What Retirees Should Know About Rising Rates + MORE Jan 20th

Believing that the Canadian economy is not yet strong enough to withstand higher interest rates, the Bank of Canada continues to leave its benchmark interest rate unchanged.
While that’s good news for those taking on debt for a house or car, the central bank’s long-running stance has exacted a heavy toll on Canadian savers.
Retirees in particular, since they tend to rely heavily on savings and favour investments that deliver a steady supply of interest income, have been saddled with miniscule returns on GICs and term deposits.
Also read: The Jury is Out on Rising Rates>
Investors Stretch For Yield
To squeeze out a bit more in interest where they could, many have discovered that bonds with longer maturities could produce much higher yields.
Instead of investing in a bond with five years to maturity, for instance, investors stretched for yield and sought out those with 15 or even 20-year maturities – and, so far, that’s been working.
But while rates aren’t likely to change for awhile yet – most economists believe that Bank of Canada Governor Stephen Poloz will need to start raising rates by the end of 2015 – these otherwise cautious investors should be preparing for increased volatility in the bond market…

If you’re one of the legions of Canadians who were burned in the 2008-2009 crash, I bet I can name one of your larger portfolio holdings today: cash. After all, keeping your money in cash and cash equivalents, such as GICs and savings accounts, is safe, right? Once bitten, twice shy: as long as you hold lots of cash you’ll be fine no matter what.
That’s the way a lot of people seem to think, but turns out it’s wrong. Holding a lot of cash in your portfolio is actually very risky. That’s because cash is pretty much the only investment out there that has absolutely no potential to earn a return in excess of inflation. Yet today, many Canadians are taking just that risk.
The 2014 BlackRock Investor Pulse Survey, conducted by the giant global asset manager in August, showed that almost two-thirds of Canadians’ financial assets are parked in low-yielding, short-term instruments. There’s no definitive answer as to why, but the survey points to safety and caution as the prime reasons…

NEW YORK, N.Y. – The U.S. stock market is opening the week higher.
The Standard & Poor’s 500 index gained seven points, 0.4 per cent, to 2,027 in early trading Tuesday. Delta Air Lines rose the most in the index, 5.2 per cent, after the company’s quarterly results beat Wall Street expectations.
The Dow Jones industrial average rose 33 points, or 0.2 per cent, to 17,543.
The price of benchmark U.S. crude oil fell $2.02, or 4 per cent, to $47.11 a barrel.
Major stock markets in Europe headed higher as a survey showed market optimism rose more in Germany than expected and a survey of bank lending showed more demand from companies for loans.
The post US stocks head higher in early trading; Delta Air Lines surges appeared first on Canadian Business.

(Anthony Rosenberg/Getty Images)
TORONTO – As the hype around RRSP season ramps up, it’s time to ask whether pushing a big chunk of cash into your retirement savings every winter is the best investment approach.
Some financial advisers say the tradition of RRSP season leading up to tax returns only encourages procrastinators to wait until the RRSP deadline—March 2 this year—before they contribute to their plan.
For everyone else, it’s smarter to set aside money on a regular basis through a pre-authorized withdrawal from their bank account.
“People are likely to save more by investing in their RRSP monthly and treating themselves like a periodic bill,” said Jason Abbott, an adviser at WealthDesigns.ca, a financial planning firm based in Toronto.
Depositing money on a regular schedule also allows investors to take advantage of a practice called “dollar-cost averaging,” considered by many as a better way to boost investment value and avoid market volatility.
Since stocks and commodities generally grow over time, the thinking goes that by saving each month investors will increase their odds of buying into the stock market when values are lower…

(Raina + Wilson)
I approach building good money habits the same away I approach my tennis game: In a slow, disciplined way, with lots of short-term goals that are part of a long-term plan.
My initial lessons on budgeting and saving started when I was just 10 years old. My parents would drive me to tennis tournaments several hundred kilometers away from my home in Thornhill, Ont. They paid for everything, but I handled a lot of the actual transactions. I would swipe their credit card for all purchases on the road—gas, coffees, meals, lessons, and other routine expenses—and those costs quickly added up. I learned that someone needs to pay and I knew one day soon, it would be me.
So in my teens I began to save 90% of all the income I earned from playing. I know that’s a lot, but it was my rainy day savings plan. The day would come when I’d have to start paying for all my competition expenses. As I got older, the day would also come when I’d have to stop playing tennis…