged as a percentage of your investments. This should not be confused with fee-only financial planning, where a financial planner charges a pre-determined flat fee or hourly fee for financial advice but doesn’t manage your investments.
Fee-based investment advice can be good for an investor because it takes away any potential for a commissioned, transactional advisor to churn an account to increase commissions…

The signals are decidedly mixed when one looks beyond heady valuations