TriDelta Investment Counsel – Q3 2015 investment review


Executive Summary – Stock Market Corrections have a Silver Lining

Well, that wasn’t a fun quarter for anyone. We do believe that much of the damage is now behind us, and in most cases, clients remain in positive territory for the past year during a time when the Toronto stock market has dropped 11%. In this report, we will explain what happened and why we are generally positive at this point.

Periodically, markets experience corrections of 10% or more. We believe these corrections are necessary to cool off an overheated stock or bond market. Despite these sell-offs, the equity markets have enjoyed historical returns of over 8% per year for long-term investors. Presently, even with the recent declines, equity markets are substantially higher today than in 2007 (pre-financial crisis) and 2011 (last major decline).

In fact, these market corrections create buying opportunities when stocks, bonds or the overall markets have reached lower price levels.

Our Perspective on Market Volatility

14498871_sThe third quarter witnessed a sharp drop in the price of global equities and commodities. This high market volatility is not unusual from a historical perspective. In fact, some of the best market returns come after turbulent times (e.g., after the 2000-2002 Technology-Media-Telecommunication bust and after the 2007-2009 global financial crisis).

Why are markets so volatile recently? We believe the following are key contributing factors:

  • Concerns over China’s weakening economic growth and surprising devaluation of its currency on August 11th, resulting in downward pressure on global inflation. China’s action also negatively influenced emerging market currencies and bonds;
  • The fall in commodity prices, including oil prices; and,
  • Investor discomfort with the rising likelihood that the U.S. Federal Reserve will move to gradually raise rates this year due to signs of strength in the U.S. economy.

Concerns about China’s weak growth and currency devaluation

China and the other emerging market economies rose markedly over the past 30 years, currently representing 57% of the global economy (30 years ago it stood at 35%) and over 80% of global growth in recent years; therefore, its influence on the global economy and the markets generally, is substantial. So, when the Chinese economy is slowing as it is presently, investors are concerned. Fortunately, China has put in place a number of reforms, in recent years, to transform its economy for sustainability and higher economic development.

Falling commodity prices

Prices of most commodities fell sharply this year. Prices fell because of rising supply, as well as commodities being priced in U.S. dollars, and the U.S. dollar continues to appreciate. The supply of commodities increased owing to rising production and stockpiling over the past number of years in anticipation of strong demand, which did not materialize. We expect commodity prices to continue to fall until these excess supplies start falling.

Expected Rise in the Fed Funds Rate

The argument in favour of a rate hike in the near future in the U.S. is based on reasonably solid economic growth and a falling unemployment rate. In contrast, the argument against a rate hike is based on slower global GDP growth, falling commodity prices and currency devaluations, which reduce the rate of inflation (a key metric for the U.S. Federal Reserve). Regardless of where you stand on this argument, it is important to realize that when rates start rising, which they will at some point, it will likely be gradual and slow. This likely slow and gradual pace of rate rises should not hinder the global economy.

Even with this high volatility, the prudent approach to investing does not change:

  1. Suitable investment plan/strategy: In times of uncertainty, you may be tempted to change your investment strategy, but often change is not necessary and may be detrimental to your long-term return. We take great care to ensure that your portfolio’s asset allocation and strategy is consistent with your risk tolerance, goals, financial situation and time horizon. Unless your goals and/or financial situation change, you should not make major adjustments to your portfolio based solely on market volatility.
  2. Diversification: Spreading your investable funds across a portfolio of multiple asset classes – equities, bonds, as well as alternative investments such as real estate, infrastructure, and the like – and within each asset class will dampen volatility in your portfolio. Why is it the case? Different securities within and across asset classes do not all move in the same direction and/or with the same magnitude over time; therefore, a well diversified portfolio will fluctuate less than a portfolio with very few securities over time.
  3. Stay invested: Trying to time the market can be very costly to investors because a significant portion of the market’s gains historically occur in very short periods of time. If you are not invested during these small windows of opportunity, you may miss most of the up market. Furthermore, many of these short periods of time occur during very unpleasant market environments when you may feel compelled to sell.

Equity Market Commentary

5186232_sThe third quarter of 2015 was a rough one for equity investors around the world as fears of a global slowdown, emanating potentially from weakness in the Chinese economy, hit the markets. Other factors came into the fray as the energy market continued to weaken and politicians in the U.S. stirred the pot by raising concerns about pharmaceutical pricing, which hit all stocks in the health care sector.

In local currency, the Chinese market was the worst of the major indices down more than 19%; whereas, the Swiss and Italian markets were some of the best performing, down just over 3% and 5%, respectively. Closer to home, the TSX Composite was down 8.6%, and the S&P 500 was down 6.9% in local currency. The U.S. currency was a positive factor for our portfolios, as measured in Canadian dollars, as the U.S dollar strengthened 6.8% relative to the Canadian dollar, severely curtailing most of the loss in the U.S. equity market.

For the TSX Composite, it was a volatile three months, since all months had decent declines and rallies, but in the end all three months were negative. From a sector level, the three worst performing sectors in the quarter were Materials, Energy and Health Care, which were all down between 17% and 20%. In contrast, the top performing sectors were Consumer Staples, up around 6%, followed by Technology, Telecommunications and Utilities, which were up marginally.

The S&P 500 was a slightly different story. July posted a marginal gain; whereas, August had a big decline, down more than 11% at one point, before rallying at the end of the month to stem the decline to only 6.4%. All sectors but Utilities, up about 2%, were negative for the quarter. Similar to the TSX Composite, the major decliners were Materials, Energy and Health Care. Consumer Staples was the least negative performing sector, down 2%.

Core Equity Model – For higher growth-oriented clients

The Core equity model was down 4.2% for the quarter, outperforming the TSX index by 4.4%. During the last three months, Core accounts were very active. Early in July, we reduced our equity exposure by around 5% for most clients, selling the S&P Mid Cap ETF; and later in the quarter, we also had two other sales that went to cash as we did not find attractive purchases that met our criteria for ownership.

We did two trades in the Energy sector: the first trade was to sell our S&P TSX Energy ETF position, which was one of our bigger negative contributors for the period; and, we purchased Suncor, which we were able to eke out a small gain plus a dividend before it failed our criteria for ownership and was sold due to negative earnings revisions.

Some of our higher growth companies detracted from performance in our Core model as Concordia Healthcare and Valeant were hit by the broad decline in pharmaceutical stocks.

On the positive side, a number of our consumer staple stocks, including Weston and Alimentation Couche Tard, had strong performance. Moreover, O’Reilly Automotive, in the Consumer Discretionary sector, continues to execute on its strategy and had a solid quarter. Three companies in the Core equity model – Altria, Verizon and Royal Bank – raised their dividends during the quarter.

Pension Equity Model – For clients requiring higher income and lower volatility

The Pension equity model was down by 2.5% during the quarter, as our more conservative strategy outperformed the TSX index by 6.1%. Based on its Pension mandate, less trading occurred in the third quarter relative to the Core model: we reduced our equity exposure in the model at the beginning of July by selling the S&P 500 ETF, and late in August we sold our Energy ETF and purchased Potash, which was eventually sold with the proceeds going to cash. For the past 12 months or so, the model has been underweight the Energy and Materials sector, which has reduced the impact of the broader market declines. That being said, Enbridge, Potash and the TSX Energy ETF were the worst performing names in the model along with Home Capital Group. Home Capital declined over the quarter because of concerns over the economy and repayment of mortgages. The company’s stock was further hampered by U.S. short sellers that were taking large short positions in July. We continue to hold the position, since we believe management at Home Capital will continue to grow earnings and dividends and it is trading at less than 8X projected earnings. A number of our stocks had good quarters, including Transcontinental, General Mills and BCE. Five companies in the Pension model increased their dividends during the quarter: Emera, Bank of Nova Scotia, CIBC, Verizon and Royal Bank.

The Quarter Ahead for Equities

It is our view that the majority of the decline in the equity markets is over, and we are looking for opportunities to be fully invested again in the coming months as each model currently has cash available to purchase two equity positons. Overall, the equity markets appear to be fairly valued with a number of undervalued sectors, the cheapest being Financials. For this reason, along with a number of other factors, we added Sunlife to the Core model at the end of September. Potential catalysts to higher equity prices include positive third quarter earnings announcements, and a possible U.S. interest rate hike in December based on the more moderate tone by the U.S. Federal Reserve.   Historically, equity markets tend to have above average performance for about six months after the first rate hike.  

Fixed Income Commentary

iStock_000010237072lThe third quarter was again rife with extreme volatility in the bond market. The cause of such volatility was threefold. First, bond market investors were getting mixed signals from central banks: the high expectation of the U.S. Federal Open Market Committee (FOMC) to start raising overnight rates paired with the softer tone coming from the Bank of Canada (BOC), where the latter lowered rates on July 15th for the second time this year (taking overnight interest rates to 0.50% down 0.25% from the last ease on January 21st). Second, the lack of liquidity in the fixed income markets; and third, the sharp moves in global equity markets.

The source of the economic weakness in Canada continues to emanate from the energy fields as oil prices (WTI) ended the quarter down 25.4%. Surprisingly, with such a sizable and sustained move, the BOC did not allow the effects of a 6.6% decline in the Canada-U.S. exchange rate to work its way through the economy, and lowered overnight rates for the second time this year. Perhaps the BOC was also concerned about the economic deterioration abroad, especially in China, and decided that the Canadian economy needed the extra support/stimulus.

The FOMC wrapped up one of their most divided regularly scheduled meetings on September 17th (economists placed the odds of a hike at 80%, while Fed Funds futures contracts placed the odds at about 40%), highlighting global economic concerns as the source of their hesitation to follow through with their first interest rate hike in over 9 years.

Core and Pension Fixed Income Models

The fixed income models have slightly shorter average bond maturities than the DEX Bond Universe Index heading into the third quarter as the global economic situation still warrants a defensive posture since both the FOMC and the Bank of England (BOE) are poised to hike overnight interest rates, and any economic fallout from Greece has already been eliminated.

Our present strategy is to remain overweight corporate bonds in near term maturities (as we view the BOC and FOMC as incapable of delivering any tightening of monetary policy) and opportunistically adding to longer term maturities because we believe that the weak economic landscape will cause the yield curve to flatten. This strategy should prove beneficial for our models over the next couple of quarters, as we believe any rate hikes by the FOMC would cause long interest rates to fall and short interest rates to rise with credit spreads narrowing, and thus bond prices rising. This forecast is premised on the notion that raising rates may trigger a higher probability of an economic slowdown.

In contrast, should the FOMC not follow through with their many hints of a rate hike as soon as October 28th, bonds will benefit on the premise that the FOMC’s mandate of price stability (i.e., 2.0% headline inflation – currently at 0.2% year-over-year) has not been achieved, and again, global economic headwinds will continue to play a role in their decision process; thus, validating lower interest rates.

The Quarter Ahead for Fixed Income

As we head into the final stretch of 2015, it appears that monetary policy globally will remain quite accommodative, meaning rates will stay low. As mentioned earlier, China’s economy is slowing and it has devalued its currency; moreover, the FOMC just balked at the much anticipated rate hike, and Japan is planning to restart “Abenomics”.

Prime Minister Shinzo Abe recently unveiled new growth initiatives, including targeting GDP at 600 trillion Yen (i.e., expanding by roughly US$10 billion), and social programs to assist families to care for the elderly. In conjunction with the Bank of Japan (BOJ), the Labour Democratic Party (LDP) will do its “utmost” to lift wages and consumption. As Japan endeavours to roll this program out as soon as possible, the Europe Central Bank (ECB) is under pressure to expand its Quantitative Easing (QE) program by extending it beyond September 2016, and by increasing asset purchases above 60 billion EUR per month. The end of easy money may not be as close as previously thought.

We believe high volatility in the bond market will continue until the end of the year; and, we are prepared to extend/lengthen the maturities of our bonds in the models further as yields approach our target.

Preferred Share Commentary

Preferred shares experienced the following problems in the quarter:

  1. Reluctance by the BOC to raise the overnight interest rate (a cut actually materialized) has caused the Government of Canada 5-year bond yield to remain stubbornly low. In fact, the yield is now roughly 0.55% below where it was at the end of 2014.
  2. Equity volatility, credit concerns and ultimately, risk aversion by investors caused a widening of market spreads for all five-year fixed reset preferred shares. As a result, the price of preferred shares fell.
  3. The persistently heavy preferred share issuance from financial institutions exacerbated the already fragile preferred share market (because banks and insurance companies are being subjected to punitive tier 1 and 2 capital requirements, thereby forcing them to raise more capital).
  4. Energy and resource based issuers (e.g., TA.PR.D & TRP.PR.B) were particularly harder hit because of the depressed level of oil prices and various other commodity prices.

The Quarter Ahead for Preferred Shares

The extraordinary capital gain offered in early 2009 (post financial crisis) on preferred shares may not be repeated this time around; however, the slow appreciation back to higher price levels will come about from the narrowing of credit spreads. In the meantime, the yields at current preferred share price levels are providing a very favourable after-tax income.


Although the markets have been tumultuous year-to-date, we believe that our clients’ portfolios are well positioned to weather the storm and take advantage of market weakness. That being said, it is often good to review, with your TriDelta Wealth Advisor, your investment plan/strategy during these periods of high volatility in the markets; however, staying the course is usually the best policy, assuming that your financial situation, goal(s), time horizon and risk tolerance have not changed.

As a final comment – Let’s Go Blue Jays!!


TriDelta Investment Management Committee


Cameron Winser

VP, Equities

Edward Jong

VP, Fixed Income

Ted Rechtshaffen

President and CEO

Anton Tucker

Exec VP and Portfolio Manager

David Oliver

Chief Operating Officer

Lorne Zeiler

VP, Portfolio Manager and
Wealth Advisor

Updated Retirement Income Guide


When you retire, not only does your daily routine change, but you also stop receiving a pay cheque. With the traditional pension becoming less of a reality for many Canadians, building steady retirement income through your investments, asset base and government programs is a key part of any financial plan.

In our new updated 2015/16 guide, you will learn about some of the best ways to build your own retirement “paycheque” using the resources you already have.

Common questions about different retirement income streams will also be answered, and tax minimizing tips will be provided along the way.

We provide you with some of our best insight on when and how much to draw from RRSPs, RRIFs, TFSAs, investment options, how to access government pensions and where to find other sources of cash flow.

We trust that our new updated guide will be helpful to you. If you have any questions on the ideas and strategies presented or to find out more about our income solutions, please contact us.

To request your free copy of our guide simply click here.

What are alternatives and do they have a place in your portfolio?


Alternative investments are those other than traditional investments such as stocks, bonds or cash. Some of the more common alternative investments strategies include:

  • REIT’s (real estate investment trusts):
    A real estate investment trust (REIT) is a real estate company that offers common shares to the public. Rather than investing directly in a single property, REIT’s typically hold dozens of commercial properties, including office buildings or exposure to real estate sectors such as seniors homes for example. REIT’s offer tax benefits, a portion of the distribution from Canadian REITs is a return of capital, which is not taxed.
  • Hedge Funds:
    A hedge fund has some similarities to a mutual fund, but they are typically structured differently and have access to a broad range of investment strategies. They are open to a limited range of investors and permitted by regulators to undertake a wider range of investment and trading activities than other investment funds.

    The term “hedge fund” has come to be applied to many funds that do not actually hedge their investments, and in particular to funds using short selling and other “hedging” methods to increase rather than reduce risk, with the expectation of increasing returns.

  • Private equity:
    Private equity refers to an asset class consisting of equity and/or debt securities in companies that are not publicly traded on a stock exchange. The fundamental reason for investing in private equity is to improve the risk and reward characteristics of an investment portfolio. Investing in private equity offers the investor the opportunity to generate higher absolute returns whilst improving portfolio diversification.
  • Venture capital:
    Venture capital is money provided to seed, early-stage, emerging and emerging growth companies. The venture capital funds invest in companies in exchange for equity ownership.
  • Wine:
    The wine industry’s growth has been remarkable. In Canada you can buy high quality bottles of wine and store them with the intention to sell later. This takes a lot of money, space and careful timing. An alternative is to buy a wine investment fund. Toronto-based Accilent Capital Management runs one or you can buy stocks in one of Canada’s many wine companies.
  • Art and antiques:
    Most of us have dabbled in this when buying décor and furniture for our homes, but few of us have made money. To successfully invest in antiques and art, you typically should have an interest in them or better still consult and /or partner with experts.

This largely unknown sector of alternative investments is growing rapidly for a variety of reasons, but primarily the ability offered to access good investments that are largely uncorrelated to traditional stock and bond markets. In fact hedge funds have benefited wealthy and institutional investment portfolios for many years with total portfolio exposure as high as 30 & 40%, so why not individual investors? Regulations have limited access given the many complex structures and potential risk although many options may actually reduce risk and certainly provide diversification.

With the mature S&P 500 bull market, portfolio managers are looking to supplement portfolios with alternative investments for long-term growth.

Bond markets also have elevated risk given the prospect of rising interest rates. This would suggest lowering bond exposure in favor of investments not subject to this risk such as multi-strategy hedge funds, real estate and private equity. These alternatives have historically produced returns that don’t correlate to traditional stock and bond markets and this added diversification will enable less volatile portfolios that should also deliver solid growth.

TriDelta’s investment product lineup includes a hedge fund, the TriDelta High Income Balanced Fund, which was launched in late 2013. Our hedge fund was however only available to ‘accredited investors’ until recently when regulations in Ontario and other Canadian provinces were amended.

At TriDelta our view is that new investment asset classes are always worth reviewing. If we find something that we are comfortable with, we will incorporate it into our overall recommendations. Now that regulatory changes have come about we’re also able to offer some of these solutions to non-accredited investors as well.

Strategies we have researched and analyzed include real estate funds, mortgages, business lending and factoring.

One common theme to alternative investments is that they often have low correlations to traditional investments such as stocks and bonds. This benefits portfolios by increasing diversification. Research has revealed that many large institutional funds such as pensions and private endowments have begun to allocate meaningful amounts of their portfolios to alternative investments such as hedge funds.

Alternative investments includes a vast category of specialist investment solutions and many we feel are simply not appropriate for the average investor. There are however a few very interesting solutions that deliver some unique advantages and better still are largely uncorrelated to traditional stock and bond investments.

Investments in real estate, mortgages, hedge funds, infrastructure, private debt and equity, and the like, continue to grow as a percentage of overall assets for some of the biggest pension funds. They comprise of over 30% of the overall portfolio at pension plans, such as the Ontario Teacher’s Plan (OTTP), Harvard Endowment Fund and the Canadian Pension Plan Investment Board (CPPIB), which manages the funds for CPP payments.

At TriDelta we spend much time reviewing market offerings and TIC (TriDelta Investment Counsel) works with a select group of alternative investment managers to provide similar benefits to our clients.

Alternative investments make up over 40% of US university endowment portfolios

The reasons for their growth are that these investments often provide:

  • a more predictable income stream
  • less volatility
  • reduce risk in your investment portfolios.
What are the main benefits to hedge fund investment?


Canadian high net worth portfolios, endowments and pension funds have also embraced alternative investment in recent years.


‘Ontario Teacher’s Pension plan asset allocation’ 32% Real assets and ‘alternative’ solutions; 35% Equities & 33% Fixed Income.


At TriDelta we believe select alternative investments play a key role in delivering more predictable and consistent returns for many of our clients.


Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CIM, FCSI
Executive VP and Portfolio Manager
(905) 330-7448

How will your Retirement be affected by a Divorce?


There is a rising trend in Divorce after 50. Ending a marriage is one of the largest life events that can happen in a person’s life. You may have tried to make things work, but now it’s clear, the marriage is over. What do you do next? How do you ensure you will be OK financially? How will this affect your retirement plans? Knowing your options and how the Divorce will affect you is key. The first steps are:

  1. Gather financial documents and know your financial picture.

Make sure you know where all your financial and legal documents are, including pension statements. Having important documents on hand in the divorce process means you avoid time and expense trying to get copies of them later. Know what assets are shared and which are exempt.  

Did you know if you inherit money or receive a gift during the marriage (in most provinces) as long as it is kept in a separate account it does not have to be shared in a divorce. Once it is used to pay down the mortgage on a family home or put in a joint account, it will be considered the property of both spouses.

  1. Assess your credit.

Request a copy of your credit report, and correct any misinformation it contains. Good credit is the foundation of your financial future, so watch it carefully! Without credit it can be near impossible to obtain loans for any purpose, or even to manage the expenses of running your household.

  1. Open accounts in your own name.

You will need your own bank accounts and credit cards. It is not too soon to set these up. Use a different bank than where you currently have joint accounts, and open both savings and checking accounts in your name alone.

  1. Assemble a professional divorce team.

Today, financial portfolios –and the regulations that govern them –are much more complex, and you may need multiple layer of professional help to navigate all the legal and financial details.

  1. Be watchful.

No matter how much you may think you know someone, it is still very common for assets and/or income during divorce to be hidden –even though that’s underhanded, unethical and illegal.

It is common for one person to know more about the family finances than the other and one may not know the extent of their debts.

Resolve to get the help you need to start down the path toward your secure financial future.

For couples over 50 divorcing, generally the 2 largest assets are the house and pension. Splitting assets 50/50 may not result in the same financial picture now that is does in retirement. The goal is for both parties to come out equally and to keep income steady, so that retirement lifestyle is not negatively impacted by a divorce.

Knowing how your pension and your future monthly retirement income is affected by different asset splitting options is important. There are many ways to legally divide assets, to ensure both current and future financial needs are met.

It is a good idea to consult a financial professional as well as a lawyer if you are going through a divorce.

Your lawyer will focus on the legal issues and a planner can provide you a summary of the short, medium and long term implications of the proposed division of assets, including tax implications.

Additionally common-law relationships come with their own set of rules.

A CDFA – Certified Divorce Financial Analyst can assist you in getting the help you need to start down the path toward your secure financial future, giving you a better understanding of your financial situation.

Contact Heather for a no obligation review of your financial situation.

Lorne Zeiler
Written By:
Heather Holjivac
Senior Wealth Advisor

Should I take CPP before age 65?


Two thirds of Canadians take their CPP benefits before age 65, but determining what’s best for you demands that you better understand your options. First let’s consider the rules around taking CPP – which changed January 1, 2012. The chart below from provides a nice summary.


You can start collecting CPP (Canada Pension Plan) any time after age 60, but this will result in a reduced amount based on how many months prior to age 65 you are when you begin collecting. Given this reduction, part of answering the question on whether or not to take CPP early will involve crunching some numbers. Our new ‘Early CPP Calculator’ can help, and is found in the Resources section of our website.

Understanding how much CPP you may be entitled to is an important first step, but is not the only variable to consider. Other factors to consider include:

  1. Cash flow. If you need the funds in order to pursue interests while you’re still healthy, this would likely trump any other factor.
  2. Poor health. This likely means that you will have a shorter life expectancy than average and as a result you should start drawing CPP earlier.
  3. Excellent health and longevity in the family. This would suggest you consider delaying the start of your CPP payments because you’ll collect more over time if you live a long life.
  4. Tax implications. Taking CPP increases your taxable income and may affect your decision on when to take it (OAS, GIS thresholds).

The most difficult variable of course is not knowing when you will die. For this reason, outside of a few scenarios that may strongly suggest certain action, the CPP decision will always remain a calculated guess. A personal financial plan can help identify how CPP should fit within a broader retirement income strategy. For more information on CPP visit the Service Canada website.

Lorne Zeiler
Written By:
Brad Mol, CFP, CIWM, FMA
VP, Wealth Advisor

Why you probably shouldn’t ever want to own a cottage



As you are reading this on what is hopefully a beautifully sunny and warm day, sitting on your dock on the water, what could be better than being at your cottage.

There is no question of how nice it can be, but do you really have to own it to enjoy it?

Occasionally clients ask our view on buying a cottage. This question usually leads to a broad discussion where the financial equation is only one part of the picture. Their stage of life, kids’ ages, desire to explore or stay put, comfort with property maintenance, and even their experiences growing up, play a big part in deciding whether to buy or not.
For me, I am pretty certain at this stage of life (with three school-aged children), we are not cottage buyers. I know that not everyone will agree with this opinion, but I know it is the right decision for me and my family. Here are five reasons why I won’t buy a cottage.

  1. Trying to juggle the summer plans of our kids leaves only two to four weeks of possible time the kids could be at the cottage each summer. At a different stage in life, cottage ownership could make more sense.
  1. We want the freedom to explore different parts of Canada in the summer (maybe even beyond Canada), and don’t want to feel that we are tied to one location. In addition, we can rent a cottage that is ideal for the age and stage of our kids — both in terms of water safety, and with an eye to places to visit within an hour of the cottage.
  2. I can’t fix anything myself. My wife is pretty good at it, but neither of us wants to spend our time away working on the property or even feeling guilty about what needs to be done. We want to enjoy it.
  3. Financially, there are better investments. Over the last 35 years, residential real estate in Canada has averaged a gain of 5.4 per cent annually. Over the same period, North American stock markets have averaged 10 per cent returns or more. If the growth is tax free on a personal residence, then the gap is smaller, but for a cottage there are usually capital gains taxes to deal with. For those who talk about needing to deduct investment management fees from returns, that can be true, but you would also need to deduct real estate taxes and non-capital expenses from the return on the cottage. Looking at the options, I would rather not lock up my capital in a cottage.
  4. Finally, no more freeloading friends and family to worry about. I know that many families love to invite people up to their cottage. It is often greatly appreciated. However, it can get very tiring after a while, and when it isn’t greatly appreciated, it can become a real weight on the relationship. When renting, you can occasionally invite people to join you, but they know not to expect the annual invite.

Reproduced from the National Post newspaper article 31st July 2015.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
(416) 733-3292 x 221