Articles

Why TriDelta has been mostly out of Oil Stocks – but that could change

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oilThe biggest investment story of the fourth quarter has been the rapid decline in the price of oil.

On September 26th the price of West Texas Intermediate (WTI) crude oil was $95.55.

As I write this in mid-December it is $57.42. In less than 3 months, oil has dropped 40%!!

Over the same period, a decent sized Canadian energy name like Canadian Oil Sands stock is down 57%.

Fortunately, at TriDelta we have been significantly underweight energy during the past few months – not to say that we avoided energy completely.

Currently the only energy names we own are large, diversified names like ExxonMobil and ConocoPhillips. Exxon is down about 10% over the same period, and Conoco is down about 20%.

For our more conservative clients, we are always underweight energy as compared to the Toronto Stock index. This is simply because there is too much volatility in the sector for a conservative client to have a 25% weighting in energy (this is generally the TSX weighting in energy stocks). We find that there are too many other sectors that better fit the consistent dividend growth goal for this type of client.

For our more growth oriented clients, we simply found that there were better growth opportunities elsewhere at this stage of the market, and we don’t feel a need to be particularly exposed to every industry. We did have a couple of smaller energy investments in the past few months that didn’t do well, but we were out of them before the most significant drop.

Having said this, there will definitely be times when we are heavier into energy than we are today. This could happen shortly as we do feel that the oil price decline is clearly overdone at this point, and when the bounce happens, there will be some very quick gains. Once again, we will likely see more exposure to energy for growth clients than conservative clients.

The last few months is a good example of how TriDelta Financial tries to manage money for its clients. We are not index huggers – trying to match the TSX. We’re disciplined about the types of companies that align well with the investment objectives of our clients. In volatile times, we will be more focused on capital protection – especially for our more conservative clients. If we are able to avoid an investment collapse or two every few years, this will obviously do a great deal to help keep your peace of mind, and also provide strong investment returns over the long term.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
tedr@tridelta.ca
(416) 733-3292 x 221

Be healthy – take an Omega 3 supplement

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omega3Omega 3 fatty acids are polyunsaturated fatty acids that are essential nutrients for health. An essential fatty acid, means it cannot be manufactured by our own body and therefore must be obtained through our diet alone.

It is highly recommended by many doctors, psychologists, cardiologists and rheumatologists because of the strong scientific evidence and its many benefits. Here is a list taken directly from MedlinePlus, which is health information from the US National Library of Medicine:

  • lowers blood triglyceride levels
  • reduces the risk of heart attack
  • reduces the risk of dangerous abnormal heart rhythms
  • reduces the risk of strokes
  • slows the build-up of atherosclerotic plaques
  • lowers blood pressure
  • reduces stiffness and joint tenderness associated with Rheumatoid arthritis

Omega-3 fish oil supplements may also help improve or prevent the following:

  • Alzheimer’s disease and dementia
  • depression
  • heart disease
  • cancer
  • arthritis
  • diabetes
  • hyperactivity
  • ADHD

What’s particularly fascinating about omega 3 fatty acids is that both conventional and alternative medicine agree on its many health benefits.

The ideal ratio of Omega-3 to Omega-6 is 1:1. Our North American diets are however very deficient in Omega-3 fatty acids, yet have excessive amounts of Omega-6. This has resulted in us having a ratio of about 1:20. This relative omega-3 deficiency is what is believed to be the cause of numerous health problems and strongly supports the continual supplementation of Omega-3 in our diet.

Foods containing Omega 3: Foods containing Omega 6:
Flaxseed Sunflower oil
Walnuts Brazil nuts
Soybeans Sunflower seeds
Navy beans Pumpkin seeds
Kidney beans Peanuts
Tofu Whole grain bread
Fish
Winter Squash
Olive oil

When buying Omega-3 supplements look for purity, potency and freshness. The brand name you choose should be able to provide you with detailed biochemical and toxicological analysis on the bottle. The potency should be measured in milligrams, with a ratio of 2:1 EPA:DHA.

A more recent development in this health sector is a new oil product known as Krill Oil, which is regarded by some as the best source of Omega 3.

For years, research has demonstrated that omega-3 fatty acids help lower an individual’s risk for heart attack, stroke, certain cancers, depression and overall inflammation. The type of omega-3s to take, however, has not always been clear. Omega-3s are broken down into three main components; ALA, EPA and DHA. EPA and DHA are found in marine sources and are the best-absorbed forms of omega-3 fatty acids. ALA is found in plant-based foods such as walnuts, algae and soybeans. It’s a great source, especially for vegetarians, but may not be as well-absorbed as their marine counterparts. The Dr Oz Show blog features this interesting and balanced opinion in a blog on the merits of Krill Oil, see http://www.doctoroz.com/blog/kristin-kirkpatrick-ms-rd-ld/new-omega-3-krill-oil

A Canadian company that originated as a biotechnology company Neptune Technologies and Bioressources Inc. There driving goal was to discover and innovate a new form of Omega-3 phospholipids. Today, they provide that superior Omega-3, and remain committed to science for ongoing research to support our health claims. Here is an interesting blog from their website, see http://neptunekrilloil.com/choosing-best-source-omega-3/

The evidence appears overwhelming in support of supplementing our diets to remain healthy.

Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CSA, FCSI
Executive VP
anton@tridelta.ca
(905) 330-7448

Three times when it’s ok to change your asset mix

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ted_banner

In some ways your investment asset mix is kind of like the luggage you pack for your vacation.

For some people they are more ‘lounge at the beach’ kind of people and their luggage will have a bikini and sun dress, sandals and maybe something for rain. Other people will be hikers and want great climbing shoes, shorts, and water bottles. Some vacations will be great for kids and others purely for adults. Some places have wide ranges of weather so you want winter coats along with a sweater. Some people travel light and take a bit of a chance, while others pack everything just in case. The key is that each person has different goals and is headed to a different type of vacation, and must pack their bags based on that.

Your investment portfolio is no different. It will look different for some people than others – depending on the type of people they are, and the stage of life they find themselves in.

Your mix of stocks and bonds is the foundation of your future investment returns and level of portfolio volatility that you will face.

asset2Of course, there are many other pieces of the puzzle – such as income levels, tax treatments, leverage and a wide range of risks within the word ‘stocks’ or ‘bonds’. However, let’s stick with the foundational asset mix for now, because this is the piece that gets questioned the most when times are not so good.

The most common question asked when markets pull back would be “is now the time in the market to change my asset mix?” I believe the answer is almost always no.

There are certainly times to rebalance because markets have caused some imbalance in your target portfolio. If you think about it, if stocks have had a great run and they now represent 68% of your portfolio instead of 60%, rebalancing is essentially a selling of something that has done well and buying of something that hasn’t done as well. But rebalancing is different than meaningfully changing your asset mix.

What I am talking about is someone who was 100% in stocks deciding that markets have dropped so now they will sell half their stocks and put it in cash or bonds. I am talking about the person who was 60% in bonds, but saw stocks doing well so decided to become 80% in stocks. These are the kinds of moves that usually come back to haunt someone because they are driven from market movements and not from a change in a person’s own situation. They are usually a problem because timing the move to get out and get back in is extremely difficult, and usually late. The other problem is that it leaves someone with a portfolio at various times that is not the right one for them as individuals. It is only right for what the market had been doing recently.

I believe that there are only three times when one should change their asset mix:

  • If they have been living an investment lie – by that I mean that their current asset mix doesn’t fit who they are today. Examples might be the investor who wants investment income, but whose portfolio has lots of growth stocks that don’t pay a dividend. Another might be the person who says they are uncomfortable with too much risk, and wouldn’t be able to sleep if their portfolio was down 10%, yet are sitting on mutual funds that are 80% invested in stocks. These are people who have the wrong asset mix for their needs (emotional and/or financial), and should make changes to get it right. These people packed the wrong luggage.
  • If they need to draw more money than they did before – This impacts the short term cash needs of a portfolio, and might necessitate a higher percentage in cash or short term bonds in order to prevent a sudden sale of stocks or long term bonds at a bad time in the market. This usually occurs when there is a change in employment (retirement, unemployment) or a sudden increase in expenses (often health or education changes). This would usually necessitate taking a step or two back in risk. If you had a portfolio with 80% in stocks, now maybe it might move to 50% or 60%. You may also want to increase the amount sitting in a high interest savings account or money market fund to help cover off your cash needs for a year without any market risks. Here, the 4 star vacation that you hoped for, has to be downgraded to a 2 star.
  • If their investment world just improved meaningfully – this situation can come about when someone sells their house and rents or downsizes meaningfully. It can happen with a sizable inheritance or taking a pension in a lump sum of cash as opposed to the traditional monthly payments in retirement. The reason this changes your asset mix is because you now may have more assets that may never get spent in your lifetime or which will be invested for a long term before they are needed. Quite often this growth in a portfolio allows you to increase the risk of your overall investments to try to achieve a larger estate. One way to think of this might be to look at your portolio and determine how much you need to invest safely to cover your needs for the rest of your life. If the number is $1 million, and you have $800,000 in assets, then you can’t afford to be too aggressive with your investments. If the number is $1 million, and you have $3 million in investments, then this can guide you to a 67% stock portfolio, which you can afford to ride the stocks up and down, with the educated goal that they will be worth more in say 25 years than if it was invested more conservatively.

 
Time for an upgrade in your wardrobe for the upcoming vacation.

In all three of these examples, you will notice that none mentioned a sudden 10% drop in the TSX. Asset mix changes made because of great or bad investment markets usually do not pay off in the long run. What tends to pay off is having done your homework on what your financial needs are, to truly understand your ability to handle downside risks in the portfolio, and then to build a portfolio that will allow you to weather the investment sunshine and storms that will inevitably come in the future.

Reproduced from the National Post newspaper article 25th October 2014.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
tedr@tridelta.ca
(416) 733-3292 x 221

TriDelta High Income Balanced Fund delivers 15.9% first year return

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income-fundThe TriDelta High Income Balanced Fund was developed to deliver strong results while providing something that many Canadian income investors are missing – diversification.

The Fund achieves this through:

  • Institutional investment strategies such as put and call options to lower volatility
  • Leverage on the fixed income portion of the portfolio to increase income
  • Actively investing in foreign exchange, hedging strategies and global bonds

 
The TriDelta High Income Balanced Fund completed its first year of operations on November 30, 2014 with a very strong return of 15.9% (F-Class shares). Unlike most alternative investment or hedge funds, TriDelta High Income Balanced Fund charges no performance fee and its management / advisory fee is lower than most mutual funds.

The fund is managed by Edward Jong, Head of Fixed Income and Cameron Winser, Head of Equities at TriDelta.

TriDelta’s fund delivered excellent overall results in the hedge fund sector as outlined in this news item, http://hedgefundgroup.org/tag/tridelta-high-income-balanced-fund

Performance:
The Fund was a steady top performer throughout the year. Its 1 year return was 15.9%, earning 6.5% over the past 6 months, 2.2% during the past quarter and 3.8% in the month of November. The Fund generated positive returns in 10 of the past 12 months.

From a performance perspective, the Fund was in the top 2% of all Growth and Income Funds (7,200 funds) found on GlobeFund, and among the top performers in that group, had among the lowest equity weightings, and highest risk adjusted returns.

The Fund is offered by term sheet and subscription agreement. Prospective investors must be Accredited Investors.

Class F Shares are owned by clients of TriDelta Investment Counsel Inc. These clients pay an advisory fee to the firm, typically based on their assets under management. An investment fund must prepare disclosure documents that contain key information about the Funds. You can contact TriDelta Investment Counsel Inc. for copies of these documents and more information on the Fund at 416-733-3292. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

TriDelta Investment Management Committee

Cameron Winser

VP, Equities

Edward Jong

VP, Fixed Income

Ted Rechtshaffen

President and CEO

Anton Tucker

Executive VP

Lorne Zeiler

VP, Wealth Advisor

Key Steps in Starting a New Business

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new_businessStarting a new business can be one of the most exciting and life-defining events for those with the courage and fortitude to strike out on their own. The rewards are potentially significant not just financially but in terms of lifestyle and freedom, particularly given the instability of traditional ‘employed’ careers these days.

It is not surprising that more people are taking the plunge. In 2011 2.67M people were self-employed, representing 15.4% of the working population (Source: Industry Canada SME Research and Statistics).

However, starting a business is also fraught with difficulty and endless challenges. Navigating the maze of government regulations, legal, tax and accounting issues can be overwhelming and it is vital to get professional support and advice at an early stage.

The purpose of this article is to provide a brief overview of the key steps and issues to consider when starting a business:

Assess Your Own Qualities

Successful entrepreneurs from all backgrounds share one common attribute – passion for what they do. Consider whether you have the traits to succeed in your own business. Apart from passion and self-belief, you should be resourceful, creative, a good communicator, possess a strong work ethic and be tenacious even in the face of failure. These are just some of the qualities you need to succeed in business.

Research Your Market

It is vital to consider whether there is a market for your idea, product or service.

You need to consider whether your offering is original and whether the market would be prepared to pay for your product or service. Who are your competitors and how will you differentiate yourself?

Conducting market research at the beginning will save lots of wasted time, effort and money. It will help you define your target market and your ideal client.

Develop a Business Plan

You would not drive to a new destination without a map, so why develop a business without a plan?

Studies show that entrepreneurs who commit their business plan to paper are more successful. It helps you to think through your business, fine-tune your ideas and think in a structured, disciplined manner about your targets and achievement goals. Building a strong plan is the best foundation for a successful business, your ‘road map’ to achievement.

Assemble a Support Team

No successful entrepreneur ever sailed solo. Building a network of advisors is critical. They can range from your social network, family and friends to act as your ‘cheerleaders’ through to the professional advisors. These are likely to include legal, accounting and tax services, but will also extend to financial planning, insurance, marketing, web development and much more. Having a strong network of professional advisors and mentors will ease the burden and help you to concentrate on your passion knowing that the mechanics of setting up the business are in place and you have a solid platform to work from.

Select the Right Business Structure

Choosing the appropriate business structure for your situation is vital. There are three basic legal structures for businesses:

  1. A sole proprietorship – you alone own the business and are 100% responsible for its debts and liabilities. All earnings are taxed as personal income. It is the most simple structure with minimal registration requirements. However, creditors can claim against your personal assets including your house and car.
  2. Partnership – Two or more owners agree to share profits and losses according to their share in the firm. In a general partnership, all partners are liable for the debts of the firm. Each partner’s share of the profits is taxed as personal income. Creditors can also claim on your personal assets.
  3. Corporation – The company is a separate legal entity and pays corporate tax on its revenue. This is separate from the owners personal tax. While a corporation is considered a more complicated legal structure, the overriding advantage is that the liability of the owners is restricted to the amount invested in the company (unlike the other two structures).

It is important to seek professional advice on the best business structure for you in order to save time, money (and tax!) and get the business off to the best possible start.

Registration

Most businesses will require some form of registration with federal, provincial, territorial and sometimes municipal agencies. It is important that you are aware of these requirements otherwise you could inadvertently fall foul of these important steps and risk a fine.

A key registration is with the Canada Revenue Agency (CRA) for your business number. This number is used in respect of your registration for corporate income tax, GST/HST registration, payroll deductions and import/export income (as required for your business). If you take on employees you will be required to deduct Canada Pension Plan (CPP) and Employment Insurance (EI) from your employees’ remuneration. Depending on the type of business you operate you may also be required to obtain certain business licences and permits. For example if you are in business as an electrician you will need to be certified by the Electrical Safety Authority as an Authorized Contractor. Your business premises may also be subject to zoning or land use by-laws that you will need to be aware of. Knowing what to register for and when is essential to avoid contravening federal, provincial or municipal regulations.

Financing

Your business plan should include cash flow projections and estimated financial statements. This will give you a good idea of how much you need to capitalize the business. The next step is obtaining that financing. There are many sources of potential finance including personal savings, equity in your property, angel investors and grants. Bank financing is one of the most established forms of financing a business, however you need to provide security for the loan and be considered a good credit risk (a well thought out business plan will go a long way to convincing the lender that you have a viable business). Once the business is capitalized, good financial management is integral to success.

It is also important that you have effective accounting systems so that you know if your business is making profit, and also to ensure that you have enough cash to pay bills as they fall due. Many profitable businesses have failed due to poor cash management.

Legal Compliance and Keeping the Corporation in Good Standing

Once the business is operational, there are certain key issues to be aware of. As an example, if you incorporate your business, you will need to ensure that the company keeps adequate statutory records, makes the appropriate statutory filings (such as an annual return of directors and officers) in a timely fashion, and carries out the required meetings (such as an annual meeting of shareholders within six months of the end of the financial year). Any changes to the corporate structure (such as a change to the directors) also require filing.

There are also a number of other obligations such as producing financial statements and filing a corporate tax return within six months of the financial year end, and paying taxes quarterly. It is important to have a calendar so that key dates are noted and forward planning is essential.

However, legal compliance is an ongoing process. As a business, you will be subject to laws and regulations concerning the conduct of your business that include environmental, health and safety, privacy, social media, licensing issues etc. Depending on your business, you will be impacted by these to a greater or lesser extent. Specialist professional advice is essential to help you stay abreast of these issues.

Developing the Business (Networking)

One of the biggest challenges for new business owners is how to find clients. There is no magic formula for this. Today’s technological society demands a web and social media platform, but there is no substitute to ‘getting out there’ and networking. It is important to position yourself in places where your potential clients might be.

Building relationships with business associates who can refer you to potential sources of work is key to growing your business. Getting known in business circles by attending meetings and networking groups will help to build your brand and credibility.

When meeting potential clients and associates be clear on your elevator pitch. You should be able to explain your value proposition, ie what you do and why you are unique in thirty seconds or less. Practise it and own it. Look for opportunities to write articles or give speeches so that you can build credibility as an acknowledged expert in your field. Sowing these seeds require patience but will be well rewarded.

Issues to Consider When Taking on Employees

A business cannot grow without taking on employees. If you recruit employees, you need to be aware of the raft of legislation and regulation surrounding the employment relationship. This covers CRA registration and payroll requirements, Workers Safety Insurance Board (WSIB), Employers Health Tax, employment standards relating to pay, vacation, working conditions, health and safety, termination of employment and much more.

Considering employee issues starts from the moment you consider taking on employees. Even the recruitment and selection process is heavily regulated. Whether you have 1, one hundred or one thousand employees, a deep understanding of this maze is essential and another instance where your business support network is invaluable.

Expanding the Business from Start up to Growth

If you have successfully launched your business and it is running profitably, the next step is to look for opportunities to take the business to the next level. Now is the time to look for new opportunities for growth, either geographically or through the services/products offered.

Continue to use your professional advisory team as a sounding board, and keep learning, not just about the field you specialize in but also on all aspects of running the business. For example, as you take on employees, leadership and motivating employees will be critical skills to learn. It is also an opportunity to delegate and achieve a better work life balance.

Conclusion

Starting a business is a journey of evolution. It is not a linear process however. You will inevitably face failures and disappointments, but you will also likely encounter unexpected opportunities to steer your business in a new direction.

Building a business is like raising a family. It can be frustrating and full of challenges, but there will undoubtedly be triumphs and rewards that make it all worthwhile. Following your dream and passion takes effort, courage and tenacity but can be the most exciting and rewarding step you ever take in life.

Article authored exclusively for TriDelta Financial by Paul Dubal, Director of PD Corporate Services. He will gladly assist you in getting your business properly set up including registration & structure for your business, see www.pdcorporateservices.ca

Genuine interest

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interestIn this fast paced and multi-task world is anyone really listening anymore? With the bombardment of electronic media – it is becoming increasingly rare to find what I call Genuine Interest.

When last did you just sit back without the TV on, no cell phone buzzing or music and just focus on the person with you? This is one way to nurture relationships by really listening and not be distracted by other stuff. If we truly care about others, we should take notice, develop and display ‘genuine interest’ towards them.

There is a big difference between simply listening to people and listening with deep interest. To show you really care it is important to really listen. Think how good you felt when friends showed a real interest in you and what you’ve been up to. They look you in the eye, ask questions and really connect. How often do we do this to others?

The good news is that the ability to be genuinely interested in people is something that can be learned. This applies to having an interest in others, caring about others and trusting people around you. If you do this other people will in-turn be interested in you and care about what you have to say.

Another important thing to help you to build genuine interest in others is to put yourself in their shoes and look at the world from their perspective. It may very well be that the topic someone came to you with is seemingly not important to you but it may be vital to them. Ask questions and be curious, it will take you far.

People can tell immediately if you are simply pretending to listen as we have all done. Take the time to mend your ways and become really interested in others by practicing genuine interest and you will find that it delivers just the same – a real interest in those around you. This happens naturally as you learn more about them and strengthen your relationship. Soon enough you will have a genuine interest and not have to practice the social skill.

I recently came across this related article titled ‘How to lengthen your life’. The article was not about quitting smoking, exercising or reducing stress, but seeing things in a new light by applying keen focus to each moment lived so that our lives feel fuller and more rewarding.

Someone summed it up as follows: “What makes life a joy cannot be limited to the BIG moments, which are rare, but a constant succession of small moments fully observed and absorbed and lived. Thank God, the world is full of endless wonders to be observed and appreciated.”

Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CSA, FCSI
Executive VP
anton@tridelta.ca
(905) 330-7448
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